In a landmark development for corporate accountability and environmental marketing, EnergyAustralia has reached a settlement in a greenwashing case initiated by advocacy group Parents for Climate. This was the first time in Australia that civil proceedings in respect of alleged misleading "carbon neutral" marketing claims were brought against an energy retailer.

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Originally filed in July 2023 and scheduled for a Federal Court hearing in May 2025, the case was resolved through a settlement shortly before proceedings commenced (without admission of liability). In the proceedings, Parents for Climate alleged that EnergyAustralia’s marketing of it now-discontinued “Go Neutral” product, which claimed to offset customer emissions through carbon credit purchases, amounted to misleading or deceptive conduct contrary to the Australian Consumer Law. As part of the settlement, the company issued a public apology to over 400,000 customers and acknowledged that carbon offsets alone do not provide a credible alternative to reducing fossil fuel emissions.

In a blog we posted last month - Understanding the ACCC’s 2025–26 Compliance and Enforcement Priorities - we highlighted the Australian Competition and Consumer Commission’s (ACCC) intensified focus on greenwashing. This case underscores the growing public scrutiny on environmental claims in marketing.

This scrutiny is not limited to the energy sector. In a separate high-profile case, the makers of GLAD products, Clorox Australia, were recently ordered to pay $8.25 million in penalties for making false or misleading representations that certain garbage bags were partly made of recycled ‘ocean plastic'. The ACCC found that these claims could not be substantiated, reinforcing the regulator’s commitment to holding companies accountable for deceptive environmental messaging.

This blog explores the legal framework governing greenwashing and provides practical insights for businesses and consumers navigating this increasingly regulated and publicly scrutinised subject.

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1. What is Greenwashing?

Although Australian law does not define "greenwashing" with strict legal parameters, the term generally refers to corporate practices that misrepresent environmental benefits. This may involve:

• exaggerating environmental credentials while omitting or downplaying exposure to climate risks;
• making vague or unsubstantiated environmental claims; and/or
• promoting environmental commitments (such as net-zero targets) without a sound basis.

Greenwashing can surface in various contexts, including:

• financial reporting and market disclosures, where companies misrepresent sustainability efforts; and
• advertising and promotional materials, which may mislead consumers about the environmental impact of products or services.

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2. How is Greenwashing Regulated?

Greenwashing has gained significant attention within the broader Environmental, Social, and Governance (ESG) space, with growing scrutiny on businesses that fail to substantiate their environmental claims.

While no law explicitly prohibits greenwashing, it can fall under false or misleading representations or misleading or deceptive conduct, both of which are prohibited under Australian law.

The ACCC and the Australian Securities and Investments Commission (ASIC) actively enforce these laws, taking action to protect consumers and investors from deceptive environmental claims.

The following legal frameworks contain key provisions under which greenwashing can be captured:

(a) Australian Consumer Law

Under the Australian Consumer Law (ACL):

• Section 18 prohibits conduct that is misleading or deceptive (or likely to mislead or deceive) in trade or commerce.
• Section 29 specifically prohibits false or misleading representations about goods or services, including claims relating to their standard, quality, value, grade, composition, style, model, history, sponsorship, approval, performance characteristics, accessories, uses, benefits, or place of origin.

The ACCC actively enforces these provisions, scrutinising environmental claims through regular reviews of business websites and materials, and taking enforcement action where necessary.

(b) ASIC Act and Corporations Act

Greenwashing may also contravene provisions of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), which regulates conduct in relation to financial services and products:

• Section 12DA prohibits misleading or deceptive conduct in connection with financial services.
• Section 12DB prohibits specific types of false or misleading representations about financial services, including representations concerning the standard, quality, value, grade, performance characteristics, uses, or benefits of those services.

Similarly, the Corporations Act 2001 (Cth) (Corporations Act) contains broad prohibitions addressing misleading, deceptive, and false representations, as well as other forms of improper conduct in relation to financial products and services:

• Section 1041H prohibits misleading or deceptive conduct in relation to a financial product or a financial service.
• Section 1041E prohibits the making of a statement or the dissemination of information which is materially false or misleading if it is likely to induce certain dealings with financial products or affect the price for trading in financial products and the person does not care whether the statement or the information is true or false or knows or ought to know that it was false or misleading.
• Section 1041F prohibits inducing another person to deal in financial products through dishonest or improper conduct, such as making false or misleading statements, promises, or forecasts, or by concealing material facts.
• Section 1041G prohibits engaging in in dishonest conduct in relation to a financial product or financial service.

There are also targeted prohibitions in the Corporations Act addressing misleading or deceptive statements in specific contexts, including misstatements or omissions in takeovers, compulsory acquisitions, and buyout documents (section 670A) and in relation to employee share schemes (sections 1100Z, 1100ZH, and 1100ZI).

ASIC actively enforces the above ASIC Act and Corporations Act provisions.  ASIC has also identified greenwashing as a long-term regulatory priority, taking enforcement action against misleading environmental claims in financial products, including issuing infringement notices to investment, superannuation, and managed funds that misrepresent their sustainability credentials.

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3. The EnergyAustralia Case: What Happened

EnergyAustralia’s “Go Neutral” campaign, launched in 2016, promoted the idea that customers could render their electricity and gas usage carbon neutral through the purchase of carbon credits. The program attracted more than 400,000 participants, appealing to environmentally conscious consumers seeking to reduce their personal carbon footprint.

EnergyAustralia promoted the idea that its fossil fuel-based energy could be considered carbon neutral and that opting in would allow customers to “have a positive impact on the environment.” This claim was based on the company's purchase of carbon offsets to match emissions from energy consumption. However, the electricity and gas supplied remained predominantly sourced from fossil fuels - meaning the offsetting mechanism did not reduce or eliminate the carbon-intensive nature of the energy itself.

The marketing campaign came under scrutiny in 2023, when advocacy group Parents for Climate initiated legal proceedings, alleging that EnergyAustralia’s claims amounted to misleading or deceptive conduct contrary to the Australia Consumer Law. The group argued that carbon offsets do not prevent or reverse the greenhouse gas emissions produced by burning fossil fuels. Instead, they contended that customers had been led to believe their energy use was environmentally harmless, when in fact it continued to contribute to climate change. Parents for Climate Action estimated that participants in “Go Neutral” collectively spent hundreds of millions of dollars annually on fossil fuel-based energy under the false impression that it was carbon neutral.

The matter was settled in May 2025, prior to a Federal Court hearing, with no admission of liability from EnergyAustralia. As part of the settlement, the company issued a public apology to affected customers and acknowledged that carbon offsets are not a substitute for actual emissions reduction.

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4. What Does the EnergyAustralia Case Mean for Businesses and Consumers?

(a) Implications For Businesses

The EnergyAustralia settlement highlights the increasing regulatory and reputational risks associated with environmental and sustainability claims. Businesses should take note of the following key considerations:

• Environmental claims must be accurate and substantiated: Claims relating to carbon neutrality, sustainability, or environmental impact must be clearly defined and supported by credible, verifiable evidence. Broad or unqualified statements - particularly those that may mislead by implication or omission - pose a significant legal risk.
• Greenwashing enforcement is a regulatory priority: The ACCC and ASIC have identified greenwashing as a focus area and are actively pursuing enforcement action. Businesses found to have made false or misleading environmental claims may face litigation, regulatory penalties, shareholder action, and reputational harm.
• Offsets are not a substitute for emissions reduction: The use of carbon offsets must be transparently communicated, with clear disclaimers regarding their limitations. Offsets should not be positioned as equivalent to direct emissions reduction, as regulators and the public are increasingly scrutinising claims that overstate their environmental impact.

(b) For Consumers

While regulatory efforts primarily target businesses, the EnergyAustralia case also carries important lessons for consumers seeking to make informed choices and hold companies accountable:

• Transparency is key to trust in environmental marketing: The case underscores the need for clear, substantiated claims in environmental marketing, enabling consumers to make well-informed decisions about sustainable products and services.
• Advocacy is driving corporate accountability: Legal action by Parents for Climate demonstrates how consumer and community-led advocacy can shape corporate behaviour and challenge misleading sustainability narratives.

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5. Sierra Legal’s Recommendations

As regulatory scrutiny and market expectations grow, businesses must proactively strengthen their approach to environmental claims. Sierra Legal recommends implementing the following measures to mitigate legal and reputational risk:

• Conduct a comprehensive green claims audit: Review all environmental representations across marketing materials, labelling, investor communications, and ESG disclosures. Engage legal advisors and environmental specialists to assess their accuracy and risk exposure.
• Establish a robust verification framework: Ensure all environmental claims are supported by evidence that is current, credible, and independently verifiable. Where possible, obtain third-party certifications and maintain detailed documentation in support.
• Implement targeted training and compliance protocols: Provide regular training for marketing, legal, compliance, and ESG teams on relevant legal obligations and regulations. Establish internal processes to vet claims prior to publication.
• Engage regulators proactively: For novel or complex sustainability claims, seek early legal advice and, where appropriate, consult with the ACCC or ASIC to manage compliance risks.

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6. Final Thoughts

As regulatory scrutiny increases and stakeholder expectations evolve, businesses must ensure that sustainability claims are clear, credible, and capable of withstanding legal and public scrutiny.

For more information or tailored advice, please contact the Sierra Legal team.

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