A significant lawsuit is unfolding involving one of the largest electricity and gas providers in Australia.
On Wednesday, Energy Australia appeared in federal court, alleging that the Energy Giant misled over 400,000 customers regarding its “Go Neutral” product.
This case is noteworthy as it’s the first in Australia concerning “carbon neutral” marketing practices. It’s also unprecedented for an Australian energy retailer facing legal scrutiny over potential greenwashing.
What is greenwashing?
Greenwashing occurs when companies make claims that they are taking action to support the environment, yet fail to deliver on those promises, according to Erin Turner, CEO of the Center for Consumer Policy Research (CPRC).
Turner indicates that the Center’s research suggests some companies outright lie or mislead customers. Others may give a better impression by using vague statements and green imagery.
“We believe that greenwashing causes confusion and harm to consumers, particularly when polluting companies promote specific green initiatives,” she says. “Our findings show that advertising on social media often highlights clean technology.”
Furthermore, Turner notes that carbon neutral certification schemes can create consumer confusion if they use logos improperly.
A survey involving 446 parents, conducted around climate issues, found that 43% encountered greenwashing from energy providers, banks, or super funds.
Is there anything to stop it happening in Australia?
Turner remarked that while Australia’s consumer laws protect against misleading practices, they don’t help when companies use vague language regarding their environmental claims.
In contrast, the European Union has implemented the “Green Claims Directive,” which requires member states to enforce laws against greenwashing, particularly concerning claims of being environmentally friendly or carbon neutral.
In 2023, the Australian Competition and Consumer Commission put forth “principles” for environmental claims, but climate advocates argue these are open to misinterpretation, suggesting the federal government needs to take more substantial action.
What are climate parents claiming in their case?
Climate parents initiated legal proceedings against Energy Australia in 2023. They allege that the retailer misrepresented its “Go Neutral” products, claiming that its electricity and gas were carbon neutral because they purchase carbon credits to offset emissions.
David Hertzberg, the lead attorney, states that the core argument revolves around misleading or deceptive practices that violate Australia’s consumer laws.
Energy Australia is still involved in the federal government’s climate-active certification scheme, most of its carbon credits sourced from international projects, including agricultural initiatives in the Kimberley region of Western Australia.
What is the climate-active certification scheme?
This voluntary program allows companies to report their emissions and the offsets they buy, enabling them to claim their products are carbon neutral.
Climate Chief Executive Nic Seton has expressed concerns about the scheme, noting that companies can acquire “low-quality” offsets that do not effectively reduce overall emissions.
These problematic offsets include “avoidance credits,” which suggest preventing future emissions without actively removing carbon from the atmosphere, Seton explains.
“We argue that the way companies use offsets for carbon neutral claims can be misleading,” he states. “It’s almost like creative marketing. In the worst case, it could be seen as a license to pollute.”
Reportedly, over 100 companies, including Australia Post and Telstra, have exited the climate-active scheme in recent years.
The Federal Environment Agency is reviewing the future direction of climate-active programs, although a spokesperson stated it will continue certifying entities that meet existing requirements.
What has Energy Australia said?
Following the legal action from climate parents, Energy Australia has halted the offering of “neutral” options to new customers and plans to gradually phase out “Go Neutral” products for current participants.
The company said, “We have made a commercial decision to cease neutrality, prioritizing a review and update of our plans to assist customers in reducing emissions.”
A spokesperson mentioned cooperation with climate parents and voiced optimism for resolving the matter collaboratively.
“Energy Australia remains committed to decarbonizing and helping customers reduce their emissions through investments in clean energy technologies,” the spokesperson added.
What’s next?
The climate parents are seeking a court ruling that Energy Australia has engaged in greenwashing, along with an order for a corrective notice.
The hearing is set for eight days, with the court’s decision forthcoming.
Depending on the case’s outcome, it could set important precedents for future allegations of corporate greenwashing and push the government towards more robust measures against it.
