Penalties Exceeding $100 million: Why Greenwashing is a Growing Risk

Greenwashing has become a tension point between consumer expectations and regulatory risk in Australia. Making false or misleading environmental claims can breach Australian Consumer Law (ACL) and expose the business to significant penalties. For corporations, the maximum penalty is the greater of $100 million, three times the value of the benefit obtained, or 30% of adjusted turnover during the relevant period. Individuals may face penalties up to $2.5 million, and, in both cases, certain false or misleading claims may also constitute criminal offences under the ACL.

For Australian businesses, this indicates the potential financial and reputational risk associated with environmental claims that are false, misleading, or simply unclear. As consumer demand for sustainable products and services grows, so does the scrutiny of the claims businesses make to meet that demand. Understanding what the Australian Competition & Consumer Commission (ACCC) expects is key to managing this risk.

What is greenwashing?

The ACCC considers a business to be engaging in greenwashing where it makes a claim that misrepresents the environmental impact associated with a product, service a business supplies, or with the business itself. This can happen intentionally, where businesses seek to capitalise on consumer preferences without making genuine investments in sustainable practices, or inadvertently (e.g. poor understanding of supply chains, insufficient due diligence, weak reporting practices).

Eight principles for trustworthy claims

To help businesses meet their obligations under the ACL, the ACCC’s 2023 guidance, Making environmental claims: A guide for business sets out eight principles for making trustworthy environmental claims:

1. Make accurate and truthful claims: Claims should be true, factually correct, and not overstate scientific acceptance or environmental benefit.
2. Have evidence to back up your claims: Make the research and data accessible to consumers, independent, scientific evidence is most credible. Claims about future matters need reasonable grounds.
3. Do not hide or omit important information: Be transparent. Omitting details that would give consumers further context can be misleading.
4. Explain any conditions or qualifications: Outline conditions that must be met for the claim to be true. Claims that are only true under certain conditions should say so clearly.
5. Avoid broad and unqualified claims: Make clear, specific claims. Terms like “green”, “eco-friendly” or “sustainable” convey benefits that can have different meanings to different consumers.
6. Use clear and easy-to-understand language: Technical or scientific terms should be avoided unless clearly explained.
7. Visual elements should not give the wrong impression: Colours, imagery and symbols can shape a consumer’s overall impression as much as words.
8. Be direct and open about your sustainability transition: Aspirational claims should be matched with clear, actionable plans, and progress reported accurately.

What does this mean for businesses?

The ACCC’s guidance makes clear that businesses do not need to avoid making environmental claims. Genuine progress on sustainability is encouraged, and businesses should communicate it. The risk lies in claims that surpass the evidence. Getting this right requires businesses to understand the full impact of what they are claiming, have clear evidence for every claim made, and communicate transparently about where they are on their sustainability journey, including where progress has not yet been made or a goal has not been reached.

We provide practical, evidence-based support to help organisations substantiate and communicate their sustainability progress clearly and transparently, reducing the risk of misleading or unsupported claims.

Get in touch with our team to find out how we can support your organisation.

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Cress is the Hydroflux Group’s in-house sustainability consulting team, operating as a specialised division and driven by a simple but powerful goal: to help organisations across Australia, New Zealand and the Pacific region create a more sustainable future. As a young and agile team, we combine technical expertise with fresh, forward-thinking approaches to help clients navigate complex challenges across climate risk, emissions reduction, modern slavery, water stewardship, and ESG reporting, building on the Hydroflux legacy of engineering excellence while bringing a sustainability lens to the industries and communities shaping the future of our region.