Avoiding greenwashing: ACCC and ASIC recommendations
To appropriately define and manage that risk, companies can rely on recent guidance and information sheet to find relevant greenwashing examples and ensure that their communication is credible, evidence-based and not misleading. Companies should also ensure that they implement a strong governance structure and integrated internal controls over the preparation of their sustainability reporting.
What is greenwashing?
As per the Australian Competition & Consumer Commission (ACCC), “a business will be engaging in greenwashing where it makes a claim that represents a product, service or the business itself as better for or less harmful to the environment than it really is”[1].
Governance Institute guides on greenwashing
The Governance Institute of Australia has released guidance on how to avoid greenwashing.
Greenwashing: a governance perspective responds to several recent, high-profile anti-greenwashing moves made by ASIC and the ACCC over allegedly misleading claims by businesses.
A European Commission review of corporate websites found that 42 per cent of environment-related claims were exaggerated, false, or deceptive. An ACCC 2022 review of Australian corporate websites found that 57 per cent of businesses made concerning claims about their environmental credentials.
The guide examines the extent of greenwashing in Australia, the legal and regulatory environment, and the risks and guiding principles of how to manage environmental disclosures and statements.
ACCC guidance on environmental claims
The ACCC has published eight principles to help businesses ensure that any of their environmental marketing and advertising claims are clear, accurate, and do not mislead consumers.
Making environmental claims: A guide for business sets out the ACCC’s view of good practice when making environmental claims. It also details obligations under Australian Consumer Law.
The eight principles are:
- Make accurate and truthful claims
- Have evidence to back up your claims
- Don’t hide or omit important information
- Explain any conditions or qualifications on 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 transitions.
‘Misleading environmental and sustainability claims continue to be an enforcement and compliance priority for the ACCC’, said ACCC acting chair Catriona Lowe.
‘[We] have several active investigations underway.
‘Our final guidance is intended to improve compliance by helping businesses make meaningful and truthful claims that meet their obligations under the Australian Consumer Law.
‘Environmental claims are often technical and can be difficult for businesses to communicate clearly. By following the principles in our guidance, businesses can more confidently make meaningful claims that consumers can understand and trust.
‘It is important for businesses to consider whether they are exaggerating the environmental benefits of their product or services and whether they have a reasonable basis to make the claims, otherwise they risk breaching the [law].’
The ACCC will release further guidance for businesses and consumers on emissions and offset claims as well as the use of trust marks. The commission will also develop guidance to help consumers assess and rely on environmental claims.
ASIC’s red light for greenwashing
ASIC’s enforcement actions in response to concerns about greenwashing range from warning letters and infringement notices to Federal Court action.
Greenwashing matters that ASIC is currently pursuing broadly allege misleading and deceptive conduct.
Future enquiries may move to examining licence obligations, directors’ and officers’ duties, and a range of other obligations. New focus areas include:
- Net-zero statements and targets
- Use of terms such as ‘carbon neutral’, ‘clean’ and ‘green’, and
- The scope and application of investment exclusions and screens.
Where public statements are made that assert aspirational environmental positions with a sound basis and supported by business plans and investments, ASIC is unlikely to have concerns.
When statements are made in marketing campaigns designed to encourage investment and promote products with little substance to back up assertions or substantiate how the transition will be achieved, ASIC is likely to request more information.
ASIC has published information sheet 271 How to avoid greenwashing when offering or promoting sustainability-related products.
Governance and internal control over sustainability reporting
When preparing their sustainability report, companies should ensure that the overall tone and balance are appropriate to adequately manage greenwashing risk. To build trust and demonstrate integrity, it is also important to implement adequate governance and control activities (e.g., reviews and approvals) over the data collection and preparation of the sustainability report. Finance teams and internal auditors are well acquainted with the preparation of credible and reliable information and could provide valuable support to develop a solid ESG internal control system.
How we can help
At Mazars we have the expertise and established, trusted professional networks with specialists to deliver services that will enable you to navigate and unlock the potential for your business to benefit from the evolving ESG landscape. If you require assistance, please contact one of our specialists via the form below or on:
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Published: 06/03/2024
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[1] Making environmental claims - A guide for business | December 2023 (accc.gov.au)