It comes as the consumer watchdog publishes draft guidelines in a bid to improve confidence in environmental standards claimed by companies.
The Australian Competition and Consumer Commission announced a crackdown in 2022 on businesses greenwashing, which involves making false claims to deceive consumers into believing a product or service is environmentally friendly.
An internet sweep found 57 per cent of businesses reviewed were making potentially misleading environmental claims.
ACCC chair Gina Cass-Gottlieb on Friday said businesses needed to be honest and transparent when making claims so consumer confidence wasn't undermined.
"Our draft guidance sets out what the ACCC considers to be good practice when businesses make environmental claims about their products and services, as well as making them aware of their obligations under the Australian Consumer Law," she said.
"Businesses that are taking genuine steps to adopt sustainable practices are put at a competitive disadvantage by businesses that engage in 'greenwashing' without incurring the same costs."
Australian Conservation Foundation spokeswoman Audrey van Herwaarden said regulations were needed to ban certain environmental claims by companies such as being "carbon neutral".
"The EU parliament recently voted to ban the generic use of the confusing - and at times misleading and deceptive - term 'carbon neutral' in advertising and has plans to ban environmental claims that are based solely on carbon offsetting schemes," she said.
"ACF would like to see the Australian government similarly consider regulatory options to control the use of broad carbon neutral marketing, including an outright ban."
She said greenwashing undermined the level of climate action needed by creating a "false impression of environmental responsibility".
Ms Cass-Gottlieb said the ACCC was seeking feedback from businesses and other stakeholders on the proposal.
"We would like to hear from businesses on whether our draft guidance improves their confidence in making legitimate environmental and sustainability claims, as well as if they have seen concerning green claims made by other businesses," she said.
Consultation closes mid-September.
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