The Greenwashing Trap: A Comparative Analysis of Corporate Climate Liability and the "Anti-ESG" Backlash in the EU, US, and Australia

Abstract

The rapid ascendancy of Environmental, Social, and Governance (ESG) criteria has transformed corporate reporting from a voluntary exercise in public relations to a minefield of legal liability. As capital markets increasingly price "green premiums," corporations face intense pressure to embellish their sustainability credentials—a practice known as "greenwashing." This article provides a critical comparative analysis of the regulatory and litigious responses to greenwashing in three distinct jurisdictions: the European Union, the United States, and Australia.

The article contrasts the EU’s prescriptive, taxonomy-based approach (via the CSRD and SFDR) with the polarized, politicized landscape of the United States, where the SEC’s Climate Disclosure Rule faces constitutional challenges. It further examines Australia’s aggressive enforcement strategy, where regulators have successfully litigated against "net zero" claims as misleading conduct. The paper argues that the divergence in legal standards is creating a phenomenon of "Greenhushing," where corporations, fearful of liability, retreat into silence, paradoxically undermining the market transparency the laws were designed to achieve.