The government plan to provide legal immunity from greenwashing
Currently before the Senate is legislation to introduce mandatory climate reporting from next year for Australian businesses.
The new disclosure regime includes a problematic three-year immunity period, where no legal action is able to be brought against a person or entity in relation to protected statements being reported through the new disclosure regime.
Protected statements include transition plans and any forward-looking statements outlined in sustainability reports, meaning the government is providing cover for widespread greenwashing to continue during the first three years of the new disclosures regime.
For Australia to meaningfully contribute to science-aligned climate action the government must raise the bar on what business is required to do, not provide loopholes that will allow greenwashing to continue in a time of climate crisis.
To ensure real progress towards global 2030 emission reduction goals, the government must be actively addressing and removing all opportunities for greenwashing.
Greenwashing in corporate Australia
Greenwashing and misleading the public and investors on climate action is more than a brand and credibility issue, these actions are actively slowing down the transition. Australia is seeing high rates of corporate greenwashing, with over 57% of companies surveyed by the ACCC in 2023 found to be promoting concerning claims about their environmental credentials.
Legal immunity against greenwashing is bad for democracy and the climate
The right of third parties to hold companies to account for making misleading statements is crucial to the proper functioning of markets, providing accurate information to investors, and is critical in driving public accountability and holding corporate actors responsible for their climate impacts. This legal immunity loophole is bad news for consumers, investors and our climate.
A new report by the London School of Economics shows that Australia has the second highest number of climate-related court cases, just behind the United States - we are one of the leading countries in the world when it comes to legal accountability for climate wrongdoing.
Without the right to take legal action against entities for making misleading statements we are unlikely to see accountability, reporting best-practice, or science-based emissions reductions for another three years. However, while legal cases can drive accountability, a long-term, sustainable transition requires regulation to level the playing field.
Regulators not holding corporations to account
The government has provided assurance that the immunity period will not be abused and lead to more greenwashing as it will not prevent ASIC from taking action for misleading and deceptive conduct during this time or other criminal proceedings being brought.
However, a recent inquiry into ASIC found they are comprehensively failing as a regulator and that ASIC’s response to most reports of alleged misconduct is to take no further action and only a fraction of reports are investigated.
The case for mandating reporting and removal of legal immunity
Since the Paris agreement there has been a groundswell of voluntary commitments by nations and non-state actors and voluntary pledges now cover over 90% of the global economy and more than 70% of Australia ASX listed companies.
However, analysis shows that most of the voluntary commitments made by businesses fall short of emerging global best practice, such as the standards recommended by the UN High Level Expert Group Integrity Matters Report, and that many large emitters have actually expanded their production operations since the Paris Agreement.
The Net Zero Integrity report, which assessed major Australian companies’ net zero pledges and associated transition plans demonstrated widespread greenwashing risk and showed many of the companies assessed are not on track to meet their own publicly stated emission reductions and net zero commitments.
This is why mandatory reporting requirements are needed to ensure real emissions cuts are made in line with science. Without strong legislative and regulatory changes, these low integrity practices will continue.
Where to next with the Bill in the Senate
Climate Integrity welcomes the amendments proposed by Greens Senator Nick McKim that would:
Reduce legal immunity for corporations from three years to one.
Limiting the immunity’s scope to “loss or damage suffered as a result of conduct that is misleading or deceptive, or likely to mislead or deceive”.
The majority of companies covered by the proposed modified liability arrangements have voluntarily been reporting on climate-related risk and have had sufficient notice of proposed reporting requirements a one-year period is sufficient.
The government has the opportunity to join global leaders in making Australia’s climate disclosure laws an effective tool in ensuring emissions are reducing at the rate required.
