Net Zero Claims in Australia: What They Actually Mean (And What They Don't)

Santos just won a Federal Court case over its net zero claims. In February 2026, Justice Brigitte Markovic dismissed the Australasian Centre for Corporate Responsibility's lawsuit alleging Santos had misled investors about its pathway to net zero by 2040. The court accepted that Santos's targets were "statements of present intention" — not binding guarantees — and pointed to the company's progress on the Moomba carbon capture facility as evidence of genuine effort.

Some people read that decision as a green light. We read it as a warning.

Because here's what actually happened: Santos spent years in litigation, defending net zero claims in Australia through a full Federal Court trial, to arrive at a verdict that basically said "aspirational language is okay if you can show you're trying." That's not exactly a ringing endorsement. And it only worked because Santos could point to billions of dollars in capital expenditure on CCS infrastructure. The median ASX-listed company claiming net zero by 2050 has no equivalent evidence to offer.

Two-thirds of ASX200 companies have made net zero commitments, according to ACSI research. But the Investor Group on Climate Change found that when they assessed twelve major ASX-listed companies in high-emitting sectors, only one met their criteria for high alignment between net zero targets and actual capital allocation. One out of twelve. The rest had targets that lived on a slide deck, disconnected from how the company actually spends money.

That gap — between the claim and the capital behind it — is where the legal risk lives.

The words "net zero" don't mean what most companies think they mean

We talk to sustainability managers every week who use "net zero" and "carbon neutral" interchangeably. They're not the same thing, and the difference matters legally under both ACCC guidance and AASB S2 disclosure requirements.

Carbon neutral means your total emissions minus your offsets equals zero. You can emit 50,000 tonnes of CO2-e and purchase 50,000 tonnes of carbon credits, and you're technically carbon neutral. Climate Active — the Australian government's certification program — operated on this basis for years. You measured, you offset, you got a logo. No minimum reduction requirement.

Net zero is supposed to mean something harder. Under the ISO Net Zero Guidelines (IWA 42:2022) and the SBTi Corporate Net-Zero Standard, net zero requires deep decarbonisation first — reducing your absolute emissions by at least 90% from baseline — with carbon removals used only for the residual 5-10% that genuinely can't be eliminated. Offsets can't be counted toward your reduction target. They can only counterbalance truly unavoidable residual emissions after you've done the hard work.

That's a massive difference. Carbon neutral lets you buy your way to zero today. Net zero demands you actually change how you operate — and even then, you've got decades of work ahead before you can legitimately use the term.

But here's the problem. When a company puts "net zero by 2050" on its website or in an investor presentation, which definition are they using? Almost nobody specifies. And the ACCC has made it clear that unqualified future environmental claims need reasonable grounds and verifiable plans to back them up.

The Australian Gas Networks "Love Gas" case is a direct example. The ACCC took AGN to Federal Court in June 2025 for claiming — in TV ads during MasterChef, no less — that household gas would become renewable "within a generation." No qualifications. No disclaimers. No fine print. Just a young girl and her dad using gas appliances, followed by a green flame logo and the tagline "Love a renewable gas future." The ACCC alleges AGN didn't have reasonable grounds for the claim, given the technical and economic barriers to distributing renewable gas at household scale. That case is still before the courts, with penalties up to $50 million per contravention under the Australian Consumer Law.

Replace "renewable gas within a generation" with "net zero by 2050." If you can't show how you'll get there — with specific reduction pathways, interim milestones, capital allocation, and credible timelines — you're making fundamentally the same type of unsubstantiated forward-looking environmental claim.

Climate Active's quiet unravelling tells you something important

The collapse of Australia's Climate Active program over the past two years is a useful case study in what happens when carbon neutrality claims meet real scrutiny.

Telstra dropped out in June 2024. So did Australia Post, PwC, Afterpay, Jetstar, the Clean Energy Finance Corporation, and over a hundred other organisations. The reasons varied, but the common thread was simple: companies didn't want to defend "carbon neutral" claims built primarily on offsets at a time when the ACCC was handing out eight-figure penalties for misleading environmental marketing.

And the program itself has stalled. Climate Active published a consultation paper in late 2023 and said reforms would follow. As of mid-2026, no reforms have materialised. The program still operates, but the exodus of its most prominent members tells you where the market is heading.

The shift away from carbon neutrality toward net zero isn't just semantic. It reflects a genuine change in what regulators, investors, and auditors expect. Buying offsets is no longer enough to claim environmental credentials. You need to show actual emission reductions — and that starts with knowing what your emissions actually are.

Which brings us to the part most companies skip.

You can't claim net zero if you don't know your starting point

This is the hill we'll die on. Every credible net zero target depends entirely on the quality of the baseline emissions data underneath it.

The SBTi requires a base year inventory covering Scope 1, 2, and 3 emissions before it will validate any target. AASB S2 paragraphs 33-36 require that if you disclose a net greenhouse gas emissions target, you must separately disclose the associated gross emissions target — which means you can't hide behind net figures that include offsets without showing the raw numbers. ISO IWA 42:2022 explicitly ties net zero to deep reductions from a quantified baseline.

Every single framework assumes you have accurate, auditable baseline data. And most Australian companies don't.

The ANAO's performance audit found that 72% of 545 NGER reports contained errors, with 17% containing significant errors. These are the companies that are legally required to report emissions and have been doing it for years. If the organisations with the most reporting experience are getting their numbers wrong 72% of the time, what does that say about the quality of voluntary emissions inventories underpinning net zero pledges?

We've seen it firsthand. A company announces "net zero by 2040" on their website. We ask to see their baseline inventory. It's a spreadsheet. The Scope 2 figures use a single national average emission factor (0.62 kg CO2-e/kWh) instead of state-based NGA Factors — which range from 0.20 in Tasmania to 0.78 in Victoria. The Scope 1 data is missing refrigerant leakage entirely. Scope 3 is "TBD." And the baseline year keeps shifting because nobody documented which twelve months the original calculation covered.

That's not a net zero target. That's a press release with a number attached.

We're not claiming this is easy to fix. Scope 3 alone typically represents 70-90% of a company's total emissions, and getting reliable supplier data is genuinely difficult — we've written about the practicalities of collecting Scope 3 data from suppliers and we'll be honest, it's still messy. But "Scope 3 is hard" isn't a reason to announce a net zero target that implicitly includes it without doing the work. It's a reason to be more careful about what you claim publicly.

AASB S2 is about to force the conversation

Here's where net zero claims in Australia move from marketing to mandatory disclosure. And it's happening faster than most boards realise.

Under AASB S2, if your company has set a net zero target (or any climate-related emissions target), paragraphs 33-36 require specific disclosures about that target. Not just the headline number. The specific greenhouse gases covered. The scopes included. Whether it's a gross or net target. The planned use of carbon credits. The methodology and baseline year. And — this is the one that catches people — whether the target was validated by a third party, such as the SBTi.

Paragraph 14(a)(iv) then requires disclosure of your transition plan, including key assumptions and dependencies. Paragraph 14(b) adds a resourcing requirement — how you're funding and allocating resources to the activities in that plan. And from your second reporting period, paragraph 14(c) requires quantitative and qualitative reporting on progress against what you disclosed the year before.

Put all of that together and the effect is clear. If you've been telling investors, customers, and the market that you're targeting net zero — you now need to explain exactly how, with what money, on what timeline, and measured against what baseline. Inside your annual financial report. Signed by your directors. Subject to assurance under ASSA 5010.

Group 1 entities are already living this. Group 2 entities start reporting from July 2026. Group 3 from July 2027. And NGER reporters get pulled into Group 2 automatically via the registration pathway.

The modified liability protection helps — transition plan disclosures are protected statements during the three-year window ending 31 December 2027, meaning only ASIC can bring action, limited to injunctions and declarations. But your Scope 1 and 2 emissions data carries full liability from day one. If your transition plan says "30% reduction in Scope 1 by 2030" and the baseline Scope 1 number is wrong, the plan may be protected, but the data it rests on isn't.

The ACCC and AASB S2 are pulling in the same direction

Something that hasn't received enough attention: the ACCC's eight principles for environmental claims and AASB S2's disclosure requirements create overlapping accountability for net zero targets.

The ACCC says environmental claims must be accurate, evidence-backed, unambiguous, and qualified where necessary. Future claims need verifiable plans and milestones. The AANA Environmental Claims Code — which took effect 1 March 2025 — explicitly requires that substantiation must exist at the time you make the claim, and that vague terms like "sustainable" or "green" need a high standard of proof.

AASB S2 takes a different angle on the same problem. It doesn't tell you what claims to make. It tells you what you have to disclose about the claims you've already made.

So if your company has a "net zero by 2050" commitment on the website, both frameworks now apply. The ACCC asks: do you have reasonable grounds for this claim? AASB S2 asks: show us the plan, the assumptions, the dependencies, the resourcing, the interim milestones, and — starting next year — your progress.

If the answer to both questions is "sort of, we're working on it," that's a problem. Not a theoretical one. The ACCC handed out $42.95 million in greenwashing penalties across four major cases in twelve months. They've called greenwashing a continuing enforcement priority for 2026-27. And ASIC has its own parallel track — remember, assurance providers will be testing your emissions data under ASSA 5010.

What a defensible net zero claim actually looks like

We're not lawyers. But we've spent enough time building carbon accounting systems and watching how auditors test emissions data to have a view on what separates a defensible net zero target from a lawsuit waiting to happen.

A defensible claim has five things.

An accurate, auditable baseline. Scope 1, 2, and at minimum a screening-level Scope 3 inventory, calculated using activity-based data — not spend-based proxies — with correct emission factors for each state and fuel type. The baseline year is clearly documented. Every number traces back to a source document.

A gross target alongside the net target. AASB S2 requires this explicitly. If you're claiming net zero by 2050, you need to show what your gross emissions target is — meaning how much you'll actually cut before offsets. The SBTi says at least 90%. If your gross target is only 50% reduction with the other 50% covered by credits, that's a very different claim than "net zero."

Interim milestones. "Net zero by 2050" on its own is vague enough to mean almost anything. A 2030 target and a 2035 target, with specific reduction percentages for each scope, turn it into something measurable. Australia's own NDC — submitted to the UNFCCC in September 2025 — commits to 62-70% reduction below 2005 levels by 2035. If the country has interim targets, your company should too.

A funded transition plan. Not a consultant-written PDF gathering dust. A plan connected to capital expenditure, operational changes, procurement policy, and energy contracts, with someone accountable for delivery. The IGCC's research was damning on this point — 75% of the companies they assessed showed medium or high alignment on investment quality, but only one company met high alignment for the actual dollar amount allocated.

An audit trail from claim to source document. When an assurance provider asks "where does this number come from?" — can you answer in under five minutes? Or does someone have to dig through shared drives, email attachments, and last year's consultant deliverables?

We'll be honest — we don't think most companies are there yet. We're certainly not seeing it from the organisations we talk to. But the gap between "where we are" and "where we need to be" is exactly why accurate baseline data is the first thing to get right. Not the strategy. Not the offsets. The data.

Stop announcing. Start measuring.

If your company already has a net zero target on the website, it's too late to take it back without looking like you're retreating from climate commitments. But it's not too late to build the data foundation that makes the claim defensible.

Get your Scope 1 and 2 baseline right — using activity data from utility bills and fuel records, not estimates, and using the correct NGA Factors for each state. Document everything. Build an audit trail that survives scrutiny from both your assurance provider and the ACCC.

Then work on your transition plan. Connect it to real capital allocation decisions. Set interim targets that are specific enough to measure and honest enough to defend. If you're going to use carbon credits, be transparent about how many, what type, and for which residual emissions — because under AASB S2, you have to disclose that anyway.

And if you haven't made a net zero commitment yet, don't rush it. A well-evidenced 30% reduction target you can actually deliver is worth more — to investors, regulators, and the actual atmosphere — than a "net zero by 2050" claim you can't explain.

At Carbonly.ai, we build the baseline data infrastructure that makes climate targets defensible. Our AI extracts emissions data directly from utility bills and fuel records — no templates, no manual entry — with a full audit trail from published number to source document. If you're preparing for ASRS reporting or need to back up a net zero claim with real data, book a demo and we'll show you what your emissions actually look like.

Related Reading: