ASIC’s Crackdown on Greenwashing: Companies must remain wary
The growing consumer demand for ethical and environmentally friendly options has prompted certain companies to make ambiguous or false environmental claims, leading to potential instances of false and misleading conduct that can result in harsh penalties from ASIC.
What is ‘greenwashing’?
Generally, greenwashing refers to the practice of providing false or misleading statements pertaining to the ethical or environmental efforts or initiatives your business is making. This issue has become enlightened in the investment and superannuation industry and has resulted in a crackdown from ASIC. In relation to investments, ASIC has referred to greenwashing as the misrepresentation of the extent in which an investment in environmentally friends, sustainable or ethical.
In a recent consumer report, the Responsible Investment Association Australasia found that 86% of Australians wish for their superannuation funds to be invested ethically and in line with sustainable principles. This has resulted in some super funds making false and misleading statements as to where investment funds are going as seen in the recent case of ASIC v Mercer Superannuation (Australia) Limited.
ASIC v Mercer Superannuation (Australia) Limited
In early 2023, ASIC commence a civil penalty proceeding in the Federal Court of Australia against Australian company Mercer Superannuation (Australia) Limited (Mercer) for greenwashing conduct. The matter concerned Mercer allegedly making misleading statements in regard to the sustainable characteristics of its superannuation investment options. This landmark case has been the first instance in which ASIC has taken action against an Australian entity for alleged greenwashing conduct in Court.
The allegations involved statements by Mercer about its ‘Sustainable Plus’ investment options offered by the Mercer Super Trust which allowed members to invest in companies who are ‘deeply committed to sustainability’. However, ASIC claims that members who chose the Sustainable Plus option were actually investing in companies who are involved in extraction of fossil fuels, production of alcohol and gambling. Thus, ASIC alleges that the advertisement of ‘Sustainable Plus’ made false and misleading statements and if engaged in misled the public.
This recent decision has highlighted the crucial significance of prioritising transparency in advertisement and ensuring that your company does not fall foul of the demands from customers for ethical and environmentally options. Ensuring compliance with the promotion or provision of sustainable offers is a crucial factor in effectively mitigating potential action from ASIC. This may also include assuring that language used to promote sustainable offers is clear and transparent in exactly what you are offering to customers.
Disclaimer: This publication is intended for general and informative use only and is not to be relied upon as professional financial or legal advice.
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