The risk of accidentally being accused of greenwashing...and how advisors can help.

Greenwashing - The regulators are out in force

Takeaway for Sumday Advisors: If clients market their goods or services as “sustainable” or “green” (or anything similar) they expose themselves to the risk of greenwashing claims if they don’t have data to back it up. Share the recent ACCC report with clients for practical examples. 

It seems court action over greenwashing from regulators around the world is only just getting started with high profile investigations underway.  

In July 2022, Swedish fast-fashion retailer H&M was taken to court over accusations that their ‘environmental scorecards’ attached to a sustainability focused line of their clothing were misleading and portrayed the idea that their products were better for the environment than they were (Stern, 2022). This is an example of greenwashing. Investopedia defines greenwashing as ‘The act of providing the public or investors with misleading or outright false information about the environmental impact of a company’s products and operations’ (Kenton, 2022).

Gas and energy giant Santos has recently been reported to ASIC, facing allegations of greenwashing with misleading future carbon neutrality targets (Milne, 2022). The ambitious public commitment to net-zero emissions by 2040 was backed by ‘speculative’ and flawed methods of achieving the target, and has been recognised as greenwashing – an attempt to lead the public to believe that their environmental commitment is much greater than it really is. Upon investigation, ASIC found that Santos planned to sell blue hydrogen and claim offsets for reducing its customers emissions, which likely involves double counting of emissions savings. Santos is expected to appear in court in early 2023 to fight this case of greenwashing. This suggests that Santos’ green credentials will continue to be under question as the case remains in the media, reiterating the importance of accurate, comprehensive and transparent carbon accounting in modern business.

In March this year, the ACCC conducted a sweep of the internet. A total of 247 businesses were reviewed during the sweep, 57 per cent were identified as having made concerning claims about their environmental credentials. 

Only last week, it was announced that ASIC would be pursuing several super funds for greenwashing, with court action expected. 

Understanding the risk and where businesses can get caught

In Australia, the Australian Competition and Consumer Commission (ACCC) breaks it down well:

"Companies realise that consumers today have an increased awareness of the environmental impact that modern goods may have. Environmental claims are now relevant to a larger product range, from small household items such as nappies, toilet paper, cleaners and detergents to major whitegoods and appliances. Many consumers consider environmental claims, such as water or energy efficiency, as a major factor when evaluating products to purchase. Therefore, it is essential that consumers are provided with accurate information in order to make informed decisions. Firms which make environmental or ‘green’ claims should ensure that their claims are scientifically sound and appropriately substantiated. Consumers are entitled to rely on any environmental claims you make and to expect these claims to be truthful."

Falsely promoting the sustainability of a product or service can have major ramifications for businesses, particularly in a world where a company’s reputation can be tarnished in hours through social media, let alone a formal claim for large corporates. 

As consumers continue to demand an understanding of the emissions associated with the businesses they’re spending money with, the importance of accurate, reliable and thorough carbon accounting has never been more obvious. 

If a business wants to promote itself as sustainable but it has no real understanding of the emissions associated with the supply chain, this is a red flag that should be considered further. Accountants can help prepare a carbon emissions assessment, bringing the actual data to light so the business can manage risk and make informed decisions.