Recent moves by the corporate regulator to outlaw greenwashing – the potential of companies or funds to overrepresent the extent to which their practices are environmentally friendly, sustainable or ethical – has discouraged companies from seeking the spotlight to flex their environmental credentials.
“Green hushing” is the fear of being sued about green claims, and according to Minter Ellison partner Sarah Barker who addressed the Green Building Council of Australia’s Transform conference in a panel discussion on Wednesday, it’s on the rise.
“This is a product of the fact that boards get nervous about forward-looking statements and in climate change, the future looks nothing like the past,” she said.
“Be careful not to get into a situation where you’re afraid to release your sustainability targets because they’re not strong enough to withstand scrutiny or ambitious enough to push the boundaries“
Also speaking at the event, GPT chief executive Bob Johnston said the result can be a tendency to avoid disclosure of climate risks and mitigation strategies. “Be careful not to get into a situation where you’re afraid to release your sustainability targets because they’re not strong enough to withstand scrutiny or ambitious enough to push the boundaries.”
Minter Ellison’s Barker said to avoid greenwashing, it is essential to have an open and transparent conversation with the market about the maturity of targets and any caveats that may prevent the company reaching them in the stated timeframe.
She urged caution in the use of the green building label and the use of any claims such as “ethical” and “responsible”.
“The standard you are going to be held to is a lot higher.”
“Halo advertising” is another potential pitfall. “Be careful not to overcook the egg in extrapolating sustainability features of a single initiative across the whole brand,” Barker added.
The Australian Securities and Investments Commission (ASIC) launched its first court action against alleged greenwashing conduct in the Federal Court in a civil action against Mercer Superannuation (Australia) for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options that were branded “Sustainable Plus”.
The seven investment options were marketed as being exclusive of investments in carbon intensive fossil fuels, and companies involved in alcohol production and gambling. ASIC is alleging that the portfolio contained 15 companies involved in fossil fuels, 15 companies involved in alcohol production and 19 companies involved in gambling.
ASIC has named greenwashing one of its 2023 enforcement priorities and the regulator has already issued over $140,000 in infringement notices for alleged greenwashing. Being found guilty of greenwashing can put companies at foul of several parts of the Corporations Act, including misleading and deceptive conduct, and breach of disclosure obligations.
“Greenwashing litigation is a big stick,” Johnston told the conference. “Any company that thinks they will be found out. Companies that don’t change will be left behind.”
Resorting to greenwashing to avoid being accused of greenwashing can produce even worse outcomes, warned Minter Ellison’s Sarah Barker. “Green hushing isn’t the best solution from a corporate point of view because your stakeholders need to understand what you’re doing. And you are misrepresenting your approach to what is a material financial risk.”
The panel on how Australia’s industry leaders are adapting and changing their business models and structures to respond to the increasing urgency of climate degradation was moderated by Davina Rooney chief executive officer, Green Building Council of Australia, and included Bob Johnston CEO of GPT Group, Alison Mirams executive chair, Roberts Co, Carmel Hourigan office CEO, Charter Hall and Rob Sindel chair, Mirvac.
The panel on global finance was moderated by Nina James, managing director and head of Asia ESG, Blackstone Real Estate and included: Sarah Barker, partner, head of climate and sustainability risk governance, Minter Ellison; Wendy Mackay, managing director, Pollination; Courtenay Smith, CFO, Mirvac; and Robert Dodd executive general manager, finance and commercial, Landcom.