As consumer demand for sustainable products grows, businesses are increasingly marketing their ESG and sustainability commitments. However, regulators worldwide are stepping up enforcement to ensure that environmental claims are transparent, credible, and science-based. In Australia, companies that fail to accurately substantiate their net-zero or carbon-neutral claims face escalating legal, reputational, and regulatory risks.
Regulators Crack Down on Greenwashing
The Australian Competition and Consumer Commission (ACCC) has designated misleading environmental claims as one of its 10 key priorities in its 2024-25 Compliance and Enforcement Policy. Meanwhile, the Australian Securities and Investments Commission (ASIC) has reaffirmed that cracking down on deceptive ESG claims remains a strategic focus in its 2024-25 Corporate Plan.
ASIC has already taken enforcement action against companies accused of greenwashing and has warned against greenhushing—where businesses deliberately withhold sustainability information to avoid scrutiny. ASIC Chair Joe Longo has emphasized that greenhushing is just another form of greenwashing, as it misleads stakeholders by omission.
Key ESG Risks for Businesses
As scrutiny intensifies, businesses must navigate three major ESG pitfalls:
Greenwashing: Making misleading or exaggerated environmental claims.
Greenhushing: Withholding sustainability data to avoid regulatory attention.
Greywashing: Setting weak, vague, or unambitious ESG strategies that lack real impact.
A recent South Pole report found that ESG-related products experienced a 6.4% growth in retail sales, 1.7% higher than non-ESG products.[1] However, of the 8,900 companies with net-zero and climate action commitments, only one-third backed their pledges with science-based targets, raising concerns about credibility and accountability.
For businesses, the path to a credible low-emissions transition requires:
✔ Accurate, verifiable data
✔ Transparent planning and disclosure
✔ Clear reporting on sustainability outcomes
Investor Pressure and the Future of ESG Compliance
Beyond regulatory enforcement, the Australian financial sector is under growing pressure from investors and stakeholders to divest from coal, oil, and gas projects. This mirrors global ESG trends, where capital and investment decisions are subject to increasing scrutiny and litigation.[2]
With ESG lawsuits on the rise and regulators tightening enforcement, companies must ensure their sustainability commitments are science-based, transparent, and credible. Failing to do so not only risks legal action but also threatens brand reputation in an era where consumers and investors demand real environmental accountability.
[1] https://www.southpole.com/blog/us-federal-trade-commission-likely-to-update-green-guides-what-you-need-to-know#:~:text=This%20is%20particularly%20evident%20in,which%20is%20the%20foundation%20for
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