Green

In June 2024, amendments to the Canadian Competition Act (Act) garnered significant attention (and often, criticism) from both business and legal communities in Canada for the introduction of new “greenwashing” provisions. The new provisions explicitly require businesses to substantiate claims made to Canadian consumers relating to the benefits of the business, business activities, products and/or services “for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change”.

Shortly following the passage of these amendments, the Competition Bureau (Bureau) reported that it had received “a large number of requests for guidance” on the greenwashing provisions, and promised to develop guidance on “an accelerated basis” in consultation with stakeholders. While the Bureau quickly announced an initial public consultation and guidance on the Bureau’s enforcement approach to environmental claims generally, the consultation materials and initial guidance did not engage substantively with the new provisions and largely restated high-level principles that are relevant to assessing any claim under the misleading representation provisions of the Act, providing little insight into how the Bureau would approach enforcement of the new provisions in particular.

In the closing days of 2024, the Bureau’s long-awaited draft guidance on its approach to assessing environmental claims under the Act, including the new greenwashing provisions, was released for public consultation. That consultation is now open until February 28, 2025.

We outline the new greenwashing provisions below, and unpack the key points that businesses making environmental claims in Canada need to know from the Bureau’s draft guidance.

Bill C-59 and the Greenwashing Amendments

With the passage of Bill C-59 on June 20, 2024, two new provisions aimed at cracking down on “greenwashing” were added to the civil misleading representation provisions in the Act:

1. The first provision applies to product-specific claims (which, by definition, include claims about services) and prohibits representations to the public in the form of statements, warranties or guarantees of a product’s or service’s “benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change” that are not based on an “adequate and proper test.” An “adequate and proper test” was already required under the Act to substantiate product performance claims generally, and has been the subject of consideration in Canadian case law (as discussed below).
2. The second provision applies to businesses and their business activities more broadly, prohibiting representations to the public relating to the “benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change” unless such claims are based on “adequate and proper substantiation in accordance with internationally recognized methodology.” Unfortunately, “internationally recognized methodology” is not used elsewhere in the Act, nor was it clearly defined in legislative discussions regarding the amendments. This However, the greenwashing provisions do expand the requirements of those general provisions by (i) specifically encompassing representations about businesses and their business activities; and (ii) requiring substantiation in accordance with internationally recognized methodology for certain environmental claims.

Related Amendments

Beginning on June 20, 2025, private parties will be able to seek leave from the Competition Tribunal (

Tribunal) to commence actions under the Act’s civil misleading representation provisions, including the new greenwashing provisions. Until June 20, 2025, the Bureau will be the only party that can enforce these provisions.If the Bureau (or, beginning in June 2025, a private party) brings a successful action under the misleading representation provisions, the Tribunal may order the business to:

Cease the impugned conduct;

• Pay an administrative monetary penalty of up to the greater of: (i) C$10 million (or C$15 million for a subsequent offence); and (ii) three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be determined, three percent of the business’s global gross annual revenues;
• Pay restitution to affected customers; and
• Publish a notice correcting the misrepresentation.
• Given the potentially significant penalties available for contraventions of the greenwashing provisions, it is important that businesses carefully assess their environmental claims. The The The However, a few key points from the Bureau’s Digest, released contemporaneously with the announcement of the initial public consultation, are worth highlighting as “foundational” guidance on making environmental claims in Canada:

The Digest sets out the most common categories of environmental claims that are the subject of complaints to the Bureau, namely:

claims about the composition of products/packaging (e.g., made from 100% recycled paper);

claims about the steps or resources involved in a production process (e.g., carbon neutral production process);

claims about disposal of products after use (e.g., recyclable);comparison claims (e.g., uses 25% less water);vague claims (e.g., eco-friendly); and

claims about the future (e.g., the company will be carbon neutral by a certain date or highlighting certain positive environmental projects that “pale in comparison” to the impact from the businesses total operations).

Claims falling within these categories likely warrant particular caution, as they appear to be the subject of heightened scrutiny from the public, including environmental advocacy groups.

1. 1. The Digest offers high-level guidance for environmental claims, including:
   2. ensure any “key information necessary for consumers not to be deceived is included” such that it will factor into the general impression of the claim;
   3. for performance claims, ensure there is adequate and proper testing in support of the claim that is completed before the claim is made;
   4. be specific about any comparisons;
   5. avoid exaggeration (“While even small changes can add up when it comes to the environment, that doesn’t mean that small changes should be marketed as big ones”);
   6. avoid vague environmental claims in favour of clear specific ones; and

exercise caution when making future-looking claims to ensure they are factual rather than aspirational.

These guidelines parallel concerns raised in the common categories of environmental claims that are the subject of complaints. Notably, these principles would apply equally to the assessment of non-environmental claims under the deceptive marketing provisions.

1. 1. While this guidance is not truly “new”, it is helpful to keep these high-level principles in mind when assessing environmental claims to Canadian consumers.
   3. Ongoing Public Consultation and Draft Guidance
   4. On December 23, 2024, the Bureau released draft guidance
   5. on environmental claims for public consultation. This The Nonetheless, the clarification is likely to provide some comfort to businesses operating in Canada, as many had raised concerns that the expansion of the greenwashing provisions to explicitly capture claims about businesses and business activities could capture (in some cases, mandatory) disclosure in securities filings.
   6. With respect to the new greenwashing provisions in particular:

The draft guidance confirms that the Bureau will interpret “adequate and proper testing” with reference to the existing body of case law that has defined this requirement under the more general misleading representation provisions of the Act. The This is a flexible standard, and will require a context-specific assessment of the intended claim and the appropriate testing procedure.

The draft guidance states that the Bureau “will likely consider a methodology to be internationally recognized if it is recognized in two or more countries”. The The This It will be interesting to see if this point is revised following public consultation.

While these clarifications are generally helpful, it is disappointing to see the Bureau has not provided detailed guidance for specific types of claims in this area, particularly in light of the indications from businesses in Canada that the provisions have created significant uncertainty.

The Bureau is accepting submissions to its public consultation until February 28, 2025.

Implications

For several years, the Bureau has indicated that misleading environmental claims are an enforcement priority in Canada. This The For

Story originally seen here