Australian Federal Court dismisses Santos greenwashing case

The federal court of Australia has handed down its decision in the much-anticipated greenwashing case of Australasian Centre for Corporate Responsibility v Santos Limited [2026] FCA 96, dismissing each of the claims that Santos had made misleading or deceptive statements regarding its climate change targets and road maps. In doing so, it made important observations on the legal standard for making ‘net zero’ and ‘clean energy’ claims. 

Key takeaways 

1. While courts will take a reasonable and contextual approach to assessment of whether a climate change or ESG disclosure is misleading or deceptive, companies must focus on ensuring its statements and targets are accurate, credible, and based on solid and contemporaneous evidence.
2. There must be a reasonable basis for long term targets and energy transition road maps, but care should be taken in using phrases such as ‘clean’ and ‘zero emissions’, which ideally would be consistent with broader government and industry use.
3. Climate change-related claims, targets and commitments must be tailored to a casual but interested reader, so companies should use defined terms to qualify or contextualise future plans and activities. 

Summary of the facts 

The proceeding concerned allegations made by Australasian Centre for Corporate Responsibility (ACCR), an incorporated not for profit ‘shareholder advocacy organisation’ and shareholder in Santos Limited (Santos), that Santos engaged in misleading or deceptive conduct in contravention of s 1041H of the Corporations Act 2001 (Cth) (Corporations Act) and s 18 and s 33 of the Australian Consumer Law (ACL), being Sch 2 to the Competition and Consumer Act 2010 (Cth).

ACCR contended that:

1. in its 2020 Annual report, Santos represented that it is a producer of ‘clean energy’ and that natural gas provides ‘clean energy’, when in fact ACCR alleged that Santos is a heavy emitter of greenhouse gas (GHG); and
2. in its Investor Day Presentation and 2021 Climate Change Report, Santos represented that it had a credible and clear plan (Net Zero Roadmap), based upon reasonable assumptions, to reduce Scope 1 and 2 GHG emissions by 26-30% by 2030 (2030 Target) and achieve net zero Scope 1 and 2 GHG remissions by 2040 (2040 Target) (together, the Targets), without disclosing that:
   1. material additional GHG emissions would be produced in Santos’ future hydrocarbon growth and exploration opportunities, including through blue hydrogen production plans (which had proposed to use carbon capture and storage (CCS) and offsets for residual emissions); and
   2. the 2030 Target and Net Zero Roadmap depended upon a range of undisclosed and/or unreasonable assumptions to reduce or offset Santos’ Scope 1 and 2 GHG emissions. 

ACCR sought declarations of contravention and an injunction. 

Key issues 

The audience 

A key initial task for the court was to characterise the audience of the Targets and Net Zero Roadmap, as this would inform a decision on whether these were misleading or deceptive to the audience. Such an analysis cannot be restricted to a hypothetical single member of the target audience.

The court found the target audience was comprised of a large and diverse group of domestic and international investors who understand and would have an interest in climate change, global warming and the energy transition, but with varying degrees or knowledge or interest. They were not assumed to have scientific knowledge, but they would understand that long term strategic objectives may change as circumstances change, and that a company such as Santos would respond and/or adapt to technological and regulatory developments.

The court also found the target audience would have read at least one of the Investor Day Presentation, the 2020 Annual Report and/or the 2021 Climate Change Report.

This characterisation of the target audience framed the court’s consideration of whether Santos’ climate change-related statements were misleading and deceptive. The key statements are considered below. 

The ‘Clean Energy’ and ‘Clean Fuel’ statements

The ACCR alleged that Santos had made statements in the 2020 Annual Report that the natural gas it produced was ‘clean fuel’ and ‘clean energy’, conveying that the generation of energy from natural gas does not release material amounts of GHGs into the atmosphere, and failing to disclose that the end use of natural gas releases material amounts of GHGs that contribute to climate change and global warming. 

The court considered that references to ‘clean’ energy or fuel could not be considered in isolation, but had to be read in light of other surrounding information or disclosures contained in the Annual Report. Her Honour found that the impression conveyed to a reasonable member of the target audience was that:

1. ‘clean’ was used in the Annual Report to convey that ‘natural gas’ was cleaner than coal and diesel, not that it had no GHG emissions;
2. in relation to Santos describing itself as a ‘clean fuels company’, this was made in the context of it conveying its future aims to ‘transition to a lower-carbon future’ and ‘transition from natural gas to hydrogen’, noting that the dictionary definition of ‘clean fuel’ is a fuel which ‘produced minimal’, not no, GHG emissions;
3. consumption of natural gas was a material contributor of GHG emissions, noting that the 2021 Climate Change Report and Investor Day Presentation had also disclosed Santos’ Scope 3 emissions; and
4. whilst Scope 1 and 2 GHG emissions from production could be addressed through CCS and offsets, scope 3 emissions arising from consumption would still occur.

The court concluded that the ACCR’s allegations in relation to ‘clean fuel’ and ‘clean energy’ were not made out, and the representations were not misleading or deceptive.

The ‘Clean’ and ‘zero emissions’ hydrogen statements

The ACCR alleged that statements made by Santos about ‘clean’ and ‘zero emissions hydrogen’ in the Investor Day Presentation, 2020 Annual Report and the 2021 Climate Change Report were liable to mislead or deceive because:

1. it was not disclosed that blue hydrogen production would increase Santos’ Scope 1 and 2 GHG emissions and that it was not practical or commercially viable for Santos to capture all of the increased Scope 1 and 2 emissions using CCS; or
2. further or alternatively, Santos’ representation that Scope 1 and 2 GHG emissions generated by it in its production of hydrogen would be entirely captured by CCS was a representation with respect to a future matter within the meaning of s 4 of the ACL ands 769C of the Corporations Act.

The court considered 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 CCS with no net emissions.

Her Honour further accepted Santos’ submission that the reasonable member of the target audience would have understood that most emissions would be caught by CCS and that Santos could purchase carbon credits to offset residual emissions, given that references to carbon credits and ‘land-based offsets’ were included throughout the publications.

Upon consideration of the experts’ understanding of how hydrogen was characterised in the Australian energy industry, the court found that there was no settled meaning of ‘clean hydrogen’ or ‘zero emissions hydrogen’ at the time, and therefore the terms could be used interchangeably to refer to blue hydrogen. 

As such, Her Honour found that the statements about ‘clean’ and ‘zero emissions hydrogen’ were not liable to mislead.

Statements about the Targets and the Net Zero Roadmap

The ACCR contended that Santos had omitted key assumptions that underpinned the Targets and Net Zero Roadmap that the target audience would have been entitled to expect or infer would be disclosed, in particular GHG emissions growth associated with future blue hydrogen production or growth from oil and gas exploration opportunities beyond 2025. The ACCR also argued the Net Zero Roadmap was based upon offset-generating activities which were ‘speculative’, ‘nominal’ or ‘notional’.

The court rejected these arguments, and found that ‘long range ESG targets necessarily involve assumptions about external future contingencies and do not require a basis only in existing, objective or verifiable facts’. The court also found that the:

1. Targets are long term motivational objectives for the company and its employees;
2. Net Zero Roadmap implicitly and explicitly expresses a level of uncertainty; and
3. 2021 Climate Change Report distinguished between things that would occur, things that were conditional, and things that were more uncertain’.

Consequently, given the long-range nature of the Targets,the court found that a reasonable member of the target audience would understand that they involved assumptions that were beyond Santos’ control, and that Santos would need to adapt to changing circumstances over time. 

Based on a detailed review of the documents and evidence, the court also accepted the Targets as having a reasonable basis, in particular accepting Santos’ argument that its use of CCS as a means to avoid or abate GHG emissions from blue hydrogen or oil and gas production operations was not speculative, and that Santos had reasonable grounds that the expansion of CCS could contribute to the achievement of its targets.

Implications 

Santos’ success was not an accident. The result was based largely on the fact that Santos could demonstrate that the Targets and New Zero Roadmap were reasonable, and based on what the court accepted as being a clear and credible plan to reduce GHG emissions. The court accepted that long term strategies and plans include an inherent degree of uncertainty, in particular due to the need to make assumptions about future technologies, markets and regulatory environments, and the target audience would have appreciated this.

The court also accepted that Santos’ claims relating to ‘blue’ hydrogen were not misleading, in part because the evidence demonstrated that the meaning of term was unsettled, and used in government publications. 

However, the decision emphasises that in order to persuade a court that climate change and ESG-related statements are not misleading and deceptive, it is important to ensure that ESG targets and transition plans are based on contemporaneous reasonable grounds, and that important qualifications or context to those targets are prominently disclosed.

Shi-Mei Ewing (White & Case, Associate, Melbourne) contributed to the development of this publication.

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