Greenwashing, broadly defined as using any claim or omitting key information to make a product, service, or business appear better or less harmful for the environment than it truly is, poses significant and growing legal risks for companies in Australia. These risks can range from substantial fines and legal proceedings to class actions and reputational damage.
Why Greenwashing is a Major Legal Risk:
1. Consumer Protection Laws:
Australia’s regulatory bodies, such as the Australian Competition and Consumer Commission (ACCC) and the Australian Securities & Investments Commission (ASIC), actively enforce consumer protection laws against misleading conduct. The Australian Consumer Law (ACL) is the primary legislation.
2. Regulatory Focus:
◦ ASIC has consistently made “Greenwashing and misleading conduct involving ESG claims” a key enforcement priority for 2023, 2024, and 2025. ASIC’s Deputy Chair, Sarah Court, has stated the commission’s commitment to tackling misleading marketing and greenwashing in financial services, highlighting that it remains in their sights.
◦ The ACCC has also listed “Consumer, fair trading and competition concerns in relation to environmental claims and sustainability, with a focus on greenwashing” as a compliance and enforcement priority for 2025-26. The ACCC educates businesses and consumers, accepts reports, investigates, and can take compliance or enforcement action if rules are broken.
3. Future Legal Landscape & International Influence:
◦ Australia has a notable gap in its consumer law compared to the EU, lacking a general ban on unfair business practices. The EU has had such a ban since 2005 and recently extended its unfair practices law to explicitly capture greenwashing through the Directive (EU) 2024/825 on Empowering Consumers for the Green Transition, which was finalised in February 2024 and will be enforced from September 2026.
◦ The Consumer Policy Research Centre (CPRC) recommends that Australia amend the Australian Consumer Law to include a ban on unfair business practices, and as part of this reform, include a blacklist of practices already identified as unfair by the EU. This indicates a potential shift towards stricter greenwashing laws in Australia, aligning with international standards.
◦ The European Parliament has already deemed any “carbon neutral” style claim based on offsetting as always misleading, and several overseas court decisions have found “carbon neutral” marketing to be unlawful. These international developments are likely to influence Australian legal precedents and regulatory approaches.
◦ Australian courts have already provided significant guidance on greenwashing liability and penalties.
Specific Marketing Practices that Constitute Greenwashing Risks:
Businesses must ensure their environmental and sustainability claims are truthful and accurate, backed by clear evidence, and presented transparently. Key areas of risk include:
• Vague and Generic Claims:
Using terms like “eco-friendly,” “eco,” “green,” “nature’s friend,” “natural,” “animal-friendly,” “cruelty-free,” “sustainable,” or “climate neutral” without evidence of “excellent environmental performance” relevant to the claim is problematic. These broad claims are easily misinterpreted and can mislead consumers into believing there’s no environmental harm.
• Claims Based Solely on Offsetting:
Making generic environmental claims based on offsetting alone is a significant risk. The landmark legal case brought by Parents for Climate against EnergyAustralia concluded in May 2025 with EnergyAustralia publicly acknowledging that offsets do not undo the harms of burning fossil fuels, and that emissions still contribute to climate change. This outcome sets a new standard, challenging the tenability of marketing polluting products as “carbon neutral” and leading customers to believe they are doing good for the planet through offsets. Concerns also exist regarding the quality of carbon offset projects (permanence, additionality, certainty).
• Misusing Third-Party Certifications:
Incorrectly or misleadingly using logos and trust marks, even if they are legitimate, can be considered greenwashing. For example, the Mobius loop (♻️) without further explanation might misleadingly imply that all parts of a product and its packaging are made from recycled materials or are recyclable, even if this isn’t the case.
• Excessive or Unhelpful Green Claims:
This includes claims about an entire product when the claim is only relevant to a specific aspect, or presenting requirements imposed by law as if they are special features of the product.
• Hiding Important Information/Partial Truths:
Omitting crucial information that gives the full environmental picture can be misleading. Small print should not hide the truth or contradict the overall message. For example, an airline claiming to be “reducing emissions” might be misleading if the flights using sustainable fuel are a tiny fraction of its operations and overall emissions are forecast to increase.
• Misleading on Repairability and Durability:
Restricting a product’s repairability or durability, such as through software updates that reduce functionality on older devices, misleading customers about repairability, inducing early consumable replacement, or making false claims about product durability, are identified as unfair practices. Businesses are increasingly expected to provide information on software update longevity and repairability scores/manuals.
• Aspirational Goals Without Concrete Plans:
Businesses should be cautious about aspirational goals and only make claims when legitimate plans are in place to meet them.
Recent Enforcement Actions and Penalties in Australia:
Australian regulators and courts have already imposed significant penalties for greenwashing, underscoring the serious legal and financial risks for businesses:
• Active Super (LGSS):
In March 2025, a federal court imposed an A$10.5 million penalty on Active Super’s trustee, LGSS, for greenwashing. ASIC had filed suit in 2023, arguing that from 2021 to 2023, Active Super continued to invest in securities related to gambling, coal mining, oil tar sands, and Russian investments, despite claiming to have eliminated or restricted them through ESG screens. The court found the breaches “serious” and noted LGSS benefited from misrepresenting its investments’ “ethical” nature, enhancing its ability to attract investors.
• Vanguard Investments Australia:
Received an A$12.9 million penalty in 2024. The Federal Court confirmed that the law on misleading or deceptive conduct applies to greenwashing when an investment fund makes false or misleading representations that potential investments would be screened to exclude securities connected to certain industries, such as fossil fuels. Vanguard admitted that a significant proportion of its securities were not screened.
• Mercer Superannuation (Australia) Limited:
Faced an A$11.3 million penalty in 2024 for admitting similar allegations by ASIC regarding false or misleading representations about the ESG credentials of certain superannuation products.
• EnergyAustralia (Parents for Climate case):
This landmark case, concluded in May 2025, represents the first Australian court case specifically targeting the marketing of consumer products as “carbon neutral”. Parents for Climate alleged EnergyAustralia misled customers about its “Go Neutral” product, arguing that “offsetting” emissions does not undo the damage from burning fossil fuels. The settlement included EnergyAustralia’s public apology and key acknowledgements about the limitations of carbon offsetting.
Outlook for Businesses in 2025 and Beyond:
The current legal and regulatory environment, coupled with increasing consumer awareness (a recent Parents for Climate report found 5.2 million Australian parents believe they’ve fallen victim to greenwashing, with 97% feeling misled and 59% changing providers), suggests a continued escalation of greenwashing enforcement.
Businesses should:
• Review all environmental claims to ensure they are precise, evidence-based, and do not mislead by omission or implication.
• Be transparent about sustainability transitions, clarifying any conditions on claims and avoiding broad, unqualified statements.
• Exercise extreme caution with “carbon neutral” and offsetting claims, especially given recent court outcomes and regulatory scrutiny of schemes like Climate Active.
• Be aware of new sustainability reporting obligations for many large Australian businesses and financial institutions, phasing in from January 2025, which will increase transparency and scrutiny of climate-related disclosures.
• Recognise the heightened risk of class actions arising from greenwashing and other climate-related claims in 2025.
Conclusion
In closing, Australian businesses must prioritise accuracy and transparency in their environmental claims. Failing to do so exposes them to significant legal, financial, and reputational risks as regulators and consumers increasingly demand integrity and accountability in the green transition.
