Media release
Greenwashing Proceedings in Federal Court
The hearing of the Australasian Centre for Corporate Responsibility’s greenwashing claims against Santos Ltd is due to begin in the Federal Court of Australia, on Monday 28 October, 2024 at 9.30am AEDT.
This is the first court case in the world to challenge the veracity of a company’s net zero emissions plan.
In August 2021, ACCR commenced proceedings in the Federal Court alleging Santos Ltd breached the Corporations Act 2001 (Cth) and the Australian Consumer Law by engaging in misleading or deceptive conduct relating to representations contained in its 2020 Annual Report.
In August 2022, ACCR amended its case to include alleged greenwashing in Santos’ 2020 Investor Day Briefing and 2021 Climate Change Report, following additional information produced by Santos in the litigation discovery process.
In February 2023, the Federal Court ordered a court-supervised conferral between the parties' respective lawyers, for the purpose of clarifying and reducing the issues in dispute in the proceedings. Following the conferral process, ACCR sought and obtained leave of the Court to further amend its case. The purpose of the amendments is to reduce as far as possible the issues that will need to be heard and determined by the court, and to clarify ACCR’s claims in light of information that has arisen in the conferral process.
Link to video streaming will be available from the Federal Court. NSD858/2021 ACCR v Santos Ltd
The case is due to conclude on Friday 15 November 2024.
Background
In August 2021, the Australasian Centre for Corporate Responsibility (ACCR) commenced proceedings in the Federal Court alleging that Santos Ltd has breached the Corporations Act 2001 (Cth) and the Australian Consumer Law by engaging in misleading or deceptive conduct relating to representations contained in its 2020 Annual Report.
ACCR later expanded its case to include representations contained in Santos’ 2020 Investor Day Briefing and 2021 Climate Change Report.
The representations concern three major areas:
- Representations that Santos has a clear and credible pathway to:
- reduce its Scope 1 and 2 greenhouse gas emissions by 26-30% by 2030 (from its 2019-20 baseline); and
- achieve “net-zero” Scope 1 and 2 greenhouse gas emissions by 2040.
- Representations that Santos is a producer of “clean energy”, and that natural gas is a “clean fuel”.
- Representations that hydrogen produced from natural gas with carbon capture and storage (blue hydrogen) is “clean” and “zero emissions”.
Net Zero Representations
In the 2020 Annual Report, 2021 Climate Change Report and 2020 Investor Day Briefing, Santos made a number of statements that it had a clear and credible pathway to achieve “net zero” emissions by 2040.
A large amount of this reduction is anticipated to come from future carbon capture and storage (CCS) processes and blue hydrogen.
However, ACCR alleges that Santos failed to disclose that it has firm plans to increase its greenhouse gas emissions through expected oil and gas growth and exploration opportunities beyond 2025.
ACCR also alleges that Santos failed to disclose that its net zero plans depend upon a range of undisclosed and/or unreasonable qualifications and assumptions to reduce or offset Santos’ Scope 1 and 2 emissions, calling into question whether Santos had reasonable grounds to assert it has a “clear and credible” plan to reach net zero emissions by 2040.
Gas as Clean Energy Representations
Santos made a number of statements in its 2020 Annual Report that the natural gas it produces is “clean fuel” and provides “clean energy”.
ACCR says that these representations convey that the extraction of natural gas, and the generation of energy using that natural gas, does not have a material adverse effect on the environment and does not release material amounts of greenhouse gases into the atmosphere.
ACCR says that the 2020 Annual Report failed to disclose that the extraction, processing and use of natural gas releases significant quantities of carbon dioxide and methane into the atmosphere, gases that are key contributors to climate change and global warming.
Over the period covered by the 2020 Annual Report, Santos was responsible for the direct emission of approximately 7.74 million tonnes of CO2 equivalent through its operations, with the end-use of the natural gas it supplied resulting in the emission of approximately 28.6 million tonnes of CO2 equivalent. These figures were also not included in its 2020 Annual Report.
Blue Hydrogen is “Clean” and “Zero Emissions” Representations
In the 2020 Annual Report, 2021 Climate Change Report and 2020 Investor Day Briefing, Santos made a number of statements that the blue hydrogen it intends to produce is “clean” and “zero emissions”.
ACCR says these representations convey that any emissions generated by the production of blue hydrogen would be captured by CCS, such that there would be zero emissions from blue hydrogen production.
ACCR claims that Santos failed to disclose that blue hydrogen production will increase its Scope 1 and 2 emissions.
The Corporations Act and the Australian Consumer Law
In the case, ACCR argues that by making the above representations in its 2020 Annual Report, Santos has engaged in conduct that was misleading or likely to mislead in relation to a financial product – its shares – in contravention of section 1041H of the Corporations Act 2001 (Cth).
It also argues that Santos engaged in conduct in trade or commerce that was misleading or likely to mislead in contravention of section 18 of the Australian Consumer Law.
Further, the case argues that in making the representations relating to gas being a ‘clean’ fuel or energy source, Santos engaged in conduct in trade or commerce that was likely to mislead the public as to the nature, characteristics, suitability, and quality of its primary product (natural gas) in contravention of section 33 of the Australian Consumer Law.
Why is this Important?
Investors need complete, open, and honest information relating to a company they have or are considering investing in.
Accurate information about how the global energy transition towards zero emissions may impact Santos’ future financial prospects is critical to investors’ ability to assess the viability of their investment and their financial and reputational exposure.
Misleading information can leave investors vulnerable to major losses and potentially skew the market unfairly in favour of companies that fail to adequately respond to the risks posed by the energy transition, and unfairly away from companies that are acting responsibly.
Further, by concealing opportunities for smart investment, misleading information may impede an effective and timely response to climate change.
Relief Sought From The Court
ACCR is asking the Federal Court to:
- Make declarations that Santos has engaged in misleading or deceptive conduct, or conduct that is likely to mislead or deceive;
- Grant an injunction prohibiting Santos from engaging in the same misleading or deceptive conduct in the future; and
- Grant an injunction requiring Santos to issue a corrective statement regarding the environmental impacts of its operations.
