Combatting greenwashing: drilling down on the construction industry

What is ‘greenwashing’?

Greenwashing is a live issue within the property and construction space. It may occur intentionally or negligently, and pertains to the false or misleading representations of a business’ environmental sustainability. Amidst the trend of decarbonisation, construction giants increasingly claim their commitment to environmentally friendly practices. The Green Building Code of Australia has named this trend the ‘new sustainability sprint’. For example, 70% of ASX200 companies are currently adopting net zero commitments (ACSI, 2022).

This is double the number of companies in 2021, indicating the push towards sustainability. Considering this push and the existing focus on improving public confidence in the construction sector, Australian state and regulatory bodies are drilling down on the disjunct between assertions of environmentalism and actual practices.

Why does ‘greenwashing’ matter to the construction industry?

The construction industry is consistently criticised for its environmental degradation. It is reportedly responsible for nearly 17% of Australia’s total waste disposal, and 24% of all hazardous waste (ABS, 2020). This constitutes a 22% increase since 2016 (ABS, 2020). In the same vein, companies earn reputational benefits in instances where their projects and practices are environmentally friendly. We see this on an interstate level with governments widely advertising the Green Star status of projects including the upcoming Brisbane Olympic Games.

Greenwashing is also relevant within the construction context because liability may arise both on an individual project level, and on a holistic operational level. When claiming environmental sustainability, regard must be had for the entirety of the supply chain, and whether the activity occurring within the chain is consistent with these claims. For example, any representation made by contractors or subcontractors must be assessed to determine their legitimacy. Likewise, it is necessary to consider the direct and indirect emissions resulting from the manufacturing, production, and distribution phase of a project to account for its overall ecological footprint. Furthermore, there are site-specific complexities requiring a stronger monitoring of sustainable practices. As such, sweeping claims of an entire project’s environmental status should be avoided to minimise the potential for greenwashing.

Australia’s stance on greenwashing

Australia’s peak regulators, ASIC and the ACCC, are taking strides to prohibit greenwashing. In addressing the issue, ASIC’s Deputy Chair, Sarah Court explained, ‘[a]s entities promote sustainability and green practices as part of their value proposition, they must ensure they can support those statements and have a reasonable basis for doing so’. It is advised that corporations carefully disclose the specificities of their processes to form a proper basis for any assertions of environmental sustainability. In addition, regulators warn that a claim of greenwashing will be assessed with regard for what the ordinary person would infer from the claim made.

On a state level, the NSW government will shortly implement the State Environmental Planning Policy (Sustainable Buildings) 2022 (the Policy) in October 2023. The Policy will enact heightened environmental requirements across residential and non-residential buildings, as well as updated water standards for large commercial developments. This will also include obligations surrounding the monitoring and reporting of emissions caused by construction materials. In this sense, whilst the Policy is not explicitly directed towards combatting greenwashing, it will enforce the associated need for construction companies to take accountability when monitoring their environmental impact.

Key takeaways

The onus is increasingly placed on construction companies to verify ambitious claims made in relation to the sustainability of a project. It is critical for industry stakeholders to be aware of these obligations, and actively mitigate against exposure to greenwashing. For assistance in understanding greenwashing and how it might affect you, please contact our people.

Ron Zucker 0410 590 111

Eollyn Cortes 0478 727 395