Australian Gas Producer Santos Wins Net Zero Court Case
Synopsis
In a major legal win for the energy sector, an Australian court has rejected a lawsuit targeting Santos Ltd. over its “net zero” climate commitment. The Australasian Centre for Corporate Responsibility (ACCR) accused the firm of deceptive conduct in relation to its 2040 roadmap, which ACCR said was misleading, particularly in relation to carbon capture and labelling of natural gas as “clean.” But Judge Brigitte Markovic determined that the company’s goals in themselves were not fraudulent under business law. The ruling establishes a precedent for the way businesses talk about environmental goals, making it clear there is a difference between aspirational goals and guaranteed promises.
The Australian Federal Court rejected the ground-breaking greenwashing legal action against Santos finding the gas producer did not mislead the public over its 2040 net zero emissions target. The activist group ACCR had contended that the company’s promises were such a deception, but the judge held that they were expressed as targets rather than promises. That is a huge win for the fossil fuel industry.
- Australian court rejects the case alleging that the gas company Santos misled the public about climate change.
- The activist group ACCR said the company’s 2040 net zero plan was misleading.
- Judge Markovic decided that the company’s goals were not, under the law, binding promises.
- The ruling establishes a defining precedent for the way businesses categorise their environmental goals.
Santos, Australia’s second-largest gas producer, has won a precedent-setting legal battle that marked a test of whether Australian companies can be held to account for the impact of their activities on the environment and climate. The Federal Court of Australia on Tuesday dismissed a case brought by the Australasian Centre for Corporate Responsibility (ACCR) alleging Santos had made misleading statements to investors and the public. The activist group said Santos’ assertion that it had a clear and credible pathway to net zero emissions by 2040 was little more than speculation and breached consumer protection laws.
The trial, which in 2021 served as a late stand-alone example of the challenges facing companies over whether they can be held accountable under the law if long-term environmental goals did not translate into clear near-term evidence. ACCR took particular issue with Santos’ characterisation of natural gas as a clean fuel and its use of carbon capture technology to achieve those aims. But Federal Court Judge Brigitte Markovic dismissed the case, in a major victory for the energy company. The full legal reasons will not be released until February 23, the ruling effectively exonerates Santos from calling greenwashing in this case.
Santos was defended by its lawyers at trial, who said that the company’s climate goals had always been presented as targets rather than ironclad promises. They argued that investors could recognise the difference between a long-term strategic ambition and an assured outcome. This distinction mattered, because the court held that the company had not violated the law with its representations. The defence also took note of how designations such as clean energy were used in a world in which gas was cleaner than coal when the planet was transitioning to renewables around the globe.
The result has left environmental advocates disappointed, undercutting their hopes that the case would compel companies to be more forthcoming about plans to reduce carbon emissions. Co-chief executive of ACCR, characterised the loss as a David and Goliath fight, but added that it now “effectively shifts the burden onto investors to check every claim made by fossil fuel companies”. Despite the defeat, she said, the trial had effectively brought light to companies’ internal assumptions when they publicly make bold climate promises.
Business analysts say the ruling will serve as a guide for how boards of directors should be disclosing their sustainability plans going forward. It indicates that so long as a company couches its goals as targets and reveals the basis for its assumptions, it may be insulated from such misleading conduct suits. This is especially the case in Australia, where new laws making climate reporting mandatory are being implemented to inhibit corporates from bluffing their way out of turning promises into practice.
Although the legal threat against Santos subsided for the time being, the debate over what role natural gas should play in a green future is not going away. Lawyers say the case is already inspiring similar legal challenges elsewhere in the world, as activists search for ways to use the courts to hasten a much faster transition away from fossil fuels. For now, Santos can proceed with its activities, and yet the international gaze will be fixed firmly on whether its 2040 net-zero ambition does in fact get delivered upon.
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