Directors Liable For ‘Greenwashing’ Disclosures

27 April, 2021

Companies and their directors could be sued for “greenwashing” their commitments to achieve their net zero carbon pledges or emissions reductions targets, according to a legal opinion backed by some of Australia’s top business leaders. In this article from the AFR Michael Roddan reports that boards might be liable for “misleading or deceptive conduct” for selectively disclosing exposures to climate change or declaring green goals while lacking credible plans to achieve them.

“The duty of care for directors on climate risks is now clear,” says Travers McLeod, Centre for Policy Development CEO and Cranlana moderator. “The focus is now on the gap between what needs to happen, or what is being promised, and what is being done. Directors must ensure net zero commitments are underpinned by proper information, governance processes, strategy and action.”

The third in a series of opinions by the legal experts after a 2016 opinion said directors could be liable for failing to understand and disclose climate risks, and a 2019 opinion saying directors could be liable if they failed to act on those risks once they were known, the opinions have backing from the Reserve Bank of Australia, the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority, the ASX corporate governance committee and the Australian Accounting Standards Board. The Taskforce on Climate-related Financial Disclosures is now seen as the global standard for notifying shareholders of the climate-related risks faced by companies.

Ms Sam Mostyn, president of Chief Executive Women and deputy chairman of CPD, said the discussion was “a clear reminder of what boards need to do to manage climate risks” and that “better risk management, better industry-wide responses and better policy will be essential” to tackling climate change.

Are your Board and Directors aware of their responsibilities with regard to disclosing exposure to climate change?

Financial Review, Michael Roddan, 26 April 2021. Read the full article here.

Cranlana Centre for Ethical Leadership’s programs include the 2 day Executive Ethics, 6 day Executive Colloquium and year-long Vincent Fairfax Fellowship. We also deliver online and tailored corporate programs. Find the right program for you. They are all held under the Chatham House Rule to encourage genuine and open debate, and allow participants to candidly discuss sometimes sensitive issues in private while allowing the topic and nature of the debate to be made public, and contribute to a broader conversation. The alumni program offers ongoing leadership development support and a lifelong connection with Cranlana.

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