Canada’s new greenwashing laws: Corporate environmental claims under review

Environmental sustainability has become a priority for consumers, investors, and governments alike, leading to a surge in eco-friendly marketing and, in some cases, greenwashing — claims that paint products or companies as more environmentally beneficial than they are. In June 2024, significant amendments to the Competition Act (the Act) came into force. These reforms represent a significant legislative move that introduces changes to the Competition Act aimed at — among other things — curbing greenwashing.

Here’s what businesses need to know about these changes and how they might affect operations, marketing strategies, and the very way companies approach sustainability in Canada.

What is Greenwashing?

The term “greenwashing”, as it is used within the context of Competition Act compliance, describes the practice of exaggerating or misrepresenting environmental benefits of a product, business or business activity or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change in order to enhance a company’s appeal to environmentally conscious consumers. While some greenwashing is unintentional, stemming from ambiguity or lack of substantiation, other instances are more deliberate.

Common greenwashing tactics include vague claims about “eco-friendliness,” “sustainability,” or “carbon neutrality,” often without substantial data or transparency to back them up. As consumers increasingly factor sustainability into purchasing decisions, greenwashing not only misleads the public but also gives non-compliant companies an unfair advantage over genuinely sustainable competitors. Bill C-59 seeks to address these concerns, allowing regulators and, in certain circumstances, private parties, to intervene against misleading environmental claims with precision.

The Competition Bureau has historically included greenwashing as part of its general mandate against misleading advertising; however, Bill C-59 has shifted the landscape, making it clearer and easier for the Bureau to hold businesses accountable for deceptive environmental claims.

Bill C-59’s Treatment of Greenwashing

Bill C-59 gives the Competition Bureau the ability to enforce stricter standards of accountability and transparency to environmental marketing practices, one that all companies should be aware of.  

1. Greenwashing as Deceptive Marketing

Bill C-59 explicitly includes greenwashing within the Competition Act’s framework of “deceptive marketing practices.” The Competition Bureau can now investigate and penalize greenwashing more effectively, establishing a precedent that companies should substantiate all eco-related claims in marketing to ensure compliance.

According to the new provisions, any representation that promotes a product, service, business or business activity as environmentally beneficial must be based on adequate and proper testing or substantiation, meaning that vague, general statements which a company may be unable to substantiate will now create enhanced compliance risk.

Specifically, two types of greenwashing representations fall under scrutiny:

• Claims of Environmental Benefits: This includes representations — whether in the form of statements, warranties, guarantees, or promises — made to the public about a product’s supposed benefits in protecting or restoring the environment or addressing climate change. If these claims are not substantiated by “adequate and proper testing,” they may be deemed a misrepresentation under the new rules.
• Business Activity Claims: Claims that a business or its activities contribute to environmental protection or mitigation of climate change effects are similarly regulated. Under Bill C-59, these statements must be based on “adequate and proper substantiation” according to internationally recognized methodologies. This applies to any representations that suggest a business’s activities are beneficial for the environment, from carbon offsetting initiatives to sustainable sourcing practices.

These provisions cover representations made in a wide range of promotional mediums, including written and oral claims, advertisements, and digital marketing materials.

The above claims would not be considered false or misleading (i.e. would not be “greenwashing”) if the representation is based on an adequate or proper test, or substantiation, conducted in accordance with an internationally recognized methodology. That is, if it was verified before the representation was made to the public.

2. Standards for “Adequate and Proper” Substantiation

Environmental claims of the sorts described above must be made in a way that can be “adequately and properly” substantiated. Although these terms are not strictly defined in the Act, the Competition Bureau has provided some guidance on what constitutes adequate substantiation for environmental claims.

 Specifically, testing that backs environmental claims must be conducted before the claim is made public and should be completed in a controlled environment to eliminate as many external variables as possible, thereby ensuring objectivity. Additionally, the testing must reflect the real-world conditions of the product or service to ensure relevance to consumers’ actual experiences. Moreover, the substantiation should support the overall impression given by the marketing claim—if, for example, a product is marketed as “100% recyclable,” then all components, including packaging, should genuinely meet recyclability standards within regular recycling systems in Canada. Without explicit definitions of “adequate and proper substantiation” and “internationally recognized methodology,” in the Competition Act and the fact that these terms have not yet been considered and interpreted by the courts, companies may still face some uncertainty in ensuring compliance, as industry standards for testing and certification vary widely and continue to evolve. In the absence of firm guidance, businesses may find it useful to reference internationally accepted methodologies to substantiate their environmental claims and reduce regulatory risk.

3. Shift in Burden of Proof

Previously, the onus was largely on the Competition Bureau to demonstrate that an environmental claim was misleading. Under Bill C-59, the burden of proof shifts to the companies themselves. This means that, if challenged, companies making green claims must be able to provide evidence proving the accuracy of their statements, in the form of adequate and proper testing or substantiation described above. For businesses, this shift underscores the importance of record-keeping and documentation as essential components of a compliant marketing strategy.

4. Consequences and Financial Penalties

The Competition Bureau can seek various administrative remedies for engaging in reviewable conduct under the Act, including deceptive marketing practices such as greenwashing. For corporations, the administrative monetary penalties (AMPs) include a maximum fine of $10 million for a first offense, and $15 million for any subsequent infractions. Alternatively, the fine can be set at up to 3% of the company’s annual global revenue — whichever amount is higher. For businesses, this represents a strong financial incentive to adhere to the Act’s standards, as even a single misleading claim could have substantial financial repercussions.

Guidance for Businesses

As these changes are introduced by Bill C-59, businesses across Canada — as well as those that do business in Canada — would be well-advised to carefully consider their practices. They now face a higher bar for making and maintaining environmental claims. The following are some possible steps, though businesses would be well-advised to contact a member of Fillmore Riley’s Business Law practice for advice tailored to their specific situation.

1. Conduct a Rigorous Marketing Review

Marketing teams will need to reassess all environmental claims across a company’s branding materials, advertising, and product packaging. Advertising representations will need to shift to precise, verifiable statements. This will require meaningful and ongoing collaboration between businesses’ marketing, legal, compliance, and supply chain departments. This may include establishing new internal review processes that verify every environmental claim meets the rigor demanded by Bill C-59.

2. Obtain Documentation and/or Third Party Certification

Bill C-59’s demand for evidence-backed claims places a premium on robust documentation. Companies should consider implementing or strengthening internal verification processes that carefully track and substantiate each environmental claim. This may involve maintaining clear records of supply chain practices, gathering data on carbon emissions or resource use, and investing in tools that document sustainable practices at each stage of production.

Verification processes might also benefit from partnerships with third-party certifiers who can add a layer of credibility and provide evidence of substantiation. Certifications or audits from reputable organizations can validate claims, helping businesses meet regulatory standards while enhancing their brand’s credibility. For sectors where eco-claims are common, such as consumer goods, energy, or packaging, having rigorous evidence to support these claims will be essential to avoid regulatory penalties. Companies that develop strong documentation processes now will be better positioned to respond to any future Competition Bureau inquiries.

3. Embrace Transparency to Build Customer Trust

Beyond compliance, Bill C-59 presents an opportunity for businesses to strengthen their reputations through transparent, credible environmental claims and differentiate themselves in the marketplace. Consumers are increasingly skeptical of broad sustainability claims and value brands that are forthcoming about their environmental impact. Companies that invest in genuine, data-backed sustainability efforts and communicate these with clarity are likely to see positive responses from consumers.

4. Plan for Higher Compliance Costs

Meeting Bill C-59’s standards will likely entail additional costs, whether through third-party certifications, supply chain audits, or enhanced documentation efforts. Companies should budget for these costs and consider them an investment in brand resilience and compliance. Proactively building substantiation measures can save companies from the much higher costs—both financial and reputational—that come with regulatory penalties or public mistrust.

Public Consultation on Greenwashing Regulations

As part of its treatment of greenwashing, the Competition Bureau opened a public consultation process inviting input on the new amendments from businesses, environmental organizations, industry groups, and members of the public. The process closed on September 27, 2024, but there is evidence that the Bureau is taking the impact on the business of Bill C-59 seriously. In particular, the Bureau sought insight on the following:

Claims About Environmental Benefits of Products or Services

• Common types of environmental claims: What kinds of environmental benefit claims are frequently made about products or services in the marketplace, and why are these specific claims more prevalent?
• Challenges with testing certain claims: Are some types of environmental claims about products or services less likely to be based on “adequate and proper testing”? What makes these claims harder to test?
• Standards for “adequate and proper” testing: What factors should the Bureau consider in determining whether testing to support environmental benefit claims for products or services is “adequate and proper”?
• Compliance challenges for businesses: What difficulties might businesses and advertisers face in meeting this testing standard?
• Other relevant information: Are there additional considerations the Bureau should keep in mind regarding the enforcement of this provision?

 Claims About Environmental Benefits of Businesses or Business Activities

• Common types of environmental claims for businesses: What kinds of environmental benefit claims are commonly made in the marketplace about businesses or business activities, and why are these specific claims more prevalent?
• Challenges with substantiating certain claims: Are there specific types of claims about environmental benefits of businesses or business activities that are less likely to be based on “adequate and proper substantiation in accordance with internationally recognized methodology”? What makes these claims harder to substantiate?
• Relevant internationally recognized methodologies: Which internationally recognized methodologies should the Bureau consider when assessing whether environmental claims about businesses or business activities have been “adequately and properly substantiated”? Are there limitations to these methodologies?
• Additional factors for evaluating substantiation: What other considerations should the Bureau take into account when determining whether claims about the environmental benefits of businesses or business activities are substantiated appropriately?
• Compliance challenges for businesses: What difficulties may businesses and advertisers encounter in meeting this substantiation standard?
• Other relevant information: Are there other factors the Bureau should consider in terms of how and when to enforce this provision?

Conclusion

Bill C-59 marks a significant change in Canada’s approach to environmental marketing, putting companies on notice that green claims must be backed by substance, not just slogans. By explicitly targeting greenwashing under the Competition Act, the legislation gives the Competition Bureau a powerful tool to pursue misleading environmental claims.

For businesses, these changes will necessitate a review of marketing strategies, investments in credible testing and certification, and the establishment of compliance processes that stand up to scrutiny. As these standards take hold, companies that make genuine, well-substantiated claims will find themselves building trust with today’s eco-conscious consumers.

Adapting to Bill C-59 will involve complexity. To learn more about how Bill C-59 could impact your business or for tailored advice on compliance, we encourage you to contact a member of Fillmore Riley LLP’s Business Group.