Allegations of greenwashing levelled against one of Australia’s largest fossil fuel producers have been dismissed after a court ruled Santos was justified in portraying itself as a clean energy company with a realistic plan to reach net zero emissions.
Santos, the second-largest Australian gas producer, has been at the centre of a long-running legal stoush in the Federal Court, facing activists who accused it of engaging in “greenwashing” by describing natural gas as clean energy and arguing it had “clear and credible” pathway to net zero emissions by 2040.
The Australasian Centre for Corporate Responsibility, an investor-focused activist group, launched the unprecedented lawsuit over Santos’ description of itself as a clean energy company in investor materials despite being a major producer of natural gas, a fossil fuel that causes climate-heating emissions when it is extracted, processed and burned.
It also accused the company of having no evidence to back up its claim that it had a strategy to slash its carbon footprint by 26-30 per cent by 2030 and reach net zero by 2040, and contested claims that it could produce “zero-emissions” hydrogen using carbon capture and storage technology.
However, Justice Brigitte Markovic dismissed the case on all grounds, finding Santos did not breach the Corporations Act or Australian Consumer Law. In the reasons for her judgement, released by the court on Monday, Markovic accepted that Santos’ description of natural gas as “clean” was not to suggest that the fuel caused no greenhouse gas emissions, but that it was cleaner in relative terms than heavier-emitting fossil fuels such as coal and diesel.
A “reasonable investor” reading Santos’ 2021 climate report or attending its briefings would have understood that natural gas was a material contributor of emissions, she said.
“Santos … states that natural gas ‘produces half the greenhouse gas emissions of coal when used to generate electricity’,” Markovic said. “To the extent a member of the target audience was familiar with that publication, he, she or it would have had that additional context.”
Santos’ description of itself as a “clean fuels company”, she added, was made in the context of its future aims to produce emissions-free hydrogen.
The ACCR, represented by the Environment Defenders Office, argued Santos’ claims were misleading and deceptive. They said Santos’ core business remained the extraction and supply of carbon-intensive fossil fuels, while its plan to reach net zero emissions by 2040 relied on controversial carbon capture and storage technology (CCS). The lawsuit took issue with Santos’ claims that so-called “blue hydrogen” – the name for hydrogen produced from natural gas while using CCS to trap and bury the emissions before they enter the atmosphere – was “clean” and could be termed “zero emissions”.
Santos successfully argued that its emissions targets were statements of “present intention” rather than ironclad promises or guarantees. The company maintained that its 2040 roadmap was an aspirational framework that would naturally evolve alongside technology and public policy.
Markovic also sided with Santos’ argument that investors had not been misled into believing that absolutely all carbon dioxide emissions in the manufacture of blue hydrogen would be caught by carbon capture technology, but “would have understood that most emissions would be caught, and Santos could purchase carbon credits to offset any residual emissions from the production of hydrogen”.
The case marks the second time in less than two years that the Environmental Defenders Office has lost a high-stakes lawsuit against Santos. In 2024, the climate-focused legal service was ordered to pay more than $9 million to Santos after a court rejected its attempt to block an offshore pipeline near the Tiwi Islands and found it had coached Indigenous witnesses.
Oil and gas industry lobbyists on Monday said the Federal Court’s outright dismissal of the ACCR’s latest case against Santos exposed a need to crack down on activist groups “misusing the courts” to target critical energy projects and companies, and for greater transparency on how they were being funded.
“When groups pursue high-profile legal action designed to influence public debate and investment confidence, transparency is essential,” Australian Energy Producers chief executive Samantha McCulloch said.
“If activist organisations expect companies to meet the highest standards of disclosure and accountability, they should also be held to the same standard.”
The ACCR said the court’s decision was disappointing, but the case would pave the way for others to legally challenge corporate net zero claims around the world.
“This was the first court case in the world to test a company’s net zero claims, and it has helped drive significant improvements in climate reporting in the Australian market and internationally,” ACCR co-chief executive Brynn O’Brien said.
“It is disappointing that, in our view, the court’s decision has not reinforced these advancements.”
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.