For all the noise around corporate climate claims, the recent ruling in the Federal Court of Australia in Australasian Centre for Corporate Responsibility’s (ACCR) claim against Santos, Australia’s first greenwashing case testing net zero, has set the bar for companies.
In what was widely seen as a landmark test of corporate “net zero” claims, the Court dismissed ACCR’s allegations that Santos had misled investors over its emissions targets and its characterisation of natural gas as “clean energy”.
The real significance of the case lies not in who won, but in how the Court interpreted the increasingly contested language of climate target.
In this case, the ACCR, a shareholder advocacy group, alleged that global energy company Santos made misleading and deceptive representations regarding their plan to first, reduce greenhouse gas (GHG) emissions by 2030 and second, achieve “net zero” Scope 1 and 2 GHG emissions by 2040 (net zero roadmap) in contravention with sections 18 and 33 of the Australian Consumer Law (ACL) and section 104H of the Corporations Act.
The ACCR alleged that Santos lacked reasonable grounds to set the Targets, and that they omitted the offset-generating activities associated with Targets.
Context, not slogans, will decide what counts as a misrepresentation
The Court’s reasoning signals a clear direction. Climate-related statements will not be judged in isolation or with scientific literalism, but in context and through the eyes of a reasonable investor.
The Court concluded that investors would have sufficient interest in anthropogenic climate change and global warming, but were not assumed to have scientific training. They would understand there is an energy transition, and, notably, understand that long-term strategic objectives may be achieved in a variety of ways. They expected Santos to adapt to technological developments.
Terms like “clean energy” or “net zero” have become lightning rods for litigation. However, the Court declined to treat them as absolute or technical claims. Instead, it accepted that investors understand these terms as relative and evolving. In the case of Santos, “clean” was interpreted not as emissions-free, but as cleaner than alternatives such as coal.
Similarly, emissions targets were treated as inherently forward-looking, shaped by uncertainty, technological development and changing market conditions. Language such as “realistic” or “credible” was seen not as a promise, but as an expression of intent with built-in flexibility. In other words, the Court recognised something the market has long understood but rarely articulated. Climate transition narratives are, by definition, imperfect and contingent.
A highter bar for claimants, not a free pass for companies
Santos’ success was due to its ability to demonstrate that the Targets were reasonable. The Court accepted that strategies such as those the subject to this proceeding include a degree of uncertainty and the target audience appreciated this
The judgment raises the bar for those seeking to challenge companies’ targets. The courts will not take a rigid interpretation of statements or representations made by companies. They will consider representations in the context made. Claimants will need to demonstrate that companies lacked reasonable grounds at the time the statements were made.
It suggests that future greenwashing cases will be less about semantics and more about substance. Internal modelling, governance processes and the credibility of underlying assumptions will matter more.
The quiet tension between law and market expectations
The quiet tension between law and market expectations
ACCR has already appealed, arguing that the judgment sets the legal bar “well below market and investor expectations”.
If the appeal proceeds the outcome will likely define the next phase of climate disclosure.
Regulators, investors and certain sections of the community have been pushing for ever greater transparency and accountability when it comes to companies’ climate commitments. Until the appeal is heard, the first instance judgment reflects the Court’s pragmatic approach to the issue; it accepts that the transition to net zero is uncertain, and companies cannot be expected to speak with scientific certainty about outcomes decades away and subject to the appeal, the Santos judgment has given boards helpful guidance of what is expected of them.
What boards should actually do now
As companies, their board and their directors adapt to the mandatory sustainability reporting regime in Australia, notice should be taken to this judgment to avoid breaching their obligations. The judgement is informative, in terms of the Court’s approach both concerning their general directors’ duties and Australia’s new mandatory climate reporting legislation that commenced on 1 January 2025 for larger entities and which expanding to capture include mid-sized and smaller companies from mid-2026.
Representations in climate reporting, especially on future matters, must be made on reasonable grounds failing which directors can be liable for a breach of duty. Directors and boards alike must turn their minds to and understand the contents of the company’s statements and climate reports.
Directors cannot obliviate their responsibility, simply relying on professional advice, a reasoned judgement needs to be made. Directors ought to review the robustness of their climate reporting systems and processes particularly given Australian regulators’ increasing focus on greenwashing.
This is just the beginning
Despite another loss, climate litigation is not going away. The judgment has set out clear guidelines for companies to avoid a finding of misleading or deceptive conduct. It has also set the bar for private applicants or activists seeking to pursue climate-related disclosures and emissions targets claims against listed entities.
Activist groups and private claimants will not be deterred and will refine their arguments, finding another company with less robust basis for their targets, focusing more on evidentiary gaps, inconsistencies and governance failures. It is clear that claims framed in absolute or guaranteed terms, particularly where contradicted by available evidence, could succeed.
Companies should take the opportunity to review their climate targets and the basis of those assumptions. Companies must ensure that statements, representations and/or targets are accurate, based on contemporaneous evidence and are subject to a reasonable basis. If statements to the effect of guaranteeing the reaching of a target is made, with the realistic likelihood of achieving that target being contradicted by available evidence, they could find themselves on the wrong end of not only an expensive judgment and facing significant reputational harm.
