‘Reasonable Grounds’: the Greenwashing claim against Santos Limited

On 17 February 2026, the Federal Court delivered judgment in Australasian Centre for Corporate Responsibility v Santos Limited dismissing the allegations that Santos had engaged in misleading or deceptive conduct through its net zero and clean energy claims, or, “greenwashing”. [1] This decision represents the first instance in which a company’s net zero strategy and transition plan have been formally contested. Whilst Santos successfully defended its position, the case acts as a useful guide as to how the courts will scrutinise statements made by companies about their climate statements, targets and “roadmaps” under the Australian Consumer Law (ACL).

Greenwashing:

Simply defined by Markovic J, greenwashing “occurs when a company makes itself, its products or services appear more environmentally friendly, sustainable or ethical than they are in fact.”  It is not novel from a legal point of view as, in essence, it is just a misleading or deceptive conduct claim.  However, as businesses look to profit on the back of growing consumer demand for environmentally friendly and sustainable products, the judgment carries great significance and should be considered by Australian businesses in their promotional efforts.

ACCR’s Allegations

The Australasian Centre for Corporate Responsibility (ACCR) alleged that statements in Santos’ annual and climate reporting were misleading or deceptive under ss 18 and 33 of the ACL, [2] and s 1041H of the Corporations Act 2001 (Cth) [3] and sought declaration to that effect.  Specifically, it was alleged that Santos made the following representations:

1. Santos was a producer of ‘clean energy’ and that natural gas provides ‘clean energy’;
2. Santos had a clear and credible plan to reduce greenhouse gas emissions by 26-30% by 2030 and would achieve ‘net zero’ greenhouse gas emissions by 2040; and
3. Santos could, in the future, deliver ‘zero emissions’ or ‘clean’ hydrogen and hydrogen with ‘no emissions in its production’.

ACCR submitted that in fact:

1. natural gas is not ‘clean’ and that Santos is a heavy emitter of greenhouse gas;
2. Santos did not disclose that its 2030 target and its Net Zero Roadmap depend on a range of undisclosed and/or unreasonable qualifications and assumptions to reduce or offset Santos’ greenhouse emissions and did not account for various exploration opportunities beyond 2025; and
3. Santos proposed to produce blue hydrogen, which generates material additional emissions.

According to its stated mission, ACCR brought the claim to ‘vindicate the public interest in ensuring commitments by Australian companies regarding climate change are reasonably based and not misleading’ [6].

Santos’ defence:

Santos argued its statements were not misleading or deceptive for the following reasons:

1. ‘clean energy’ did not mean zero emissions, and no reasonable member of the intended audience would have understood the term as meaning emission free;
2. as part of their net zero commitments, Santos was setting long term targets in an inherently uncertain and evolving industry. It argued a reasonable investor would understand that such targets depended on assumptions about future developments in technology, markets and regulation. Further, the emission targets were grounded in years of analysis and strategic evaluation, not mere aspirations, providing reasonable grounds for making the statements; and
3. ‘zero emissions blue hydrogen’ was not literal, and at the time, the terminology was used interchangeably with descriptors such as ‘clean’ and ‘carbon neutral’.

Finding:

Markovic J largely accepted Santos’ submissions, dismissing the application and ordered that the ACCR pay Santos’ costs.

The Key Points:

• Reasonable grounds rather than certainty are required for representations about future matters:

A more complex issue in the case against Santos was that their net zero commitments and transition plan were representations about future matters. Such representations will be considered misleading or deceptive if the maker did not have ‘reasonable grounds’ at the time the representations were made [462]. In this case, Markovic J was satisfied based on the evidence before Her Honour that Santos had reasonable grounds regarding the ‘clear and credible’ representation of the transition plan. Whilst Markovic J acknowledged that the long-term transition plans depended upon data and assumptions about markets, technology and regulation which was likely to be uncertain in the future, the extent of internal documentation and analysis performed by Santos was sufficient to demonstrate that it had a reasonable basis for making the claims about its transition plan and Net Zero commitments.

Takeaway: Companies making representations as to their future climate ambitions and targets must be able to point to evidence of having a reasonable basis for making them at the time.  Contemporaneous records and analysis were crucial to establishing ‘reasonable grounds’ for Santos.

• Context and target audience:

The Santos judgment makes clear that context and target audience are significant factors in determining whether a statement is misleading or deceptive.

Markovic J placed weight on the evidence which suggested that at the time the representations were made the definitions of the contentious phrases within the Australian energy industry were unsettled. Specifically, Her Honour found, when considering that context and publications at the time, the terms ‘clean hydrogen’ and ‘zero emissions hydrogen’ were often used interchangeably to describe both renewable hydrogen and fossil fuel-based hydrogen with carbon capture and storage (or blue hydrogen).  Consequently, Santos’ use of these terms to describe blue hydrogen was not found to be misleading or deceptive.

Similarly, Her Honour found that the use of ‘clean energy’ and ‘clean fuel’ in respect of natural gas was not misleading or deceptive as the allegations lacked context.  Markovic J reasoned that the definitions of the terms ‘clean energy’ and ‘clean fuel’ at the time were ambiguous, and coupled with the entire context of the document which contained the terms (noting that natural gas was a method of transitioning to ‘lower carbon fuels’), the target audience would not have understood that natural gas did not release greenhouse gases at all.

In parallel to contextual considerations, is the consideration of who the target audience is.  Markovic J’s assessment of the target audience of the relevant investor documents reached an unsurprising middle ground between the overly broad and overly narrow characterisations submitted by the parties. Whilst Her Honour concluded that the target audience was a large and diverse group of investors, those investors (among other things) had a sufficient interest in and general knowledge of climate change, the oil and gas sector, and fossil fuels.

Takeaway: Companies should carefully consider the user or target audience of their statements and the context in which statements are made to understand how those statements are likely to be perceived.  Reliance on dictionary definitions alone is likely to ignore the overall picture being painted to the target audience.   

Considerations Going Forward:

This landmark decision paves the way for the future of greenwashing litigation, indicating the key considerations for companies when handling climate risk and sustainability.  As regulators, civil society groups and consumers call for greater transparency in companies’ environmental disclosures, companies should apply the key learnings from this decision to avoid investigation and/or litigation.  These include ensuring:

• claims about future matters are supported by contemporaneous documentation which supports the claims, including but not limited to internal reports, expert analysis and market research; and
• that statements and documents are properly understood by the maker in their evolving industry contexts and in the eyes of the targeted user or reader.

Notes

[1] Australasian Centre for Corporate Responsibility v Santos Limited [2026] FCA 96.

[2] The Australian Consumer Law ss 18-33.

[3] Corporations Act 2001 (Cth) s 1041H.