The world's first lawsuit questioning a company's commitment to transformation took place in Australia.

In August 2021, the Australian Centre for Corporate Responsibility (ACCR), a research and consulting firm, filed a lawsuit in the Federal Court of Australia, accusing oil and gas exploration and production company Santos Ltd. of misleading and deceptive statements in its 2020 Annual Report that "natural gas is a clean fuel" and "net zero emissions by 2040" violated the Corporations Act and the Australian Consumer Law.

This case became the world's first climate lawsuit questioning the effectiveness of a company's net zero goal, and for the first time included the environmental feasibility of carbon capture and storage (CCS) technology and "blue hydrogen" projects in judicial review, triggering the international community's high attention to "greenwashing" in energy transformation.

The case is currently being heard in the Federal Court of Australia, and its verdict is expected to have a far-reaching impact on the climate information disclosure and legal responsibilities of global companies.

(Image source: Santos 2024 Climate Transition Action Plan)

Why are Santos' "clean fuel" and net-zero path questioned?

1. The "cleanness" of natural gas

ACCR pointed out that Santos's labeling of natural gas as a "clean fuel" is misleading. Natural gas releases a large amount of carbon dioxide and methane into the atmosphere during extraction.

2. CCS technical feasibility and "blue hydrogen" project controversy

ACCR also stated that Santos proposed in its net-zero emission path that it would use CCS technology to reduce carbon emissions, but in fact, judging from the current status of CCS technology research and development disclosed by Santos, its reliability and test results are still to be verified.

In July 2021, Santos released its corporate strategy, saying that relying on the company's more than 65 years of experience in the natural gas industry, it will vigorously develop the "blue hydrogen" project, that is, a natural gas hydrogen production project equipped with CCS equipment, which can help reduce tens of millions of tons of carbon dioxide emissions each year.

However, in the view of ACCR, "blue hydrogen" is the key point of "false emission reduction" of oil and gas companies. Santos' plan to develop "blue hydrogen" using CCS technology is likely to be just a "cover" to pave the way for "substantially expanding fossil energy mining activities in the future."

It is worth noting that a study published in the academic journal "Energy Science and Engineering" in 2021 showed that the total greenhouse gas emissions from the production of "blue hydrogen" over the entire life cycle are even higher than the greenhouse gas emissions from direct combustion of natural gas.

According to the study, compared with traditional fossil energy hydrogen production, the "blue hydrogen" project equipped with carbon capture and storage equipment has only reduced carbon dioxide emissions by 9%-12% over the entire life cycle, while releasing more and more powerful greenhouse gas methane. At the same time, the carbon dioxide capture efficiency of carbon capture and storage equipment is usually only about 85%-95%, and the normal operation of the equipment also requires a lot of electricity, which may emit more carbon dioxide in this process.

Judicial breakthrough in climate responsibility

ACCR claimed that Santos' environmental statements constituted "greenwashing" based on section 18 of the Australian Consumer Law (prohibition of misleading or deceptive conduct) and section 1041H of the Corporations Act (prohibition of false statements).

This case is the first to bring the technical feasibility of corporate climate commitments and the authenticity of information disclosure into judicial review.

Environmental organizations use this to promote regulation of the fossil fuel industry, requiring companies to provide verifiable evidence of emission reduction plans rather than relying on technical gimmicks.

Santos 2024 Annual Report

Santos announced its 2024 full-year results and 2024 Sustainability and Climate Report on February 19.

Santos achieved sales revenue of US$5.4 billion, net profit after tax of US$1.2 billion, and underlying profit of US$1.2 billion in 2024. Strong free cash flow from operations of US$1.9 billion. Annual production was 87.1 mmboe and sales volumes was 91.7 mmboe.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said the company’s strong free cash flow from operations reflects the cash generative nature of the base business.

“A highlight of the year was the successful startup of Moomba CCS phase one in September, which had an immediate and ongoing impact on the company’s emissions. Net equity Scope 1 and 2 emissions for 2024 reduced by 26 per cent and fourth quarter emissions intensity reduced by 18 per cent compared to our baseline year of 2019-20.”

“Importantly, Moomba CCS phase one gives us confidence in the potential to build a commercial carbon management services business as customer demand for CCS grows in Australia and in Asia.”

“In 2024, Santos’ Scope 1 and 2 equity emissions were 26 per cent lower than the baseline year of 2019-20. This reduction represents 84 per cent progress to our 2030 emissions reduction target of 30 per cent Scope 1 and 2 emissions.”

Santos 2025 Annual General Meeting

Santos held its 2025 Annual General Meeting on April 10.

Santos announced that the 120-mile pipeline for our Pikka project is now substantially complete – one year early – with minor tie-in and punch-list works remaining. This creates the possibility for early startup of the project, depending on weather and logistics which will become clearer over the coming months. Barossa LNG is also 95.2 per cent complete at the end of March and on track for first gas in the third quarter this year.

The announcement said that another highlight of the AGM was resounding support for Santos’ Say on Climate with 85.85 per cent of voting shareholders supporting the company’s advisory resolution. This reflects the success of Santos’ low-cost Moomba Carbon Capture and Storage project, which will store up to 1.7 million tonnes of CO2 per year, depending on CO2 availability, and, having passed six months of operation, is expected to soon generate its first revenue with the allocation of Australian Carbon Credit Units by the Clean Energy Regulator.

Santos has a strong balance sheet and line of sight to increased production of more than 30 per cent by 2027 when Barossa LNG and Pikka phase one are both online.

“The strong vote for our Say on Climate confirms that we are also on the right track with our decarbonisation strategy as we look to build a commercial carbon management services business based on carbon capture and storage,” Mr Gallagher said.

In addition, Santos was asked about the current litigation Santos is facing regarding greenwashing.“Since last year, the company has lost three board members with key skills in climate change and energy transition. In the context of current litigation and the existential threat posed by climate change, is the company concerned that its capabilities in this key area have been degraded?”

Santos responded:

“Regarding the greenwashing issue, I am sure you understand that I cannot comment on this as the matter is before the courts.

Regarding the board issue, there is indeed a board renewal. In the process of the board's renewal, it will very clearly look at the required capability structure.

For those directors who are about to retire, we have very specifically sought new candidates with the right skills - especially in energy transition.

We re-evaluate the skills composition of the board every year. In fact, based on the results of the evaluation, we believe that the overall strength of the board in terms of climate, energy transition, innovation and corporate transformation has increased compared to the previous period. You can refer to our annual report and corporate governance statement and compare it with last year's version to see this.”​

Editor's note:

ACCR v Santos not only challenges corporate environmental commitments, but also reveals deep contradictions in the transformation of the fossil energy industry.

This case is not only a legal game, but also a microcosm of the global energy transformation. It reveals the gap between corporate climate commitments and actual actions, and promotes the evolution of ESG from "moral initiative" to "legal responsibility". In the future, similar lawsuits may become an important tool to promote climate action, and companies need to make substantial improvements in technical feasibility and transparency.

Author: Qinger