Greenwashing: Avoid significant penalties for your business

In recent years, consumers have become increasingly concerned about the environmental impact of the products and services they use. As a result, many retailers have begun to market themselves as “green” or “eco-friendly” in an attempt to appeal to these consumers. However, not all of these claims are genuine, and some businesses engage in a practice known as “greenwashing”.  

The recent actions taken by the ACCC and ASIC demonstrate that greenwashing continues to be a crucial area of focus for these regulatory authorities. In light of this, it is crucial to ensure that your business is providing truthful, transparent, and dependable statements regarding the goods and services it offers. 


What is greenwashing?

Greenwashing is the practice of making exaggerated, misleading or false claims about the sustainability and environmental benefits of a product or service. This can take many forms, from simply using vague or meaningless terms like “natural” or “organic” to outright lying about a product’s environmental impact. Greenwashing can mislead consumers into believing that they are making environmentally responsible choices, when in fact they are not. 


How can your business be liable for greenwashing?

In Australia, most transactions and day-to-day activities of retailers are governed by the Australian Consumer Law (ACL). Under the ACL businesses are prohibited from engaging in misleading and deceptive conduct, which includes making claims that are likely to mislead or deceive ordinary consumers in the context of their decision-making.  

The Australian Competition and Consumer Commission (ACCC) has recently announced two “sweeps” aimed at identifying businesses that make false environmental claims. The first sweep targets over 200 company websites across various industries, such as energy, household products, food and drink packaging, cosmetics, clothing, and footwear. The second sweep focuses on online reviews and testimonials. The ACCC has stated that it intends to publish the results of these sweeps and impose fines on any businesses found to be in breach of the ACL. 


What are the consequences of greenwashing?

Retailers that engage in greenwashing can face serious consequences, including legal action, fines, and damage to their reputation. 

Consumers are becoming increasingly savvy about greenwashing and are likely to be sceptical of businesses that make exaggerated or false claims about their environmental practices. 


Key Takeaways

When making a “green” statement, businesses need to: 

  • Clearly state the environmental benefits that the product or service offers. 
  •  The statement must not overstate a benefit. 
  • Take into account the entire life cycle of the product. 
  • Avoid using overly technical language that may confuse consumers. 
  • Support any sustainability claims with concrete facts and have evidence to back up any claims made about products or services. 
  • Be honest and specific about the businesses’ sustainability practices. 
  • Avoid using vague or misleading terms that could be misinterpreted by consumers.