Australia’s corporate regulators have upped the ante to combat greenwashing activity. Recently, ASIC detailed 35 interventions it made over the past nine months, including historic legal action against superannuation giant, Mercer, for spruiking a green fund with links to gambling and fossil fuels. And now ACCC is pursuing dairy company Moo over accusations it incorrectly labelled its packaging as made from ‘ocean plastics’. Both cases highlight the serious issue of false and misleading environmental claims and their potential to distort investment decisions.
What should your business be doing to avoid greenwashing?
>> Pay attention to regulation and update governance systems.
Greenwashing is a key enforcement priority for regulators ASIC and ACCC in 2023. In addition to ASIC interventions, an Internet sweep by ACCC late last year of 247 companies revealed that over half had made spurious claims about their environmental credentials. ESG regulation is moving quickly so keep up to date with regulatory news and changes and update corporate governance systems accordingly. Take a look at the recent guidelines from ASIC which sets out disclosure obligations and some useful examples.
>> Substantiate your claims.
If your business is reporting or promoting a net-zero commitment or target, or using terms like ‘carbon neutral’, ‘clean’ or ‘green’ then you must be able to support this with factual evidence about how the targets are being achieved. Regularly disclose performance against targets and detail the actions that your company is taking to reach that commitment. Disclose the sustainability framework and metrics that you are using to measure and report. Remove any statements (including forward-looking statements) from investor briefings, marketing materials, websites and social media where you cannot provide a reasonable basis for claims.
>> Disclose your climate information.
We recommend reporting against the Taskforce on Climate-Related Financial Disclosures (TCFD) framework which is supported by ASIC to disclose your company’s climate information. Despite the review of global sustainability standards currently underway, the TCFD is well positioned for best-practice disclosure in the future.
>> Use truthful, clear language when describing financial products.
When labelling or describing a financial fund or product, avoid language and headline claims which are vague, open to interpretation and/or cannot be appropriately verified. Phrases such as ‘socially responsible’ or ‘sustainable’ need to be defined – so that investors can make informed decisions. That is, what does the fund or product do that is ‘socially responsible’? If your fund or product does not accurately reflect the description or label, then those statements are at risk of being misleading. Check the ASIC site for useful examples.
>> Assess marketing and advertising statements.
Greenwashing is not only limited to investor information and financial products. Companies must ensure that marketing, advertising, social media and packaging statements are truthful and aligned to factual sustainability information. As a first step, conduct an audit of any marketing materials (including digital media and website content) to check the validity of environmental claims. Make sure your company can produce evidence to back up any claims.
>> Engage specialist advice.
Contact the Futureproof team for guidance on how to build a robust ESG program with best-practice disclosures to avoid greenwashing risks for your business.