At a glance
The Federal Court has dismissed greenwashing claims brought by the Australasian Centre for Corporate Responsibility (ACCR) against Santos.
The Court found that Santos’ descriptions of natural gas as “clean energy” and its 2040 net zero target were not misleading when read in context and from the perspective of the relevant target audience.
This is an important decision for any company sustainability-related claims, setting emissions targets, or labelling products with certain claims. It confirms that:
- context is critical
- audience matters
- future targets must be backed by reasonable grounds
- common terminology is evolving and must be kept in mind.
While Santos was successful, the case highlights how closely courts and regulators will scrutinise climate claims.
What happened
The ACCR, an Australian shareholder advocacy group, commenced proceedings in the Federal Court in 2021. It alleged that statements made by Santos in its 2020 Investor Day Presentation, 2020 Annual Report, and 2021 Climate Change Report were misleading or deceptive in breach of section 1041H of the Corporations Act and sections 18 and 33 of Australian Consumer Law (ACL).
The claim centred on Santos’ annual Investor Day in December 2020, where it announced:
a 26–30% reduction in Scope 1 and 2 greenhouse gas (GHG) emissions by 2030 (the 2030 Target); and
a net zero Scope 1 and 2 emissions target by 2040 (the 2040 Target).
These targets were supported by a publicly released ‘Net Zero Roadmap’. Santos also described natural gas as “clean energy” and “clean fuel”, and referred to plans to produce “zero-emissions” or “clean” hydrogen from natural gas using carbon capture and storage (CCS).
The hearing took place over 13 sitting days across October, November, and December 2024.
On 17 February 2026, Justice Markovic of the Federal Court of Australia dismissed the ACCR’s application in full and ordered the ACCR to pay Santos’ costs (see Australasian Centre for Corporate Responsibility v Santos Limited [2026] FCA 96).
Why the Federal Court ruled in Santos’ favour
The ACCR argued that Santos’ use of “clean energy” and “clean fuel” to describe natural gas falsely conveyed that natural gas produced zero or negligible emissions. The Court disagreed.
Justice Markovic found that neither term had a settled or precise meaning in the Australian energy industry at the relevant time. When read in full context, including references to “energy transition to lower carbon fuels”, a reasonable member of the target audience would have understood “clean” as a comparative descriptor rather than an absolute one.
The Court accepted that natural gas produces approximately half the emissions of coal when burned to generate electricity and was widely regarded as a transitional fuel in the global shift away from higher-emitting energy sources. However, the Court rejected the ACCR’s literal interpretation of “clean” as meaning zero emissions, emphasising that representations must be assessed in context and from the perspective of the relevant target audience (in this case, a reasonable investor).
Santos described blue hydrogen (produced from natural gas with CCS) as “zero-emissions” and “clean” hydrogen in multiple publications. The ACCR argued this was misleading because CCS cannot capture 100% of production emissions. Santos’ own expert witnesses acknowledged that blue hydrogen is more accurately described as “low net emissions” hydrogen.
Despite this, the Court found in Santos’ favour. Justice Markovic accepted expert evidence that, in late 2020 and early 2021, the terms “clean hydrogen” and “zero-emissions hydrogen” had no settled meaning in the Australian energy industry. They were used loosely and interchangeably by government, industry and other energy companies to describe hydrogen produced from fossil fuels with CCS, as well as green hydrogen produced from renewables. The market was, in the words of one expert witness, “in a state of flux”.
Given the uncertainty at the time the claims were made by Santos, the Court found that a reasonable member of the target audience would have understood “zero-emissions” and “clean” hydrogen to mean hydrogen produced from natural gas with CCS and offsets with “no net emissions” rather than with literally zero production emissions. Santos’ publications linked these terms to CCS and to its broader net zero framework, which expressly allowed for offsets. In that context, the disclosures were not misleading.
This was the most complex aspect of the case. The ACCR challenged Santos’ climate targets on three main grounds.
First, the ACCR argued that Santos had presented its targets as “clear, credible and tangible” rather than aspirational goals. The Court rejected this, finding that the language used by Santos such as “realistic and doable” would have been understood by a reasonable investor as falling short of certainty, particularly given the 20-year time horizon and the acknowledged uncertainty in Santos’ own publications.
Second, the ACCR argued that Santos lacked “reasonable grounds” for the key components of its Net Zero Roadmap; in particular the “Hydrogen with CCS” component (estimated to contribute 2.5 MtCO₂e in reductions) and the “CCS Expansion” component (estimated to contribute 1.5 MtCO₂e). The ACCR characterised these figures as “speculative” and “nominal”, pointing to internal Santos documents in which one employee described the CCS Expansion figure as “a nominal number making up the difference”.
The Court undertook a detailed analysis of the work Santos had conducted in the lead-up to the Investor Day. It concluded that Santos had reasonable grounds for each component.
Third, the ACCR argued that Santos misled investors by using the word “reduction” to describe what was in large part a carbon credit acquisition strategy rather than actually reducing absolute emissions. The Court disagreed. It found that Santos’ publications expressly disclosed reliance on offset initiatives and that a reasonable investor would have understood that a “net zero” target allowed for offsets.
A key issue: who was the “target audience”?
Whether conduct is misleading depends on its likely effect on the relevant target audience.
The Court rejected both parties’ proposed characterisations. Santos argued for a narrow, sophisticated investor audience, while the ACCR argued for a broad, diverse investing public including retail shareholders with limited knowledge.
Justice Markovic took a middle course, finding that the target audience:
Comprised a large and diverse group of both individual and institutional investors;
Had a sufficient interest in climate change and the impact of fossil fuel companies, but with varying levels of knowledge.
Was not assumed to have scientific training.
Understood that there is an ongoing energy transition, but did not have detailed knowledge of specific technologies.
Expected that long term strategies in the oil and gas sector may evolve over time.
Had read at least one of the three publications in question.
This balanced and context driven characterisation was central to the Court’s analysis of each claims and corresponding reasoning.
What this means for your organisation
This is the first time an Australian court has substantively examined a greenwashing claim brought by a private applicant against a listed company. The decision provides significant practical guidance for companies making climate-related disclosures, emissions targets and product-level sustainability claims.
Context must do real work
The Court focussed heavily on the overall context in which statements were made. Terms such as “clean”, “zero-emissions” and “net zero” were not read in isolation but in light of the surrounding disclosures, the industry setting, the timeframe and the characteristics of the audience.
Companies should ensure that individual claims are embedded in, and qualified by, broader contextual disclosure.
Target audience matters
The Court’s characterisation of the target audience as a diverse group of investors with general (not expert-level) knowledge of the energy transition was important to the outcome. Companies should think carefully about who will read their sustainability communications and what that audience would reasonably understand to be the company’s sustainability position based on that material. Different publications may have different audiences.
Reasonable grounds are critically important (and must be documented)
Even though Santos succeeded, the judgment demonstrates that companies making representations about future matters (including emissions targets) must be able to establish reasonable grounds for the assumptions underpinning those representations.
The Court found in favour of Santos because it could point to substantial internal work, board engagement, expert analysis and market research supporting each element of its roadmap. Companies should ensure that their climate strategies are supported by documented analysis and appropriately stress-tested.
Terminology in flux may create risks
The unsettled nature of terms like “clean hydrogen” and “zero-emissions hydrogen” in 2020–2021 was significant in this case. However, the regulatory and market environment has continued to evolve.
As terminology becomes more standardised through regulation, reporting frameworks and case law, the same arguments may not be available to companies making similar claims today. Companies should monitor evolving standards and update their language accordingly.
Omissions can create exposure
A significant part of the ACCR’s case focussed on what Santos did not say, including the assumptions underpinning its roadmap and its reliance on offsets.
While the Court found the overall disclosures sufficient, the emphasis on omissions reflects a broader enforcement trend. Material assumptions underlying sustainability claims should be disclosed.
Greenwashing risk remains active
This case was brought by a shareholder advocacy group. At the same time, ASIC has its own active greenwashing enforcement program and has brought and won cases before the Federal Court.
The decision does not signal that climate-related disclosures are safe from scrutiny; only that, on the specific facts of this case, Santos’ disclosures were not misleading. The bar for what constitutes credible, reasonable disclosure continues to rise as regulatory expectations develop.
Looking ahead: key developments to monitor
Ongoing regulatory enforcement by ASIC and the ACCC
ASIC and the ACCC’s greenwashing enforcement programs continues, with further regulatory actions anticipated. The ACCR’s case has demonstrated that private enforcement by shareholder groups is a live and credible threat. See our insight on the ACCC’s 2026-27 compliance and enforcement priorities here.
The rollout of mandatory climate reporting
Mandatory climate-related financial disclosures are now being progressively introduced in Australia under the Corporations Act. As reporting obligations become more specific, the standard for what constitutes adequate and accurate climate disclosure will increase.
Further guidance on net zero and transition plan credibility
International guidance on net zero target-setting and sustainability claims (including from ISSB, TCFD, SBTi and the ACCC’s ongoing greenwashing work) continues to evolve, narrowing the terminological flexibility that assisted Santos in this case.
Any appeal in the Santos matter
An appeal by the ACCR cannot be ruled out. Companies should monitor any further developments in this litigation.
What you can do now to prepare
Now is a good time to:
Review your climate targets and supporting assumptions.
Assess whether your sustainability language aligns with current regulatory expectations.
Test whether a reasonable investor would clearly understand your pathway and limitations.
Ensure board and management oversight is appropriately documented.
If you would like to discuss how this decision may affect your disclosures or strategy, we would be pleased to assist.