For much of the last decade greenwashing and social washing has not been as litigated in the APAC region (excluding Australia), especially compared to the frequency litigation brought in the US or with the global visibility on litigation brought by social activist groups in Europe.
This is now changing. Green and social washing in the APAC region is now becoming real. For businesses in the APAC region new regulations are being implemented swiftly and new complaints are being lodged.
The boundaries of green and social washing risk in the APAC region is not uniform across jurisdictions. For businesses active in the APAC region, navigating these risks can be tricky. It is easy to say that businesses should simply be on their best behaviour as if operating in the US and Europe, but local nuances are also at play.
In Australia, the ASIC has launched its first court action against alleged greenwashing conduct, commencing in March 2023, civil penalty proceedings in the Federal Court against Mercer Superannuation (Australia) Limited for allegedly making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.
The Australian Competition and Consumer Commission has in early March 2023 also completed an initial sweep of companies’ environmental claims and found that 57% of the 247 business reviewed had promoted “concerning claims about their environmental credentials”.
In April 2023 A group of indigenous Australians filed human rights complaints against 12 international banks over a US$1 billion (S$1.3 billion) loan to a company building a controversial gas project which they claim threatens their traditional lands and sea, as well as the future of their culture.
Australia ranks second to the US in terms of the number of climate change litigation, in stark contrast to the rest of the APAC region.
Japan’s Financial Services Agency has also publicly stated in February 2023 that it suspects “more than a few cases” of greenwashing by asset managers running ESG portfolios and will take “regulatory action against malicious cases,”.
New guidelines are also being issued to regulate the use of labels such as “ESG”, “SDG”, “sustainability” and others, and a class of “ESG Public Funds” will have specific criteria including on benchmarking and continuous disclosures to be met.
The South Korean government has announced that it will implement a new law to fine up to ₩3 million (US$ 2,300) for companies that mislead the public about their environmental impacts.
In March 2023, Minister of State for Trade and Industry Alvin Tan stated in parliament that the country is studying developments on greenwashing in other jurisdictions to assess if any specific regulations or guidance would be useful in the Singapore context. The Monetary Authority of Singapore also unveiled an AI tool to help financial institutions curb greenwashing in July last year.
There are a few nuances to the green and social washing risk in the APAC region:
- legal regimes to support class action suits are not as strong or prevalent as in the US so the guardrails protecting consumers and investors are largely regulator led
- the scope of directors duties are being seen as one way in which businesses can be required to take into account climate risk and responsibility to protect the interests of wider stakeholders
- many countries in the APAC region have laws protecting the rights of indigenous communities and these laws are likely to be relied on to support social claims
Experienced legal counsel with a firm foothold in the APAC region and a culturally sensitive approach is needed to navigate these risks. At Reed Smith we have helped companies globally implement policies to manage such risks so that businesses can have the confidence to move forward with effective marketing and business strategies on a global scale. Speak to us to find out more.