In an effort to combat greenwashing, the Canadian government has amended the Competition Act, adding a new provision that regulates environmental claims in marketing materials. The new legislation adopted by the Canadian Parliament on June 20, 2024 is positioned to regulate environmental claims and prevent greenwashing in Canada.
According to the Act, on page 429 of the 546-page Bill C-59, a two-paragraph amendment to the Competition Act drastically increased regulation in this area by classifying environmental claims as within the scope of deceptive marketing practices.
The Competition Act is Canada’s commerce law that regulates trade, mergers, and marketing practices. The act applies to companies that are based in Canada, as well as foreign companies that do business or operate within Canada. Enforcement is through the Competition Bureau, which operates in a similar function as the U.S. Federal Trade Commission. Penalties can be both civil and criminal.
The amendment addresses claims by businesses relating to “protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change.” Those claims must be substantiated in “accordance with internationally recognized methodology.” In other words, if a company says they are climate friendly in a marketing campaign or on their website, they now have to prove it.
Notably, under the Act, any six residents of Canada over the age of 18 may file for an inquiry with the Competition Bureau. Once the complaint is filed, the language of the Act requires the Commissioner to commence an inquiry. The changes, effective June 20, pose new challenges and risks for companies, requiring immediate action to ensure compliance.
New greenwashing provisions
- Product Benefit Claims: Any environmental claims about a product must be backed by “adequate and proper” testing, with the burden of proof on the claimant. This includes statements about resource use and emissions savings. Example: Claims about a product’s reduced emissions must be tested under controlled circumstances, reflecting real-world usage to eliminate external variables and subjectivity.
- Business Activity Claims: Statements about a business’s environmental impact must be substantiated according to internationally recognized methodologies, a term not yet defined by regulatory bodies. Example: A company’s goals regarding carbon neutrality or emission reductions must be substantiated with recognized best practices.
These provisions demand businesses conduct rigorous testing and use established methodologies for environmental claims, shifting the proof burden to the companies.
Enforcement and litigation risks
Penalties for greenwashing under the new amendments are severe, including:
- Administrative monetary penalties up to C$10-million (C$15-million for repeat offenses) or 3% of worldwide gross revenues.
- Private litigation commencing June 2025, allowing individuals and groups to seek action if deemed in the public interest.
Given the significant volume of greenwashing complaints, businesses should expect increased scrutiny from both regulators and private parties.
Strategic business recommendations
- Review and substantiate all environmental claims
- Follow best practices for testing and substantiation as recommended by reputable international bodies
- Implement strict compliance programs to avoid enforcement actions and litigation
