Briefing

It ain’t easy proving greenwashing: Federal Court confirms high bar for greenwashing claims

The Federal Court of Australia has dismissed the world-first greenwashing claims against Santos, finding its net-zero, clean energy and hydrogen representations were contextual and supported by reasonable assumptions. The decision sets a high threshold for proving net-zero plans and future-looking decarbonisation strategies constitute misleading climate disclosures.

Background

The Australasian Centre for Corporate Responsibility (ACCR) contended that Santos engaged in conduct that was misleading or likely to mislead or deceive in contravention of s 1014H of the Corporations Act 2001 (Cth) and ss 18 and 33 of the Australian Consumer Law.

The ACCR alleged that Santos’ 2020 Investor Day Presentation, 2020 Annual Report, and 2021 Climate Change Report (together, the Publications), contained three major areas of misleading or deceptive representations:

that Santos is a producer of ‘clean energy’ and that natural gas is a ‘clean fuel’ (Clean Energy Representations);
that blue hydrogen produced by Santos from natural gas with carbon capture and storage (CCS) is ‘clean hydrogen’ and ‘zero emissions hydrogen’ (Hydrogen Representations); and
that Santos had a clear and credible pathway to ‘net zero’ by 2040 (Net Zero Roadmap Representations).

The decision

The Court ultimately dismissed each of the ACCR’s contentions of misleading or deceptive conduct against Santos.

The target audience

The first matter for determination was establishing the target audience of Santos’ alleged misleading representations. The Court considered the characteristics of the target audience, as this would inform whether Santos’ representations were liable to mislead a target audience with those characteristics.

Justice Markovic struck a balancebetween the ACCR’s broad, lay characterisation and Santos’ narrow, sophisticated characterisation, and attributed a list of characteristics to the target audience, including: a sufficient interest in anthropogenic climate change, no scientific training, an understanding of an ongoing energy transition (but no technical familiarity), and some degree of familiarity with the Publications (having read at least one of them).

Context is key

A central feature of Justice Markovic’s reasoning was that the alleged misleading conduct must be assessed in context, including surrounding text, qualifications, and the broader disclosure framework. Her Honour rejected the ACCR’s approach of isolating terms such as ‘clean energy’ and ‘zero-emissions hydrogen’ and construing them in an absolute sense.

In relation to the Clean Energy Representations, Justice Markovic found that Santos expressly framed natural gas as cleaner rather than clean in an absolute sense. Phrases such as transitioning from ‘heavier emitting fuels, such as coal and diesel, to cleaner fuels such as natural gas’ and statements that gas produced ‘half the greenhouse emissions of coal’ conveyed a comparative emissions claim. Read in context, a reasonable member of the target audience, as defined earlier by the Court, would understand that natural gas still produces greenhouse gas emissions – and thus would not be misled or deceived.

Similarly, the Hydrogen Representations were found not to convey a literal claim of zero emissions. Justice Markovic emphasised that references to ‘zero-emissions hydrogen’ were repeatedly qualified by disclosures concerning offsets and carbon capture storage, including Santos’ stated intention to ‘reduce, and where relevant, offset greenhouse gas emissions’. Her Honour concluded that the representations conveyed net-zero emissions, not emissions-free production, when read holistically. As such, the representations were not misleading in the manner alleged.

Audience understanding will be shaped by industry usage

Justice Markovic placed significant weight on the knowledge base of a reasonable member of the target audience, including how terms were used and understood within the Australian energy industry at the relevant time. Her Honour accepted Santos’ expert evidence that terms such as ‘clean hydrogen’ and ‘zero-emissions hydrogen’ did not have settled or uniform meanings in the industry when the representations were made.

Against that background, the Court found that a reasonable member would not interpret those expressions as guaranteeing emissions-free hydrogen production. Instead, such a person would understand Santos to be referring to hydrogen production pathways involving natural gas with carbon capture and storage, supported by offsets. This industry context further undermined the ACCR’s contention that the representations would mislead by conveying an absolute or literal zero emissions claim.

Reasonable grounds do not require complete certainty

In addressing the Net-Zero Roadmap Representations, Justice Markovic rejected the proposition that uncertainty or contingency necessarily negates reasonable grounds. Her Honour emphasised that long-term climate strategies are, by their nature, conditional and forward-looking, and that this uncertainty was both explicit and implicit in Santos’ disclosures.

Justice Markovic observed that Santos did not represent its roadmap as a series of inflexible steps or guarantees, but rather as long-term objectives dependent on future developments, including emerging markets and technologies. Her Honour explained that describing a plan as ‘realistic’ does not amount to a promise of achievement, particularly when read in context with disclosures about contingencies and assumptions.

Importantly, the Court held that reasonable grounds do not require completeness or precision to the level alleged by the ACCR. Omissions concerning future emissions growth or technological pathways did not render the representations misleading where the roadmap was clearly subject to change.

Key takeaways

Alleged greenwashing will not be established by isolating individual words or phrases, but by examining whether the representations, read as a whole and in their proper context, would mislead a reasonable member of the target audience.
The Court will assess alleged greenwashing not by reference to theoretical or dictionary meanings, but by how relevant audiences, informed by industry practice and disclosure norms, would understand the representations.
Long‑term climate and net‑zero representations may be grounded in reasonable belief despite inherent uncertainty, and aspirational plans expressed with appropriate qualifications are not rendered misleading merely because they depend on future contingencies.
The decision should provide some comfort to companies genuinely (and publicly) pursuing emissions reductions and net zero. However, the financial and reputational costs of litigation in which greenwashing is alleged should still deter unscrupulous net zero claims that cannot be supported by evidence.

The ACCR has appealed the decision.

Jessie Stewart, Graduate, assisted in the preparation of this briefing.