An overhaul of a long-criticised federal program should mean businesses can no longer hoodwink consumers or offset their way out of climate action.
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The scheme known as Climate Active will become a credible standard for the domestic market and consumers, Assistant Minister for Climate Change and Energy Jenny McAllister will announce on Friday.
"Climate Active certification should be a trusted signal to Australian consumers that a business is taking credible climate action," Senator McAllister said.
Climate Active was established in 2010 to help businesses measure, reduce, offset, and publicly report their emissions.
It has provided more than 700 certifications to over 540 businesses that have offset more than 38 million tonnes of carbon emissions, including supermarkets, banks and energy companies.
But community expectations, international benchmarks and business practices have been evolving towards clearer reporting and more accurate emissions reduction targets.
Critics have said the scheme allowed companies to exclude part of their pollution from the assessment, which meant they were effectively "greenwashing" shoppers who were convinced by the certification and logo.
Senator McAllister said the former coalition government's "climate inaction and scepticism" over the past decade stopped the program from keeping pace.
"Proposed changes will make it difficult for companies and organisations which are not genuinely committed to climate action to be certified under the Climate Active program," she said.
The term "carbon neutral" will be dumped and organisations will be required to prioritise direct emissions reductions.
Federal Labor proposes requiring gross emission reduction targets and participants to lose their credentials if they fail to meet targets promised under the scheme.
Most targets focus on what are known as Scope 1 and 2 emissions, which are directly linked to a company's operations and supply chain, but specific Scope 3 emissions when products are used by customers are set to be included in calculations.
To cancel out emissions, businesses have been able to buy carbon credits generated by projects in Australia and overseas.
The use of international offsets will be tightened and the program, while remaining voluntary, will mandate a minimum proportion of renewable electricity consumption.
Regulators are already cracking down on vague terms such as "green", "sustainable" and "environmentally friendly" that may con a consumer or investor into thinking a product is more climate friendly.
"We are sending a clear signal to the market that climate claims must be legitimate and that consumer trust must be maintained," Senator McAllister said.
The federal government is seeking feedback by December 15.
Australian Associated Press
