THE RISE OF "GREENWASHING" LITIGATION AND HOW IT AFFECTS THE ENERGY SECTOR

Introduction

One emerging trend is a type of litigation challenging so called "greenwashing", when a public body or company describes its operations or its products as more environmentally friendly or "green" than they actually are. Greenwashing can also be used to describe when an organisation attempts to emphasise sustainable aspects of a product or business practice to draw attention away from the organisation's involvement in other environmentally harmful practices.

Litigation in this area usually arises when consumers or other affected persons seek to hold organisations accountable for their claims about their products, or the nature of their operations, and how they are better for the environment.

Greenwashing litigation is of increasing importance given the widespread public debate about the contribution that individual lifestyle and consumer choices have on reducing the impacts of climate change. It also highlighted the importance of clear and accurate messaging by organisations about their green credentials.

We have seen a significant rise in greenwashing challenges before the courts and regulators like advertising standards boards. While these challenges have spanned various sectors including aviation and food and beverage industries, they have predictably centred on the energy sector given increasing societal pressures to reduce fossil fuel usage and switch to renewable energy sources.

One example of a recent greenwashing challenge in the energy sector is the lawsuit brought in the United States in July 2022 by environmental groups and thinktanks, including Client Earth and the non-profit organisation US Public Interest Research Group (PIRG) Education Fund against Washington Gas Light Company, a natural gas utility. , The groups claim that Washington Gas has breached consumer protection laws by misleading customers by using language and imagery that suggests methane gas is a sustainable and environmentally friendly fuel.

Washington Gas is said to have advertised that methane or natural gas provides "clean, efficient and reliable energy" and that there are environmental benefits associated with switching to natural gas from electrification. The challengers claim that such advertising is greenwashing the environmental impact of methane gas which itself is a fossil fuel that contributes to global warming. Washington Gas has filed to have the case dismissed but the court has not yet set the matter down for hearing.

Further afield in Australia, shareholder advocacy group, Australian Centre for Corporate Responsibility (ACCR), commenced legal proceedings against the Australian gas company, Santos alleging that it breached Australian corporate and consumer protection law by attempting to greenwash its operations to appeal to investors by claiming to produce "clean fuel". The shareholders also challenge Santos' claim that it will reach net zero emissions by 2040 noting its plans for fossil fuel expansion. The legal challenge (like many greenwashing challenges) is set to be a long-running litigation, having commenced in August 2021, and with ACCR expanding its allegations around greenwashing in August last year following additional information produced by Santos in the litigation discovery process.

Recent claims have also demonstrated that it is not just energy companies who need to be aware of the risks of climate litigation –other businesses or organisations who are involved in the sector may also find themselves being targeted. For example, last month in February 2023 a group of three French NGOs announced they had raised an action against major European bank BNP Paribas. The campaigners allege BNP Paribas has failed to comply with the responsibilities imposed by French law on large businesses there to set out clear measures to prevent environmental damage caused by business activity. The groups want BNP Paribas to immediately stop financing the expansion of fossil fuels and adopt an oil and gas exit plan.

The action demonstrates just one of the many novel legal approaches which environmental groups are now pursuing to put pressure on companies regardless of whether they have a direct link to the energy sector, if it is believed that their conduct or actions may have negative environmental impacts and insufficient action has been taken to slow the effects of climate change.

What does 2023 have in store?

The energy sector is likely to continue to be a primary focus for climate litigation targeting greenwashing. Companies working within the sector ought to be alive to the risk of greenwashing challenges, and proceed with caution when considering new messaging and advertisements promoting more environmentally friendly practices and environmental commitments, such as intentions to reduce carbon emissions or commitments to reach net zero.