Regulatory action on greenwashing is speeding up. Some companies have been hit hard by the authorities to make the point that that this kind of behaviour won’t be tolerated. Mercer copped an $11 million fine for its poor screening of products. And there are more to come such as the Australian Competition and Consumer Commission embarks on a major prosecution over greenwashing against Clorox and its Glad bags.
Legal concerns about product claims and anti-competitive behaviour, whether real or contrived, can get in the way of companies acting to solve sustainability challenges, and then openly sharing their stories.
Fears of being caught out greenwashing lead to deliberate silence or so called greenhushing. And there’s concern from corporate lawyers that collaboration with rivals to raise industry standards or fix supply chains may be called out as cartel conduct.
For innovative lawyer Hannah Marshall, however, with the right tactics companies can use the law to empower their sustainability efforts. It’s called greenlighting, and has become the guiding philosophy for Good Company Law, the firm Hannah founded this year.
Hannah shared her journey and vision with The Fifth Estate’s Murray Hogarth.
You’re coming from this philosophy of the law being an enabler for good companies and good action by companies, not a barrier. Is it a challenge to get cut-through with that message?
Historically, legal compliance has been a roadblock and a risk to manage. But the forward-looking businesses and those who are serious about their impact are starting to see it as an opportunity as well, and I think that’s really cool, and that’s what I love to help them with.
Nonetheless, you nearly took a big break from legal practice this year. What’s this kelp farming thing?
I had quit my job with this fanciful idea of taking time off and maybe reimagining myself as a kelp farmer with a cute beanie and some gumboots. What actually happened was about six or eight weeks into that break, I got a mad sense of FOMO, to be frank. That was a lovely affirmation that I missed the law, and I loved the law.
That triggered a comeback?
Ultimately, I decided I wanted to set up my own firm and try to do something a little bit different. So here I am, about five months in.
How did sustainability and ESG get into the picture for you?
I’ve always been interested in the environment. I remember raising eyebrows when I was a very junior lawyer at a firm called Clayton Utz in Perth, which was very heavily involved in the mining industry, and I chose to go to a Greens dinner where Bob Brown was speaking instead of attending the professional staff dinner. It’s kind of marinated within me ever since.
What do companies typically get wrong in sustainability and ESG?
It starts with the idea of what they’d like to be able to say about their business in an aspirational sense. Maybe it’s a marketing team saying, “Oh, products which are sustainable are selling really well at the minute, so we should be sustainable too.” Then they come up with a content strategy which is disconnected from the actual business practice.
So it’s an over-enthusiasm problem?
Over-enthusiasm is a good way of putting it. Everyone feels a sense of urgency to different degrees about the climate crisis, and they want to get out there and be part of the solution so greatly, and they’re just getting a bit ahead of themselves before starting to look really closely at their internal practices.
We’ve seen a trend recently where corporations that had heroic goals for carbon neutral and net zero have been walking them back. Are there mixed blessings in that?
In some instances, that’s a really great outcome, where there were businesses which were greenwashing quite badly. On the other hand, there are a bunch of good businesses which are making a broader risk assessment of the environment at the moment, and deciding to maybe say a bit less, and that’s a real shame. I think it is incumbent on most businesses that want to play a part in the solution to the climate crisis to keep talking and not be afraid, and to find ways to communicate that match their risk appetite, rather than just being “green-hushed”.
Greenwashing has been around for a long time. Is there something different with how it’s manifesting itself now, and how companies are being compelled to respond to it?
One aspect is that consumer understanding of the climate crisis, carbon emissions and things like that, has evolved a lot. Consumers have wised up and said, “Well, we need more information than just a logo or a sticker on a product to understand what it is you’re actually doing and to inform our choices.”
On the other side, there’s been a lot more regulatory activity and prosecutions, which have also fed into the broader risk profile for businesses.
What are the real penalties for being caught out greenwashing?
We’ve seen some big numbers start to come out of the courts from Australian Securities and Investments Commission (ASIC) prosecutions. Recently, there was $11 million for Mercer greenwashing about its ESG screens on its investment products. There are more to come. There have been two other prosecutions recently where the court has determined that an investment fund or a superannuation fund misled consumer, but they’re still waiting to decide penalties. We haven’t seen as much on the consumer product front yet, but the Australian Competition and Consumer Commission (ACCC) has commenced its first major prosecution over greenwashing against Clorox and its Glad bags.
So, if you’re thinking of making green claims, are you going to call your lawyer first rather than your PR?
It should be a team effort in an ideal world. Different industries have different risk profiles based on the nature of their products or services. Obviously, the financial services industry has borne a lot of scrutiny over the last couple of years. So absolutely, they should be working with both their lawyers and their PR and marketing teams.
Is the ACCC’s guidance quite useful?
It’s as clear as it can be, given the fact that the law which sits behind it is basically just a principle which says, “Don’t be misleading”.
Tell me about this concept of greenlighting that you’ve embraced
Greenlighting as a concept is helping businesses feel empowered to move past “greenhushing” and be confident to communicate their journey warts and all. Environmental communications, to start with, was a bit of a cowboy landscape. People would say anything and not worry too much about whether they could back it up. That’s old. That’s not what happens anymore. Now people need to be aware of their legal obligations, aware of the part that their business can play in shifting the dial on climate change, and confident to share their story in a transparent way.
What’s your process to do that?
If you flip around the process from what people might kind of naturally conceive, it makes it a lot easier, and less scary.
Step one is to look at what your business is already doing. Consider what is your substantiation before you come up with your communications strategy. Have a look at what’s already happening. How have you changed your product inputs? What data do you have from your own business or from suppliers about your climate impact? Interrogate that data, make sure it’s reliable and robust. Starting with your substantiation also helps if you ever do need to defend your claims.
Step two is to craft your language and come up with a communications strategy which is closely aligned with that factual data that you’ve already amassed. This reduces your legal risk, but it also creates a more meaningful story, which consumers might be able to relate to. That can have a positive brand impact as well, where people feel a greater sense of trust and loyalty because you’ve told a slightly more detailed story about your business’s impact.
Step three is an overall risk sense-check. Have we got enough detail? What’s the inherent level of risk? Is this a heavy-handed comparative claim? Does the risk profile match your risk appetite? And have you had legal input?
So, is that about making sure that you’ve thought through what you’re getting yourself into?
A recent example is MasterChef and its gas industry sponsorship deal. I can’t help but wonder what level of risk analysis from a brand perspective, as well as a legal perspective, was applied to that partnership before it went live. People are incredibly critical of what they’re saying about renewable gas and its viability, and the way it’s being represented through the MasterChef show.
You’ve also highlighted competition law as another challenging area for companies doing sustainability
A lot of businesses are starting to look at how they can improve their impact and finding that there are problems they can’t solve on their own. And that naturally leads to them thinking, “Well, is this something we can address at an industry level?” Particularly in larger businesses, with in-house legal teams, the lawyers can get very worried as soon as someone says, “Let’s get together with our competitor and figure out how we can lower impact from supply inputs.” They’ll say, “You can’t do that. That’s cartel conduct.” So often, for that reason, those ideas get shut down before they really get explored.
But can you manage that?
Legally speaking, yes, there can obviously be competition law risks which arise when competitors get together to try to solve common problems. But in most cases, particularly where they’re trying to solve environmental and impact problems, the legal risk is surmountable. The ACCC seems to be saying, “We want to see more of this stuff. We’re perfectly open to considering the positive environmental benefits from collaboration and seeing those as outweighing any competitive detriment, which would allow us to authorise the activity and grant immunity from competition law liability.”
So bring it on?
I hope, in the short-term future, that we see businesses start to become a bit bolder on that front, and start to explore how they can collaborate, either in a small or a large way. The bigger scale is industry groups doing product stewardship schemes and things like that. But it doesn’t have to be that big. It can just be a really small thing, such as let’s both agree not to use this harmful product.