AGL Energy accused of greenwashing in a new class action suit
A class action accusing AGL Energy of greenwashing customers who paid a $1.50 weekly premium for "carbon neutral" products is putting a spotlight on how misleading environmental claims can damage trust inside organisations, too.
The class action suit was filed in the Federal Court by Slater and Gordon Lawyers, alleging that AGL misled its customers about its "carbon neutral" products, which it claimed would offset the emissions linked to their energy use.
"The carbon credits AGL used to support those claims did not genuinely deliver that outcome," the law firm said on its website.
"The class action alleges AGL's claims were misleading and deceptive within the meaning of the Australian consumer law. This amounts to a type of greenwashing."
AGL told the Australian Financial Review that it will "vigorously defend the proceedings."
"AGL takes its obligations under Australian consumer law seriously and remains committed to providing clear and accurate information to customers about its products and services," the company told the AFR in a statement.
The risk of 'greenwashing'
Greenwashing is the term used to describe false or misleading environmental claims in a bid to make a business appear more environmentally beneficial than it really is, according to the Australian Competition and Consumer Commission (ACCC).
"Omitting information can amount to a false or misleading representation or misleading or deceptive conduct, depending upon the circumstances and the overall impression created," the ACCC said on its website.
"We consider a business to be engaging in greenwashing where they use any claim that makes a product or service seem better or less harmful for the environment than it really is."
In workplaces, greenwashing can happen when organisations falsely claim that their internal culture and operations are environmentally friendly.
The practice has emerged amid rising regulations on sustainability, and as employees further scrutinise their employers' commitment to the environment and being sustainable.
Belinda Lyone, co-CEO of COS, previously told HRD that employees "now assess commitments through what they see in decision-making across sourcing, logistics, infrastructure and supplier relationships, rather than through statements or targets alone."
For HR, this means greenwashing carries real consequences for how employees view their employer.
Research from Ivey Business School in Canada in 2023 showed that corporate greenwashing can negatively impact employees' perceptions of their organisation, to the point of employees considering resignation.
Greenwashing can also put employers' reputations at risk if employees decide to expose them for the practice, resulting in boycotts and even sanctions.
"As we are experiencing a workforce that is achieving increasingly higher levels of education in sustainability issues, these findings are particularly salient," said Associate Professor Wren Montgomery.
Organisations accused of greenwashing should demonstrate how they have altered their environmental practices to be more authentic, according to the study.
"We know that consumers, investors, and governments are more attuned than ever to exaggerated sustainability claims made by companies," Montgomery said.
"But many companies overlook a key stakeholder that is both more likely to know the truth about green claims and able to impact the bottom line – their employees."
