NSW Bar Opposes 3-Year Moratorium on ‘Greenwashing’ Lawsuits

Wind turbines can be seen in Albany, Western Australia, on Aug 6, 2023. Susan Mortimer/The Epoch Times

The New South Wales Bar Association has opposed a proposal by the federal government to protect corporations from private citizens’ greenwashing lawsuits, claiming it would give corporations an “unwarranted zone of immunity.”

However, industry groups such as the Australian Chamber of Commerce and Industry (ACCI), have warned that not having the protections could see companies bogged down in lawsuits based on inaccurate climate reporting—potentially slowing down future investment as well.

Under the federal Treasury Department’s proposal, private citizens would be prohibited from suing corporations for misleading or deceptive greenwashing claims for three years.

The department says companies were overly cautious in their climate disclosures if there was a risk of being sued, hence the need for the moratorium.

Normally, the Australian Securities and Investments Commission (ASIC), the Australian Competition and Consumer Commission, and private litigants can file a claim against a business for misleading greenwashing.

Greenwashing is where an entity misrepresents its climate change policies or commitments as a way to appear more environmentally friendly, sustainable, or ethical.

However, under the new proposal (pdf), the Climate-related Financial Disclosure, a three-year moratorium on lawsuits would effectively lock out any legal action, except from ASIC.

The government will also outline new disclosure requirements around climate change commitments from companies in relation to governance, strategy, and risk management. The mandatory reporting requirements for businesses will commence in July 2024.

The NSW Bar Association argues that the proposed three-year moratorium, or freeze in litigation by private citizens, will not only undermine Australia’s ability to achieve its 2030 emissions target but also restrict access to justice for people who believe they have been misled by a company’s climate claims.

“It would also amount to an unwarranted zone of immunity for corporations from action by private litigants under provisions of the law that otherwise regulate (and have for many years regulated) corporate behaviour in all other areas of the commercial life of the nation, and which operate to protect individuals from harm that may be suffered as a consequence of ‘greenwashing’ activity,” NSW Bar President Gabrielle Bashir S.C. said in a submission (pdf).

Concerns Around Calculating ‘Upstream and Downstream’ Emissions

Meanwhile, the Treasury Department acknowledged that significant data availability issues were a problem for accurate climate reporting, including forward-looking statements and emissions reports.

For instance, there are three emission scopes categorised by the government: scope one covers direct emissions from assets owned by the company; scope two covers indirect emissions from the energy consumed by the company; and scope three includes emissions that occur either upstream or downstream in the company and is usually used in the wider community.

Scope three emissions are a concern as the emissions are generated outside the company’s control, for example, gas produced by an energy company that is then burned by a customer.

The bar president said the new moratorium would also protect companies already carrying out climate disclosures.

Ms. Bashir pointed to a current case in the Federal Court of Australia, where a private litigant, in this case, the Australasian Centre for Corporate Responsibility, alleged that oil and gas giant Santos Ltd. breached both the Corporations Act 2001 (Cth) and the Australian Consumer Law by engaging in misleading or deceptive conduct around representations related to its “clean energy” claims to achieve net zero by 2040.

Ms. Bashir argued that under the government’s reporting requirements, companies like Santos would be exposed to liability from 2021 to 2024, and from 2027 onwards, but would be protected for a three-year period in the interim.

“The moratorium would, in that sense, operate arbitrarily for entities who are already making voluntary disclosures. This would be to the detriment of consumers,” she argued.

“For that reason, the [NSW Bar] Association respectfully suggests that if there is to be any moratorium at all, it should be a more targeted moratorium. A disclosing entity which has already made forward-looking statements and/or reported Scope 3 emissions prior to the commencement of the reform should not be protected by the moratorium.”

Penalties Need to be ‘Proportionate’: Business Groups

In a submission (pdf), the ACCI said that penalties needed to be “proportionate,” particularly for businesses that have been compliant with regulations so far.

Moreover, the Association of Mining and Exploration Companies (AMEC), said (pdf) that the proposed three-year litigation freeze was “insufficient” due to the “seismic shift” in administrative and legal requirements.

AMEC reasoned that accurate, standardised, and reliable methods to calculate scope three emissions do not yet exist.

Additionally, the Association of Superannuation Funds of Australia (ASFA) has requested (pdf) the litigation freeze be extended from three to four years.

“[I]t will be late 2028 before superannuation funds can access the Scope 3 emissions reporting (reasonable assurance level) completed by many of the entities in which they invest,” ASFA said.

Additional Reporting Requirements

There are five climate-related categories that companies would be required to report on when the mandatory reporting kicks in.

These categories are: governance, materiality, strategy, risk management, metric, and targets.

For governance, businesses would be required to detail how the company’s governance bodies will oversee and monitor climate-related risks and opportunities, including how they will be incorporated into company policies and procedures.

With materiality, companies will need to disclose information on what could influence investor or creditor decisions, such as the effect of climate change on their financial position, financial performance, and cash flow.

While for metrics and targets, businesses will need to disclose greenhouse gas emissions data, such as scopes one, two, and three emissions.

Additionally, the federal government has proposed a timeline for three tiers of businesses to begin their climate reporting.

For example, group one businesses, which have more than $1 billion in assets and more than 500 employees, will need to make their climate disclosures from 2024-2025.

Group two, which has more than $500 million in assets and more than 250 employees, will need to report from 2026-2027.

While group three businesses, which have more than $25 million in assets and more than 100 employees, will need to report their climate disclosures from 2027-2028.

Consultation on the climate financial disclosure standards is open until March 1, 2024. Draft legislation is expected to be released by the Albanese government by the end of the year.