ASIC prosecutes for Greenwashing
Greenwashing update – enforcement priority for ASIC and the ACCC. As the first successful prosecution of a company for ‘Greenwashing’ concludes, it is clear that the regulators are just getting started.
Greenwashing enforcement
Last year we identified ‘Greenwashing’ as an enforcement priority for the Australian Securities and Investments Commission (ASIC), with a particular emphasis on misleading conduct in the finance sector. Three court proceedings were commenced against Mercer Super, Active Super and Vanguard Investments Australia Ltd in relation to claims that their investment offerings had ‘green’ or ‘sustainable’ credentials.
What is Greenwashing?
Greenwashing can take a number of forms, including making vague and unqualified claims such as ‘kind to the planet’ and ‘green’; asserting unsubstantiated environmental future goals; using absolute claims like ‘100% plastic free’ or ‘non-polluting’ that are not entirely true or lack specificity; making comparison claims that mislead consumers; exaggerating the sustainability benefits of products; omitting relevant information; or ambiguously using third-party certifications or trust marks (a leaf, the planet, etc.).
Prosecution progress
Of the three ‘greenwashing’ proceedings commenced last year, all were pursued using the established misleading and deceptive conduct provisions of the ASIC Act.
The AFR reported on 7 December 2023 that Mercer Super agreed to a $11.3 million penalty settlement (subject to final court approval). The Active Super matter was heard on 25 and 26 March 2024 and judgment has been reserved. Then on 28 March 2024, Vanguard became the first company successfully prosecuted by ASIC in the Federal Court. Civil penalties payable under the ASIC Act will be determined on 1 August 2024.
What did Vanguard do wrong?
Vanguard promoted to investors an Ethically Conscious Global Aggregate Bond Index Fund (the Fund), underpinned by a research process asserted to screen out securities that didn’t meet the Fund’s environmental, social and governance (ESG) criteria. Unfortunately, Vanguard’s screening process had limitations and failings which, in the court’s opinion, amounted to false or misleading representations as to the standard, quality or grade of the Fund, resulting in the finding that Vanguard’s conduct was liable to mislead the public as to the nature, characteristics and suitability of the Fund.
Other sectors being examined
The regulatory focus on greenwashing is not limited to ASIC. For the second year running, the Australian Competition and Consumer Commission (ACCC) has also identified greenwashing as an area of focus. The ACCC is pursuing greenwashing investigations in the energy and consumer products sectors. On 24 November 2023, MOO Premium Foods Pty Ltd provided an undertaking to the ACCC to remove representations about its packaging being made from ‘100% ocean plastic’. This followed an ACCC investigation which found that the representations were misleading as the packaging was made from abandoned plastic waste collected 50km from the shoreline in regions where waste management is inexistent or inefficient.
Most recently, the ACCC commenced proceedings on 18 April 2024 in the Federal Court of Australia against Clorox Australia Pty Limited (Clorox) (the manufacturer of ‘GLAD’ branded kitchen tidy and garbage bags).The ACCC alleges that representations made by Clorox that the tidy bags and garbage bags were made of 50% recycled ocean plastic were misleading. The ACCC alleges that the bags were instead made partly from plastic collected up to 50 kilometres from the shoreline, from communities in Indonesia. The ACCC also asserts that the representations were misleading due to the use of the statement along with an image of a wave and the blue colour of the bags, which suggested that the plastic was taken from the ocean or sea. We will provide an update on the outcome of these proceedings in due course.
How can you protect against allegations of ‘greenwashing’?
To assist businesses, in December 2023, the ACCC released a new guide: Making Environmental Claims. It provides eight principles for business to follow:
- Make accurate and truthful claims;
- Have evidence to back up your claims;
- Do not hide or omit important information;
- Explain any conditions or qualifications on your claims;
- Avoid broad and unqualified claims;
- Use clear and easy-to-understand language;
- Visual elements should not give the wrong impression; and
- Be direct and open about your sustainability transition.
This guide is an important document for you to review if your company promotes itself, or any service or product, with any claims of environmental merit.
