Greenwashing – Building a Case

By Damian Kelly

What’s Green and Ethical About Greenwashing?

For lawyers working across corporate/commercial, consumer protection and environmental fields, the rise of “greenwashing” poses a new frontier in compliance, litigation, and reputation management. Once a term of casual environmental critique, greenwashing has become a focal point of regulatory enforcement and judicial scrutiny in Australia and beyond.

Defining the Deception

The term “greenwashing” is defined differently across jurisdictions, but the legal bottom line is consistent: it turns on whether environmental and ethical claims are misleading.

• ASIC frames it as “the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.”

• ACCC describes it as environmental or sustainability claims made by businesses that “may be false, misleading or ha[ve] no reasonable basis.”

• The New Zealand Law Journal goes further, linking greenwashing to ESG credentials—encompassing environmental, social, and governance standards—and warning of deceptive disclosures by financial institutions attempting to entice ethically-minded investors.

  
  

The legal origins of the term trace back to a 1986 essay by Jay Westerveld, who accused hotels of feigning environmental concern to cut laundry costs. As the term spread, so too did the regulatory awareness. In 2024, the Federal Court of Australia recognised this history in ASIC v LGSS Pty Ltd [2024] FCA 587, grounding the concept firmly in legal precedent.

The Pacific Relevance

Greenwashing isn’t just an abstract issue for global financial centres. In the Pacific context, it’s deeply relevant:

• It dovetails with the Pacific Legal Network’s work, including Green Climate Fund certification, Rennel Oil Spill litigation, and ICJ climate submissions.

• Pacific nations often already have the legislative tools to tackle greenwashing—no major reforms needed.

• While regulatory authorities (ASIC, ACCC) often take the lead, individuals, NGOs, and class actions (especially in the US and Europe) are increasingly becoming active litigants.

• Legal pathways include consumer protection, securities regulation, environmental law, and in some countries like Fiji, even director’s duties.

  
  

Case Law: Setting the Benchmark

Case Study 1: ASIC v LGSS (Active Super) [2024] FCA 587

The Conduct: LGSS made representations that it excluded investments in gambling, tobacco, coal, and Russia. Yet, it invested in companies like PointsBet and coal producers—directly and through pooled funds. It argued its Sustainable and Responsible Investment Policy clarified these claims, but the court disagreed. Overlay processes and external ESG ratings were insufficient defenses.

The Finding: The Federal Court ruled that the claims breached sections 12DB(1)(a) and 12DF(1) of the ASIC Act 2001 (Cth). The representations were unequivocal and not effectively qualified. A $10.5 million penalty followed.

The bottom line: Representations about future matters cannot be bluesky ambitions.

Case Study 2: ASIC v Mercer Superannuation (Australia) Ltd [2024] FCA

The Sustainable Plus product was marketed as excluding fossil fuels, alcohol, and gambling, yet the underlying investments told a different story. The court found Mercer breached the same statutory provisions as LGSS, and levied a fine of $11.3 million.

The bottom line: Australia’s current regulatory framework is sufficient to pursue greenwashing. Reform is not required to enable enforcement.

Case Study 3: ACCC v Clorox (GLAD Bags)

The ACCC took action outside the financial sector. Clorox claimed its bags were made with “50% Ocean Plastic.” In truth, the plastic was sourced up to 50km from oceans—not the same thing. The court found this misleading, ordering an $8.25 million penalty and corrective marketing actions.

The bottom line: Companies need to be honest.

Building a Case: A Legal Framework

The current and emerging case law shows that greenwashing claims can be pursued under several heads:

1. False and Misleading Advertising – Common law and statute. Consumer protection action has been taken in Australia under the ASIC Act and ACCC Act. In a Pacific context there are similar bars on false and misleading advertising, including section 55 of the Samoan Competition and Consumer Act 2016, section 75 of the Fijian Competition and Consumer Commission Act 2010, and section 24 of the Consumer Protection Act 2010.

2. Consumer Protection – Statutory remedies with broad application, usually expanding upon common law rules and providing frameworks for traders who engage in anti-consumer conduct.

3. Securities Law – Misleading claims can affect share prices and regulatory compliance.

4. Environmental Law – Especially relevant in jurisdictions where licensing applications require environmental representations.

There’s some technical assessment that is required as to ascertain whether a claim constitutes greenwashing. Case law such as ACCC v Vanguard Investments Australia Limited, now provides significant guidance. To keep it simple, the court will look at whether a false claim was sufficient to lead a consumer into acquiring a product, service or asset in error.

Relief and Penalties

Australian courts have not hesitated to apply strong deterrents, including:

1. Declaratory Relief:

Statements found false must be corrected publicly.

2. Specific Relief:

Cease and desist orders; removal of offending material.

3. Financial Penalties:

Hefty fines. Mercer: $11.3m; LGSS: $10.5m; Clorox: $8.25m.

There are many factors that contribute to the size of penalties, these can be broken into two categories:

• Objective seriousness (e.g. recklessness, seniority, impact on market); and

• Company’s position (e.g. financial size, compliance culture, prior conduct, cooperation)

Final Thoughts: The Green Light to Litigate

With growing regulatory scrutiny and a string of successful test cases, the bar has been set. For lawyers, especially those advising corporates or institutions with ESG portfolios, this is a wake-up call. Claims must be grounded in fact, future representations need evidence, and ESG must be more than branding.

And for those on the enforcement or advocacy side—regulators, NGOs, class action firms—the legal framework is already in place. You don’t need to wait for reform. You just need to build the case, this is something we can help with. For businesses, it’s a reminder to protect your interests and ensure all green claims are sufficiently backed with certifiable facts.