What is it?

In an era where sustainability is a key driver of consumer and investor choice, the commercial imperative to present strong environmental credentials has never been greater. However, this pressure has fueled a rise in 'greenwashing' – the practice of making false or misleading claims about the environmental benefits of a product, service, or the sustainability credentials and even plans of a company.

For businesses, navigating this landscape is not just an ethical obligation but a critical legal and commercial one, with both ASIC and the ACCC intensifying their scrutiny.

Why does it matter?

Misleading environmental claims harm consumers, distort competition and erode trust in genuine sustainability investment. Under the Australian Consumer Law, false or deceptive environmental statements can attract compliance action, corrective orders and civil penalties — ASIC and the ACCC have both publicly signalled greenwashing as an enforcement priority.

What are regulators doing?

Australia’s corporate and consumer watchdogs are actively targeting greenwashing, having moved from guidance to action, targeting misleading sustainability claims across finance and consumer markets.

The Australian Competition and Consumer Commission (ACCC) is focused on protecting consumers from deceptive environmental claims in marketing. Following a 2023 internet sweep, the ACCC found that 57% of the businesses reviewed made potentially misleading environmental claims. Their focus is on ensuring that when a business makes a claim about its products or operations – such as being 'eco-friendly', 'sustainable', or 'recyclable' – it is backed by clear, accurate, and substantiated information. Vague or unqualified statements are a primary red flag.

What does good practice look like?

Avoiding greenwashing allegations requires a proactive and principled approach. Businesses should use the following tests:

• Substance: Are all of your environmental claims verifiable? If you claim a product is '50% recycled material', be prepared to prove it with credible evidence. Make sure any third-party labels or ratings are current and relevant.

• Specificity: Have you avoided ambiguous and absolute terms like 'green' or 'eco-friendly'? Instead, provide specific details. For example, rather than 'sustainable', say 'Our packaging is made from 70% post-consumer recycled cardboard'.

• Clarity: Use measurable metrics and timebound targets, and disclose the scope of any assessments and the assumptions used.

• Authenticity: If a claim focuses on one benefit (e.g. lower water use), don’t imply broader environmental performance.

• Alignment: Ensure your internal governance systems and processes are aligned with your external sustainability claims and commitments. For example, ASIC expects to see a direct (causal) relationship between a net-zero pledge and your corporate strategy.

• Accountability: When making claims, consider the full lifecycle of a product or service. Highlighting one positive attribute while ignoring significant negative impacts elsewhere can be misleading by omission. Be sure to update claims when circumstances change and correct any errors promptly.

Ultimately, authenticity is the best defence against greenwashing. By embedding genuine sustainability practices into your corporate strategy and communicating them with transparency and precision, you not only comply with regulatory expectations but also build lasting trust with your stakeholders.

A final note for Directors and senior leaders

Green claims are a board-level risk. Ensure oversight, assign ownership for sustainability claims, and integrate legal and compliance review into campaign sign-offs. Doing so protects reputation, supports genuine sustainability progress — and keeps you on the right side of Australian law and active regulator scrutiny.