Judgment looms for Santos net zero 'greenwashing' case

The veracity of one of Australia's biggest gas companies' promises to slash emissions will be put to the test as the Federal Court rules on a landmark greenwashing case.

In a judgment expected to have implications for climate commitments made by all businesses, the court will rule on allegations Santos breached corporate and consumer law with its representations of environmental goals.

The case brought by the Australasian Centre for Corporate Responsibility challenged claims made by Santos that natural gas provided "clean energy" and that the company had a "credible and clear plan" to achieve net zero by 2040.

The shareholder advocacy group's lawyers further alleged the energy company's descriptions of blue hydrogen as "clean" and "zero emissions" were misleading.

Blue hydrogen is a fuel created using gas that relies on carbon-capture technologies to deal with the emissions.

The company's defence lawyers rejected allegations its net-zero goals lacked credibility, arguing they were always targets, not promises, and claimed the "clean" hydrogen fuel label was used only when accompanied by carbon credits.

The case was all about the credibility of corporate climate promises, Monash Business School Green Lab researcher Ella Vines said.

"It sends an important signal about how companies must frame their net-zero commitments and transition pathways," Dr Vines said.

Courts were increasingly being asked to determine whether long-term emissions reduction claims were backed by concrete, near-term action and credible assumptions, the expert in corporate sustainability regulation said.

"The decision will shape how boards approach climate risk disclosure, transition planning and public communications," Dr Vines said.

Santos allegedly made the misleading statements at a December 2020 investor day and in its 2020 annual report and climate change report, both published in February 2021.

The advocacy group is seeking injunctions forcing the firm to issue a corrective notice about the environmental impacts of its operations.

It is not seeking damages or compensation, saying it filed the lawsuit to vindicate the public interest in ensuring corporate climate change commitments were reasonably based.

The corporate responsibility centre holds shares in firms such as Santos to try to force them to meet the goals of the Paris Agreement, the primary international climate change pact.