The decision was the first case internationally to challenge the veracity of a company’s statements regarding its net-zero emissions targets. It provides valuable guidance regarding how the courts will evaluate representations regarding environmental objectives and energy transition strategies, emphasizing that such statements must be made on reasonable grounds and properly substantiated.
Key takeaways
The court’s judgment reinforces the following:1
- Statements regarding climate ambitions, such as net-zero targets or emissions reductions plans, are representations as to future matters that must be made on reasonable grounds and supported by appropriate evidence. Given that statements may be misleading by omission, it is important to disclose material assumptions or qualifications regarding any such targets.
- Long-term climate targets necessarily involve assumptions about future technologies, markets, and regulations that cannot be known with certainty. Nevertheless, in determining the reasonableness of emissions targets or clean energy claims, the courts are likely to closely interrogate consideration of whether the target is appropriate and achievable, such as expert evidence and board consideration of the targets. Evidence of robust internal processes for target setting supported by evidence will support an inference that there are reasonable grounds for a target.
- Whether a particular representation is misleading or deceptive focuses on the effect it has on its audience. Santos’ communications were held to be made to a large and diverse group of investors, with interest in climate change but no scientific training, who would expect that Santos’ objectives may change over time. Santos’ statements regarding their “clean” fuel and “net zero” hydrogen were held not to be misleading to this audience, when viewed in their context. However, it remains possible that similar statements, made in a different context, could mislead investors or consumers, particularly if they are less sophisticated than Santos’ audience. For this reason, it continues to be important to avoid making broad, unsubstantiated claims or using vague terminology regarding “green” credentials. This is consistent with guidance previously issued by the ACCC and ASIC.
Background
ACCR’s claims
Santos is a major Australian oil and gas company. In 2021, the Australasian Centre for Corporate Responsibility (ACCR), a shareholder advocacy organization and Santos shareholder, commenced proceedings against Santos in the Federal Court of Australia. The ACCR alleged that Santos had engaged in misleading or deceptive conduct contrary to the Corporations Act 2001 (Cth) (Corporations Act) and the Australian Consumer Law, by statements made in its Investor Day Presentation published on December 1, 2020, its 2020 Annual Report, and its 2021 Climate Change Report.2 The ACCR’s case focused on three main claims:
- Clean energy representation: First, that Santos represented that it produces “clean energy” and that Santos is a “leading clean fuel company.” The ACCR maintained that this was misleading, on the basis that natural gas is not “clean,” and Santos is a heavy emitter of greenhouse gases.3
- 2030 target and net-zero roadmap representation: Secondly, that Santos represented that it had a “clear and credible” plan to reduce its Scope 1 and 2 greenhouse gas emissions by 26–30% by 2030 and achieve “net-zero” Scope 1 and 2 emissions by 2040. The ACCR maintained that this plan did not account for additional emissions associated with expected hydrocarbon growth and was based on undisclosed and unreasonable assumptions that were “nominal,” “notional,” and “speculative.”4
- Zero-emissions hydrogen representation: Thirdly, that Santos claimed it could, in the future, produce “zero-emissions” or “clean” hydrogen, and hydrogen with “no emissions in its production,” when in fact Santos was proposing to produce “blue hydrogen” (hydrogen made from natural gas using carbon capture and storage) which generates material additional emissions.5
The ACCR argued that, by these representations, Santos had engaged in conduct that was misleading or likely to mislead in relation to:
- Santos’ shares, as a financial product, contrary to section 1041H of the Corporations Act
- the supply of natural gas, contrary to section 18 of the Australian Consumer Law
- the nature, characteristics, suitability, and quality of natural gas as a product, contrary to section 33 of the Australian Consumer Law.
The ACCR did not seek financial compensation. Rather it sought a declaration regarding Santos’ alleged breaches and injunction, asserting that it was acting in the public interest to ensure that corporate climate commitments are made on reasonable grounds and not misleading.6
Santos’ response
Santos opposed these claims, maintaining that its statements were not misleading or deceptive. It contended that:
- Clean energy representations: First, that Santos never suggested that natural gas produces no emissions, but rather that natural gas was “cleaner” than coal and diesel, and that no reasonable member of the target audience would have understood otherwise or be led into error.7
- 2030 target and net-zero roadmap representations: Secondly, that Santos’ statements made it clear that its 2030 targets and net-zero ambitions were long-term targets based on assessments about potential developments and opportunities in a highly uncertain future in an industry marked by rapid changes in markets, technology, economics, and regulation. Santos maintained that a reasonable member of the target audience would have understood this and would not have been misled.8
- Zero-emissions hydrogen representations: Thirdly, that Santos did not convey that hydrogen production would have no emissions. Rather, at the relevant time, terms like “zero-emissions,” “clean,” and “carbon neutral” hydrogen were industry terms referring to hydrogen produced from natural gas with carbon capture and storage and with offsets for remaining emissions.9
The court’s decision
The court (Justice Markovic) found that Santos’ representations were not misleading or deceptive, or likely to mislead or deceive. In doing so, they made a number of key findings.
Legal framework and target audience for representations
The court reiterated the well-established test for establishing whether conduct is misleading or deceptive, which requires consideration of the following steps:10
“[F]irst, identifying with precision the ‘conduct’ said to contravene s 18; second, considering whether the identified conduct was conduct ‘in trade or commerce’; third, considering what meaning that conduct conveyed; and fourth, determining whether that conduct in light of that meaning was ‘misleading or deceptive or … likely to mislead or deceive’.”
A key focus of the case was on defining the characteristics of the “target audience” for Santos’ communications. This is because whether conduct is misleading or deceptive depends on its likely impact on the ordinary or reasonable member of that audience. Justice Markovic found that the target audience of Santos’ representations was a large and diverse group of investors, including both individuals and institutions, who had the following characteristics:11
- They have a sufficient interest in climate change but have varying levels of knowledge about it.
- They are not assumed to have scientific training.
- They understand there is an ongoing energy transition but do not possess precise familiarity with the means or technologies involved in the transition.
- They understand that long-term strategic objectives may be achieved in various ways and would expect the pathway to achieve those objectives may change as circumstances change.
- They would expect Santos to respond or adapt to technological and regulatory developments in the area.
- They have some degree of familiarity with at least one of the impugned publications.
The court also found that Santos’ 2030 target and net-zero roadmap representations were representations as to future matters under section 4 of the Australian Consumer Law, meaning that such representations are deemed to be misleading unless they are made on “reasonable grounds.”
Clean energy representations
Justice Markovic held that Santos was not misleading or deceptive in using the terms “clean energy” and “clean fuel” to describe natural gas.
Her Honor held that, when viewed in their context, Santos’ references to “clean” energy in its 2020 Annual Report conveyed that natural gas was cleaner than coal and diesel, rather than suggesting that natural gas had no greenhouse gas emissions on consumption.12 Similarly, the description by Santos as a “clean fuels company” was made in the context of its statements regarding a transition to a lower-carbon future, and the transition from natural gas to hydrogen.13 The court held that, read in context, these statements did not convey that Santos’ present state was as a clean fuels company.
The court observed that a reasonable member of the target audience would have understood that the consumption of natural gas was a material contributor of greenhouse gas emissions, particularly given that Santos’ publications disclosed its Scope 3 emissions and included a “2030 Scope 3 emissions target.”14 Accordingly, the representations were not misleading or deceptive.
Zero-emissions hydrogen representations
Justice Markovic also rejected the ACCR’s claims that the target audience would understand “clean” and “zero-emissions” hydrogen to refer to the production of hydrogen with no emissions.
The court accepted that at the relevant time, the terms “clean hydrogen” and “zero-emissions hydrogen” were used interchangeably to refer to blue hydrogen produced from natural gas with carbon capture and storage.15 Justice Markovic found that a reasonable member of the target audience would have understood “clean,” “zero-emissions” and “carbon neutral” hydrogen to mean the production of hydrogen from natural gas with carbon capture and storage with no net emissions (referred to as “blue hydrogen”).16 The court accepted expert evidence that at the relevant time there was no settled industry meaning of these terms, but that they were used interchangeably at relevant times to refer to “blue hydrogen.”17
2030 target and net-zero roadmap representations
The most substantial part of the judgment concerned Santos’ 2030 target and net-zero roadmap. The court found that the ACCR had not established that Santos lacked reasonable grounds for its targets.18
Justice Markovic accepted expert evidence from Santos’ expert, Professor Collis (a specialist in long-term corporate strategy), that long-range environmental targets “necessarily involve assumptions about external future contingencies and do not require a basis only in existing, objective or verifiable facts.” The court found that given the long-range nature of Santos’ 2030 target and net-zero roadmap, the reasonable member of the target audience would have understood that they involved assumptions about future markets and developments, including regulatory developments, that were beyond Santos’ control.19
The court also considered the reasonableness of Santos’ 2030 target and net-zero roadmap, conducting a detailed analysis of evidence adduced by Santos supporting the targets. This included analyzing the reasonableness of Santos’ assertions that carbon capture and storage would be used to avoid or abate emissions. Importantly, the court found the following:
- Santos had reasonable grounds for its baseline emissions assumptions,20 and for its assumptions regarding hydrogen with carbon capture and storage forming part of its roadmap to net-zero emissions.21
- The relevant targets were the product of years of strategic development regarding a potential market for hydrogen and were not rushed decisions.22
- Santos’ net-zero roadmap was presented in a way that conveyed an appropriate level of uncertainty and flexibility.23
- Santos had clearly indicated that certain activities, such as expansion of carbon capture and storage, were “planned” and conditional.24
The court found that the targets had a reasonable basis, and rejected the ACCR’s claims that the relevant representations were misleading or deceptive.
The court ordered that the ACCR pay Santos’ costs of the proceedings.
Implications of the case
Representations regarding climate-related commitments
The Santos case is widely regarded as the first proceeding globally to challenge the validity of a company’s stated pathway to achieving net-zero emissions. The judgment establishes several important principles for companies making environmental claims in their communications:
- Context is critical: Climate-related statements will be assessed in their full context, including in the context of the document in which the statement is contained, accompanying statements, and the industry landscape.25
- Climate related representations should be stated clearly, with qualifications identified: To avoid claims of misleading or deceptive conduct, it is important that climate-related claims are stated clearly and supported by appropriate evidence. Any assumptions, qualifications or conditions should be identified with precision. The case emphasizes the difficulties that can arise when ambiguous and overbroad statements regarding climate credentials are used in public communications, such as representations that a product is “clean,” “green,” “sustainable,” or “eco-friendly.” This is consistent with previous guidance from the ACCC and ASIC that the use of such broad language should be avoided when making climate related claims.
- Long-term targets involve inherent uncertainty, but must be reasonable: The court in Santos was willing to recognize that climate targets necessarily involve assumptions about future technologies, markets, and regulations that cannot be known with certainty based on existing, objective, or verifiable facts.26 However, it was emphasized that such targets are representations as to future matters that must be made on reasonable grounds.
- Evidence and process are important: In determining the reasonableness of emissions targets or clean energy claims, the courts are likely to closely interrogate internal consideration of whether the target is appropriate and achievable. Evidence of robust internal processes supporting target setting will assist in determining that the target is reasonable.
- Consider the target audience for communications: The target audience for a relevant communication will be key to determining whether representations are misleading or deceptive. When viewed in their context, Santos’ statements regarding their “clean” fuel and “net zero” hydrogen were held not to be misleading to its “large, diverse investor group” with some knowledge of climate issues and the energy transition. However, a representation may be more likely to be misleading if it is made to less sophisticated groups. For example, a representation regarding a product’s “green” credentials made to a broad audience of consumers may be more likely to be held to be misleading or deceptive as compared to the representations in Santos.
Actions by public interest groups
The case also has implications for climate claims by public interest groups:
- Unsuccessful climate claims may carry significant costs implications: The decision is the latest in a series of judgments demonstrating the potentially material financial consequences for litigants who unsuccessfully pursue climate claims. While the ACCR maintained that its claim was brought in the public interest, it was ultimately ordered by the court to pay Santos’ costs of the proceedings. These costs are likely to be substantial, given the duration and complexity of the matter. This decision follows Santos’ successful application for indemnity costs after its victory in Munkara v. Santos NA Barossa Pty Ltd. In those proceedings, the court ordered the Environmental Defenders’ Office, the public interest law firm representing the applicants, to pay Santos AUD9,042,093.05 in legal costs.
- Risk of climate claims by public interest groups still prevails: Nevertheless, for many public interest groups and environmental organizations, the litigation process itself serves a strategic purpose beyond obtaining a favorable judgment. Climate claims generally attract significant media coverage and public attention, and provide a platform to highlight and scrutinize corporate environmental policies and commitments. Because of this, there remains an ongoing risk of “greenwashing” claims by public interest groups.
Regulators continue to scrutinize disclosures for “greenwashing”
Finally, the Santos decision does not signal that environmental representations are immune from regulatory scrutiny. ASIC has recently secured pecuniary penalties following civil penalty proceedings against a number of funds and investment managers in connection with greenwashing claims:
- In ASIC v. Mercer Superannuation (Australia) Limited [2024] FCA 850, the Federal Court ordered Mercer to pay an AUD11.3 million penalty after admitting it made false and misleading statements about its “Sustainable Plus” investment options. Mercer’s website marketed these options as excluding companies involved in carbon-intensive fossil fuels (amongst other matters). However, the court found Mercer’s investment policies permitted investment in such entities, including in BHP. The court noted that greenwashing practices have the potential to reduce consumer confidence in environmental, social, and corporate governance (ESG) claims, and Mercer agreed to pecuniary penalties for its conduct.
- In ASIC v. Vanguard Investments Australia Ltd (No 2) [2024] FCA 1086, the Federal Court ordered that Vanguard pay a AUD12.9m penalty for making false or misleading statements regarding an “ethically conscious” fund. ASIC successfully maintained that Vanguard’s representations regarding the fund were false and misleading because the research and screening of securities for inclusion in the Fund against ESG criteria had significant limitations, and the fund included issuers that failed to meet these criteria.
- In ASIC v. LGSS Pty Ltd (No 3) [2025] FCA 205, the Federal Court ordered that Active Super pay a AUD10.5m penalty for making false and misleading representations about its “green” and ESG credentials. Active Super had made representations that its investments would not be made in relation to gambling, coal mining, oil tar sands, and Russian entities following the Ukraine invasion. However, contrary to these representations, Active Super held both direct and indirect investments in companies operating in these sectors.
Similarly, the ACCC recently secured the first civil penalties for greenwashing claims contrary to the Australian Consumer Law.
- In ACCC v. Clorox Australia Pty Ltd [2025] FCA 357, the ACCC secured orders that Clorox Australia Pty Ltd pay a penalty of AUD8.25m for making false or misleading representations to consumers that certain GLAD kitchen and garbage bags were partly made of recycled “ocean plastic.”
- More recently, the ACCC has launched Federal Court proceedings against Australian Gas Networks Limited alleging it made false and misleading representations in its “Love Gas” TV and digital advertising campaign, by alleging the gas it distributes to households on its network will be renewable within a generation. These proceedings are ongoing.
The decision in Santos provides some comfort to companies that the courts will assess environmental representations in their full context, and that long-term climate targets may involve assumptions that cannot be known with certainty. Nevertheless, it is clear that scrutiny of such representations by both regulators and public interest groups will continue. It remains important that considerable care be exercised in ensuring such claims are accurate, substantiated and appropriately qualified.
Footnotes
1. Australasian Centre for Corporate Responsibility v. Santos Limited [2026] FCA 96 (ACCR v. Santos).
2. ACCR v. Santos, [4].
3. ACCR v. Santos, [5(1)].
4. ACCR v. Santos, [5(2)(a)].
5. ACCR v. Santos, [5(2)(b)].
6. ACCR v. Santos, [6].
7. ACCR v. Santos, [7(1)].
8. ACCR v. Santos, [7(3)].
9. ACCR v. Santos, [7(2)].
10. ACCR v. Santos, [456]; citing Self Care IP Holdings Pty Ltd v. Allergan Australia Pty Ltd [2023] HCA 8 at [80].
11. ACCR v. Santos, [499].
12. ACCR v. Santos, [519]–[520].
13. ACCR v. Santos, [521].
14. ACCR v. Santos, [523]–[524].
15. ACCR v. Santos, [562]–[563].
16. ACCR v. Santos, [545].
17. ACCR v. Santos, [554]–[555].
18. ACCR v. Santos, [823] and [851].
19. ACCR v. Santos, [596]–[607]
20. ACCR v. Santos, [661].
21. ACCR v. Santos, [770]; [822].
22. ACCR v. Santos, [708].
23. ACCR v. Santos, [604(1)].
24. ACCR v. Santos, [604(2)].
25. ACCR v. Santos, [516]–[518] and [828]–[830]
26. ACCR v. Santos, [596] and [607].
