When Green Marketing Crosses the Line: The True Cost of False Advertising

Across industries, organisations are racing to show how they are helping the planet. They promise carbon neutrality, circular design, and eco-friendly packaging. The intention is positive. The problem is precision. 

Under the Australian Consumer Law, the same rule applies whether you are selling shoes or sustainability: claims must not mislead or deceive. It doesn’t matter if your motives are genuine. If your statement gives a false impression, it can still be considered false advertising. 

That includes vague or unsubstantiated language using words like “green”, “sustainable”, or “environmentally friendly” without evidence to back them up. 

In the ACCC’s 2023 Internet Sweep, 57 per cent of businesses reviewed had made potentially misleading environmental claims. That number cut across fashion, food, energy, transport, and finance which proves that even responsible brands are getting caught out. 

Australia has already seen several high-profile examples. 

• Lorna Jane faced a $5 million fine after promoting “anti-virus activewear” that was later found to have no scientific basis. 
• Woolworths was challenged over “biodegradable” bags that did not degrade as claimed. 
• Superannuation funds have come under ASIC scrutiny for overstating their ESG performance and investment screening. 

In each case, the issue wasn’t malice but it was overstatement. The language promised more than the product or practice could deliver. And that is all the law requires to establish misleading conduct. 

These cases have moved greenwashing from a PR concern to a legal and governance risk. Regulators are clear that sustainability claims carry the same weight as product statements. Boards and marketing teams are now expected to verify every claim they make, just as they would verify financial results. 

For insurers and risk managers, greenwashing claims create complex exposure. A single statement can trigger multiple policies. 

• Management Liability may respond when regulators investigate or fine directors for misleading disclosure. 
• Professional Indemnity can be tested if consultants, marketers, or ESG advisers are accused of contributing to false claims. 
• Directors and Officers (D&O) insurance comes into play when shareholders allege that leadership failed to exercise proper oversight. 

Yet these policies often have exclusions for deliberate misconduct, meaning that once intent or negligence is proven, the financial burden can sit with the business itself. That makes prevention and governance the true first line of defence. 

Greenwashing is still false advertising but with better branding. 
Good intentions do not remove liability. The laws governing truth in marketing apply equally to claims about ethics, sustainability, and social impact. 

Insurance can help manage the fallout, but it cannot repair trust. That requires precision, transparency, and a culture that values accountability over appearance. 

Insurance evolves after catastrophe, but real resilience comes from anticipating blind spots before they break. 

For boards and executives, that means asking sharper questions before the next campaign goes live. 

• Is this claim verified by evidence? 
• Could this statement mislead a reasonable consumer? 
• Do our policies and governance processes protect us if it does? 

Sustainability is not a slogan. It is a governance issue. And the cost of getting it wrong is more than financial, it is reputational. 

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