South Australia's peak environment group has called on the corporate watchdog to investigate accusations a Leigh Creek fertiliser company's marketing is misleading about the climate impacts of its processing plant – an allegation the company strenuously denies.

On Tuesday, the Environmental Defenders Office (EDO), a legal body acting for the Conservation Council of SA, wrote to the Australian Securities and Investments Commission (ASIC) asking it to investigate whether urea fertiliser company NeuRizer, formerly known as Leigh Creek Energy, had made "misleading or deceptive" carbon-neutral claims.

NeuRizer has denied the allegation, describing it as "offensive and factually incorrect".

While the company is yet to begin production, with plans to start operating in 2025, its website states it is "leading the world in the development of responsible inputs for food production" and that it was "Australia's first carbon neutral producer of urea fertiliser".

The process converts coal from its solid state into a gaseous form, resulting in the production of synthesis gas (syngas) containing methane and hydrogen, which is then further refined into urea fertiliser.

In its complaint, the EDO argued underground coal gasification used for urea production was not environmentally safe or responsible, and an investigation should be launched to determine whether the marketing statements are in accordance with the Corporations Act 2001 and Australian Consumer Law.

"It is a very carbon-hungry project," the Conservation Council SA's chief executive Craig Wilkins told the ABC.

On its website, NeuRizer said it would have the only fully-integrated urea production facility in Australia capable of producing up to two million tonnes of fertiliser each year.

Conservation Council SA, which represents 60 environment groups, has questioned that statement, arguing the process used to create urea fertiliser is based on fossil fuel hydrogen production from gases related to brown coal reserves.

"NeuRizer will exploit the coal seam by essentially putting it on fire and extracting syngas and then turning that gas into a product," Mr Wilkins said.

The ABC put the allegations to the company which said it had its sites independently audited and had purchased offsets to ensure it was carbon neutral.

"A large per cent of CO2 produced in the process of making urea is used later in the process," the company said.

"CO2 is required in the process of converting ammonia to urea.

"Any surplus CO2 will be dealt with by way of reduction of the generation of CO2 through the use of renewables, the purchase of offsets and the sequestering of CO2 (CCS) at our site."

Certification 'one of the most rigorous'

NeuRizer also states on its website that it is a "certified carbon neutral organisation, having been awarded Climate Active certification in March 2022".

Climate Active is a partnership between the federal government and businesses and describes its certification as "one of the most rigorous in the world".

NeuRizer also said that Climate Active had "vetted" its carbon neutral claim through "independent experts meeting the Climate Active Carbon Neutral Standard".

But Environmental Defenders Office managing lawyer Kirsty Ruddock said the certification only related to NeuRizer's office emissions footprint – not its product.

NeuRizer said Climate Active certification only related to its current carbon footprint.

"We have made it very clear in our statements and printed material that there are two stages to be 'carbon neutral'," the company said.

"Stage 1 is the offsetting of emissions prior to production (office and site) and then once in production a combination of the usage of our CO2 in the production of urea, and the use of renewables to lower our footprint and the use of CCS [carbon capture and storage] of any surplus CO2 will ensure we are carbon neutral."

NeuRizer said it would fully cooperate with an investigation if ASIC chose to launch one.

ASIC getting tough on 'greenwashing'

In cases where ASIC has found misleading statements have been made, it has been cracking down on what is called greenwashing – a term used when an organisation makes an environmental claim that does not stack up.

Last month, the corporate watchdog said it had intervened in 35 instances of greenwashing, with civil proceedings commenced against one company and infringement notices issued to 11.

University of Adelaide human geography professor Melissa Nursey-Bray said greenwashing was a form of false advertising, but regulation was "fairly ambiguous".

"What needs to happen is that some structures and regulations need to be put in place to help companies monitor themselves, but also provide some kind of third-party review," Professor Nursey-Bray said.

A federal parliamentary inquiry is currently investigating the impacts of greenwashing on consumers and is expected to identify the legal and regulatory actions needed to stop it.

Professor Nursey-Bray said she hoped the inquiry would lead to better protection for customers.

"I think Australia will have to wait for the results of the parliamentary inquiry to decide what kind of next steps it's going to take and how they're going to trickle down across the nation," she said.

"It's a work in progress, and it will be really interesting to see what happens."

ASIC has been contacted for comment. ​​​​​​