“Factually incorrect”: ASIC fines company $56,000 for greenwashing, warns more is to come

Australian Securities and Investments Commission (ASIC) has slapped energy company Tlou with a $53,000 fine for so-called ‘greenwashing’, as the financial regulator warns others who are boasting about their sustainability to back up their claims — or else.

Greenwashing is an emerging term for the practice of representing that a financial product, investment strategy, or business’s operations are environmentally friendly, sustainable or ethical when in actuality is a distortion to influence investment or consumer decisions.

Tlou Energy Limited was fined $53,280 for four infringement notices regarding false or misleading sustainability-related statements made to the Australian Securities Exchange (ASX) in October of last year, ASIC says.

The “factually incorrect” statements were part of two ASX announcements in 2021, namely that electricity produced by Tlou was carbon neutral and that Tlou had environmental approval and the capability to generate certain quantities of electricity from solar power.

Further erroneous claims include that Tlou’s gas-to-power project would be “low emissions”, and Tlou was equally concerned with producing “clean energy” through the use of renewable sources as it was with developing its gas-to-power project.

ASIC found there was either no reasonable basis for Botswana-based Tlou to say those things, or else they were flat-out false.

Deputy chair Sarah Court says there could be more to come for several Australian companies currently under ASIC’s microscope to scrutinise whether their green credentials marry up with operations behind the scenes.

“ASIC is currently investigating a number of listed entities, super funds and managed funds in relation to their green credentials claims,” Court said.

“Companies are on notice that ASIC is actively monitoring the market for potential greenwashing and will take enforcement action, including court action, for serious breaches.”

Court says the lesson is simple: live the greener values you spruik or be prepared to pay up big.

“As entities promote sustainability and green practices as part of their value proposition, they must ensure they can support those statements and have a reasonable basis for doing so,” Court warned.

Last month, ASIC confirmed it was participating in a Sustainable Finance Task Force organised by the International Organization of Securities Commissions to delve into the greenwashing of financial products.

The Australian Competition and Consumer Commission (ACCC) has also flagged it was undertaking a “sweep” of websites for false or misleading claims about sustainability, as part of a broader regulatory crackdown on corporate greenwashing practices.

“As consumers become increasingly interested in purchasing sustainable products, there are growing concerns that some businesses are falsely promoting their environmental or green credentials,” said ACCC deputy chair Delia Rickard.

“Misleading claims about products or services undermine consumer trust and confidence in the market.”

It comes as Baptist World Aid recently released its 2022 Ethical Fashion Guide, which threw a spotlight on hundreds of fashion companies in scrutinising their environmental sustainability and human rights observance.

Overall the 2022 edition gave out a fairly low average score of 29 out of 100 (the top score was 86), while the average score of Australian companies was even lower, at 24, compared to the average score of companies based overseas, at 35.

Baptist World Aid director of advocacy Peter Keegan told SmartCompany that Tlou’s fine should act as a warning for other businesses touting overblown green credentials.

“Increasingly, companies’ social licence to operate depends on demonstrating ethical and sustainable practice,” Keegan said.

“It is a welcome development to see regulators start to call out companies that engage in a marketing exercise without addressing the real challenges in their operations and supply chain.”

Fines should not act as a deterrent for companies committed to embedding sustainability into their brand, Keegan continues, but they should remember green credentials are far more than a simple marketing strategy — they require an overarching operational shift.

“Real change is hard, but governments and citizens should be able to expect transparency — and meaningful progress — from companies,” Keegan said.