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Green-washing – are companies clean when it comes to environmental claims?

“Wipe out your electricity bills”, “100% eco friendly”, “Using only green energy”, “Carbon neutral” – are they all extravagant claims or are businesses making statements like that able to back them up?

Under the Australian Consumer Law (ACL) substantiation notices can be issued, which
require companies to prove to consumer protection authorities that their advertising is truthful, and the advertised product ‘does what it says on the label’.

Misleading consumers with environmental claims that are not true or are only half true in order to sell a product is classed as a false or misleading misrepresentation and misleading or deceptive conduct.Harsh  penalties apply if legal action is taken up to $1.1 million for a corporation or $220,000 for an individual.

Prior to the ACL, businesses were often asked to prove that their product worked, on a voluntary basis. In a number of cases authorities had to engage in extensive testing to prove whether the claims being made could be substantiated.

Now a range of tools have been provided for ACL regulators to call upon a business to substantiate claims. Failing to comply with a substantiation notice carries a fine of up to $16,500 for a corporation and $3,300 for an individual. Meanwhile providing false or misleading information in a substantiation notice could cost a corporation up to $27,500 and an individual $5,500.

One area where these powers might be used is in response to so-called ‘green-washing’ in Australia. The term refers to the deceptive use of green PR to create the impression that a company’s policies or products are environmentally-friendly. This form of marketing spin was the subject of a recent conference hosted by the Sustainable Energy Association at Perth Convention Centre (24 March 2011).

Brand consultant Tracey King kicked off by promoting honesty in green marketing. She outlined several cases where companies had been caught stretching the truth about environmentally friendliness. This included an air-conditioning manufacturer which, in 2006, had to pay back $3.1 million to consumers who purchased air-con units that did not comply with energy efficiency claims on the labels. Another example was a car-maker, which after being challenged by the ACCC, agreed not to re-publish an advert claiming a certain brand of its vehicles are green, with carbon neutral emissions.

In warning the audience about the use of words like ‘eco’, ‘recyclable’ and so on, Ms King outlined the sins of green marketing. These include hidden trade-offs e.g. recycling that produces greenhouse gas emissions, no proof or vagueness – “all-natural” etc. (see terrachoice). You can view the presentation online. Katrina Alidenes, Senior Associate at Minter Ellison, outlined the substantiation notice provisions in the ACL. The ACL regulators have produced a guide to inform businesses about their obligations under the ACL when it comes to promoting green credentials. It examines some issues surrounding carbon offset and neutrality claims and can be found online

Anthony Hilton, Deputy Director of the ACCC, spoke about the need for explanation when making green claims: not just a carbon calculator but all the workings. He said the ACCC was concerned about consumer detriment and used enforcement action, such as that taken against suppliers of “power-saving” devices, as a deterrent. The ACCC, he said, is very interested in hearing about dodgy environmental claims from consumers, competitors or people within government. Businesses need to get it 100% right or they could be subject to naming and shaming.

Commissioner for Consumer Protection Anne Driscoll concurred and spoke about publicly naming several products which wrongly claimed to be able to reduce fuel consumption in motor vehicles. She discussed the emerging issue of solar power claims. Consumer Protection received 211 solar power related enquiries in just the first quarter of 2011. Concerns included the system cost versus the time it will take to break-even through power savings, how much electricity is truly produced and what system capacity is required to create enough power to reduce household bills or even feed back into the grid.

Western Australia is leading the way in tackling misleading claims by solar power system providers, in conjunction with other Australian Consumer Law regulators: NSW, ACT, and the ACCC by coordinating a national compliance program looking at environmental claims. Consumer Protection relies on the community to be its eyes and ears. Consumers and businesses can report any concerns about misleading practices by calling on 1300 30 40 54 or by emailing

Page last updated on:   -  Thursday, 28 April 2011