ACCC launches major ‘greenwashing’ crackdown amid complaints

Businesses making false environmental claims to lure earth-conscious consumers are in the watchdog’s sights after a spike in complaints.

The Australian Competition and Consumer Commission is planning a major crackdown on greenwashing, with plans to conduct an “internet sweep” of environmental claims in corporate advertising, taking legal action if necessary.

“The ACCC is hearing growing concerns that some businesses are falsely promoting environmental or green credentials to capitalise on changing consumer preferences,” ACCC deputy chair Delia Rickard warned in a speech to a conference in Sydney on Tuesday.

“The Commission won’t hesitate to take enforcement action where we see that consumers are being misled or deceived by green claims.”

Ms Rickard’s comments follow warnings by corporate regulator, the Australian Securities and Investments Commission (ASIC) that it was also prepared to take action in “egregious” cases of greenwashing.

ASIC deputy chair, Karen Chester, told the Australian Institute of Company Directors conference in August that the regulator was looking at a range of potential actions when it saw cases of greenwashing from giving companies “a nudge” to taking enforcement action.

The regulator has issued an information sheet making sure that companies were aware of their legal obligations about potential greenwashing.

ASIC in June warned fund managers and super funds to ensure that claims about their green credentials in product disclosure statements and prospectuses for new products were accurate.

The regulator defines “greenwashing” as the practice of misrepresenting the extent to which a financial product or investment strategy was environmentally friendly, sustainable or ethical.

The ACCC’s Ms Rickard signalled a similar approach, saying that consumer and fair trading issues relating to environmental claims and sustainability were “a current priority for the ACCC.”

She said consumer and fair trading issues relating to environmental claims and sustainability were “a current priority for the ACCC,” she said.

Ms Rickard warned business that the ACCC would soon be starting an “internet sweep of various environmental claims made by Australian businesses.”

A similar review done by the International Consumer Protection Network (ICPEN) in 2020 had found that 40 per cent of environmental claims were potentially misleading and required further action.

While the ACCC will use the information from its internet sweep to update its guidance for Australian business, Ms Rickard warned that the ACCC was prepared to take action against companies which it believes have misleading claims, in the same way that it took action against car maker VW for false representations about compliance with Australian diesel emission standards.

That case led to a court ordering VW to pay $125m in penalties.

Volkswagen was fined after it falsely claimed its cars met Australia’s diesel emissions standards. Picture: Dean Lewins

Ms Rickard said businesses were increasingly advertising their ‘sustainability benefits’ to sell their goods and services, as consumers became more focused on sustainability to inform their purchasing decisions.

Some consumers were also willing to pay more for a product which they believed was more environmentally sustainable.

She said this saw frequent claims by companies that their products were “environmentally friendly”, “biodegradable” or involved “sustainable” production methods or were made from recycled materials.

But she said there was a “huge element of trust” involved in the advertising claims with consumers unable to check the veracity of a company’s claims.

“Greenwashing erodes consumer trust,” she said.

While some companies inadvertently misled consumers, she said there was “an element of the market that will deliberately ‘fudge or bend the truth’ and will create a misleading impression to meet consumer expectations.”

The ACCC crackdown comes as corporate regulator the Australian Securities and Investments Commission recently moved to increase its scrutiny of claims by superannuation funds and managed funds promoting “sustainable” investments.

Ms Rickard said the ACCC was working closely with ASIC and other regulators like the Clean Energy Regulator to take a “co-ordinated approach to addressing the broad range of issues related to sustainability.”

She said companies claiming they had green credentials in their advertising would need to be able to substantiate their claims with up to date facts.

They would also need to make sure that visual claims and labels were useful to consumers and were not confusing or misleading.

Ms Rickard said the ACCC was closely watching action in the Netherlands against clothing company H&M and global sporting goods retailer, Decathlon, which saw the companies forced to remove or amend misleading sustainability claims.

She said the action being taken in the Netherlands would “hopefully see a flow on benefit for Australian consumers.”

Ms Rickard it was difficult for consumers to verify corporate claims about their sustainability.

“Most consumers are not going to do the research required to verify claims when standing in aisle 12 at their local supermarket when choosing between two brands of detergent,” she said.

“This gives rise to the greater likelihood of consumers being misled, and unfortunately can also be knowingly exploited,” she said.

“False or misleading sustainability claims undermine consumer trust in all green claims and reduces confidence in the market – something the ACCC is keen to guard against.”

Ms Rickard said the ACCC was seeing many examples of businesses making claims about their products, without providing any information to consumers to substantiate the claims.

“It is important that businesses can back up the claims they are making, whether through reliable scientific reports, transparent supply chain information, reputable third-party certification, or other forms of evidence.”

She said if the ACCC was concerned about business claims, it would be asking companies to verify them.

She said investments by companies which were genuinely improving their environmental credentials needed to be protected from “unscrupulous behaviour of other businesses making green claims without incurring the same costs.”

Ms Rickard said tighter regulations on environmental advertising may need to be introduced in Australia.

“This is something that the ACCC will continue to consider in consultation with relevant stakeholders,” she said.