2. Consumer Law Actions Against Climate-Related Greenwashing

Because climate greenwashing is misleading and deceptive conduct, it contravenes the ACL (see Box 1). These provisions can be enforced by the ACCC and state and territory consumer bodies. They can also form the basis for civil action by private litigants such as consumers, advocacy organisations and other businesses. In this section we set out three different ways in which regulators can make a legal argument for greenwashing and show how difficult they can be to prove. This shows that the idea of climate conscious consumerism may be difficult to enact in practice if consumer law cannot be successfully used to combat greenwashing. We will then examine the way that environmental advocacy groups are using the ACL in a more activist way against greenwashing.

2.1 Three Ways to Prove Climate Greenwashing is Misleading and Deceptive Conduct

Greenwashing actions in consumer law typically include allegations that a trader has made a claim about the environmental credentials of its products, services or broader activities that was either (1) false; or misleading or deceptive because it (2) omitted important information or (3) used vague or ambiguous terms. There is no need to prove intention to tell a lie (as the definitions in Box 1 indicate). These actions depend on whether the claim was false,  misleading or likely to mislead the public, or a relevant section of the public.^[1]

An example of successful greenwashing action, based on making false environmental claims, is the successful Australian enforcement action in the global ‘Dieselgate’ scandal. Volkswagen (VW) had intentionally designed and fitted their diesel cars with a ‘defeat device’ that enabled the cars to meet government limits on nitrous oxide (a GHG) emissions when tested in the lab, but then allowed them to emit more nitrogen oxide on the road, enhancing performance. This affected more than 10 million VW and Audi cars globally, and tens of thousands in Australia. Regulators around the world took action. In Australia, VW agreed to a $75 million civil fine for misleading and deceptive conduct, which the Federal Court increased to $125 million.^[2]

The VW case succeeded because the intentional misrepresentation had already been discovered in the US and overseas regulators had already taken enforcement action, adducing much of the evidence needed for the Australian case.^[3] In most cases, however, it is much more difficult for a consumer or regulator to access internal corporate information about the environmental impact of products to know whether a claim is false or not. It is also very rare to find ‘smoking gun’ evidence that a company intentionally misled regulators and the public, which would make their moral culpability obvious.

A (rare) example of successful action against climate greenwashing by omitting important information was an advertising campaign by global banking giant HSBC in the lead up to a meeting of country leaders regarding climate change in Glasgow. HSBC put posters and billboards up all over Glasgow highlighting their intention to provide up to USD1 trillion in financing for clients to transition to ‘net zero’ and plant 2 million trees (see Figure 2). HSBC did not disclose on their posters that they were also still financing billions for fossil fuel and other emissions-heavy industries and were committed to do so in some cases up until 2040. Activists made dozens of complaints to the UK Advertising Standards Agency (ASA), arguing that HSBC’s billboards amounted to misleading greenwashing.

The ASA agreed that the ads gave consumers the misleading impression that HSBC’s climate commitments included immediate divestment from emissions-heavy industry:

Despite the initiatives highlighted in the ads … HSBC was continuing to significantly finance investments in businesses and industries that emitted notable levels of carbon dioxide and other greenhouse gasses [and would be until 2040]. We did not consider consumers would know that was the case. We concluded that the ads omitted material information and were therefore misleading.^[4]

Although HSBC’s climate approach was detailed on its website, consumers would have had to follow the scan code on the billboard to find the information and be sufficiently educated about climate policy and investment strategies to correctly interpret the disclosures.

The ASA ordered that HSBC stop its advertising campaign and ensure any future environmental claims were ‘adequately qualified and did not omit material information about its contribution to carbon dioxide and greenhouse gas emissions’.^[5] No penalties were levied as the ASA is a self-regulatory body with no power to issue fines or other punishments. This form of climate greenwashing (by omission) remains very common, including by banks and superannuation (or pension) and investment funds.^[6]

Enforcement action against vague or ambiguous green claims can be particularly difficult. Generic terms like ‘clean’, ‘green’, ‘sustainable’, ‘bio’, ‘pure’, ‘eco’ or ‘eco-friendly’ and ‘for the planet’ are common in green marketing.^[7] Such terms are used with little consistency or explanation. They are often used in combination with colours (green, ocean blue or earthy beige), nature imagery and even environmental emojis (such as green ticks, recycling logos or suns). These aesthetic elements are known as ‘executional’ greenwashing since the greenwash is in the way the ad format and images have been creatively executed rather than in the textual claims. Research has shown that executional greenwashing can be even more effective at manipulating consumer responses than functional textual claims because it appeals to consumers’ emotional connection to nature and desire to do the right thing.^[8]

The ACCC’s first greenwashing action was regarding vague and ambiguous claims and occurred in 1992.^[9] It was against Continental, which was Australia’s largest manufacturer of paper cups. The ACCC argued that Continental had falsely claimed that their poly-coated cups were ‘environmentally friendly’ and ‘recyclable’, and this was further inferred through a pine tree logo.^[10] However, at that time there was no facility in Australia for recycling these cups. Continental did not admit liability but did sign a settlement with the ACCC (known as an ‘enforceable undertaking’) agreeing not to continue making these claims.

Claims made regarding the sustainability of plastics is highly relevant to climate change as most plastic is produced from fossil fuels, and the small number of plastics made from plants still relies on resource-intensive agriculture (including GHG-intensive inputs). Despite the action against Continental for such claims, plastic packaging and containers nowadays commonly claim to be ‘recyclable’, ‘biodegradable’ or ‘plant based’. Yet plant-based plastics (or bioplastics) can still be GHG intensive. Likewise, claims regarding a product being recyclable, compostable or biodegradable rely on a consumer having access to the right kind of waste service, which is very rare (unless the product says it is home compostable). For instance, only green bins at houses in South Australia, and a few other councils, currently accept specific kinds of compostable packaging.^[11]

The proliferation of these kinds of claims on plastic packaging reflects how difficult it can be for the ACCC to take enforcement action for greenwashing. Traders can, for instance, argue that their use of terms like ‘compostable’, ‘recyclable’ or ‘biodegradable’ are accurate in principle even though in reality their products are far more likely to go to landfill.^[12] For example, the ACCC lost a case concerning disposable picnicware that was labelled ‘eco’, ‘biodegradable’ and ‘compostable’. The court accepted the defendant’s argument that the products had at the time of sale the quality of biodegradability, even though in practice consumers could not rely on this quality because the picnicware would only biodegrade in specific circumstances in a special facility.^[13] Consumers expect such green claims to be used consistently, reliably and in a way that has been checked and verified by a trusted authority.^[14] But the very vagueness and ambiguity of these terms means that business can often escape liability for greenwashing.

2.2 The Need for a More Proactive Public Interest Approach to Regulatory Action Against Greenwashing

When the regulator loses a greenwashing case, such as the case concerning ‘eco’ picnicware, businesses are effectively given more license to make meaningless claims. Even when the regulator wins and obtains a hefty financial penalty, they have only won one prosecution regarding an individual business and a specific representation or claim. A more general deterrent effect on greenwashing conduct is more difficult to achieve. The more likely result is a ‘discourse-based arms-race’^[15] in which knocking out one term becomes a reason to invent another. This sort of reactive regulation also relies on a consumer, non-government organisation (NGO) or competitor waiting until a representation is made, then identifying a false representation, complaining to a regulator and compiling enough evidence to prove it was false. This sets up a game of ‘whack a mole’, going after claim after claim serially, making it impossible to address all the instances of greenwashing, given how frequent it is.

The ACCC’s enforcement against product packaging marketed as made from ‘ocean plastic’ is a good example of the limits of consumer law enforcement for climate action. The ACCC took action against a yoghurt company for claiming its containers were ‘100% ocean plastic’, which gave the impression that ‘the recycled plastic waste was collected directly from the ocean’.^[16] The plastic used in the tubs was ‘collected within 50 km of the shoreline in regions where waste management is inexistent or inefficient’.^[17] After the enforcement action, the company now clarify their containers are made from ‘ocean bound plastic’. The images in Figure 3 show the before and after packaging.

Arguably, this is a slight change that leaves many consumers believing that the plastic was picked up from rivers and beaches rather than potentially tens of kilometres away. Furthermore, the consumer is still left with an impression that plastics recycling is a viable option for dealing with plastics waste when, in reality, recycling plastics is costly, resource intensive, causes pollution and cannot be done indefinitely on the same plastics (like it can for some other materials). This is partly why experts call for a focus on reducing plastic production and consumption rather than recycling.^[18] Hence, tweaking one claim does not address the broader ways in which marketing on such products individually and across multiple products is misleading the consumer regarding the existence of environmental solutions.

In response to these problems with the reactive case-by-case approach to greenwashing, regulators including the ACCC are developing a more proactive approach to greenwashing. The ACCC’s Making Environmental Claims: A Guide for Business includes eight principles aimed at guiding businesses about how to substantiate and evidence environmental claims and avoid greenwashing.^[19] In Box 2 we show how these eight principles apply to climate-related claims specifically.

Nevertheless, it may remain difficult to take enforcement action against climate greenwashing claims that a business is or will be ‘net zero’, ‘carbon neutral’ or ‘climate friendly’ unless there are established science-based standards against which to judge them. Section 4 of the ACL does provide that claims about the future, which could include a business that will be net zero in the future, will be assumed to be misleading or deceptive unless there is substantial evidence to back these claims up.^[20] What should count as appropriate evidence of climate commitment and how to measure emissions is often at issue when environmental advocates argue that businesses are greenwashing (see examples in Box 3). Governments failing to introduce standards to clarify these matters is a key barrier, and it reflects how governments also benefit from being able to make vague claims about their own climate credentials.

2.3 Consumer Law Enforcement Against Greenwashing as Environmental Activist Public Interest Litigation?

To reveal the extent of greenwashing to the public and put pressure on governments to be more proactive regarding greenwashing, environmental activist groups are also using consumer law to draw attention to greenwashing by businesses, including how businesses use greenwashing to delay serious climate action. The Environmental Defenders Office (EDO), an environmental advocacy focused community legal centre, has been particularly active in filing complaints with the ACCC, ASIC and other government authorities on behalf of various NGOs and citizen clients alleging climate greenwashing in breach of consumer law. (Box 3 gives some examples of their climate greenwashing complaints.) The EDO has released the Misleading or Deceptive Conduct a Greenwashing Handbook: A Legal Guide to Greenwashing to help clients create new complaints.^[21] This strategy puts pressure on government regulators to keep prioritising greenwashing education and enforcement.

In addition to encouraging regulators to use their enforcement powers against climate greenwashing, some environmental activist groups have also commenced their own civil actions against misleading climate claims by corporations. For example, the EDO on behalf of the Australian Centre for Corporate Responsibility is suing Santos for ‘clean energy’ claims that assume gas is better for the climate than oil and future ‘net zero’ promises reliant on what the EDO argues is an overly optimistic interpretation of the potential of carbon capture and storage.^[22] At the time of writing, the case has just begun to be heard by the Federal Court.

The ACCC actions discussed above are largely aimed at ensuring clear information about each product to support individual consumer choice. The strategies of environmental NGOs, however, go further and are intended to delegitimise the climate claims of high-emissions industries such as fossil fuels, aviation, petrol vehicles and fertilisers.^[23] They seek to reveal a range of greenwashing tactics used by companies to avoid or delay serious climate action, such as vague net-zero claims. These tactics include a focus on future unproven technologies and a reliance on carbon offsets rather than reducing emissions directly from business activities. In regard to carbon offsets, they are further limited by significant integrity issues and difficulties in ensuring long-term storage of carbon in soils and trees.^[24]

The strategy of environmental NGOs like the EDO’s clients may be regarded as strategic public interest litigation, ‘intended to achieve change to law and policy that will benefit individuals and communities beyond those directly involved in the campaign’.^[25] It may not be significant that such a case succeeds on technical legal grounds. Rather the charge of ‘greenwashing’ is designed to change public and policy perceptions of the industry to argue against their social licence^[26] to operate, and to extend the legal and societal interpretations of what counts as unlawful greenwashing. Accordingly, activist litigation against greenwashing may be most impactful where it is supported by political and media campaigns to pressure corporate and state actors to take real and meaningful action on climate mitigation and adaptation.

However, activist strategies by civil society and regulatory action continue to rely heavily on existing consumer law. As we saw in section 1, consumer law exists largely to advance consumer rights and consumer sovereignty, not to foment the economic and social change needed to meaningfully mitigate and adapt to the climate crisis, nor to promote sustainable consumption levels.^[27]