The June 20th change to the Canadian Competition Act tackles greenwashing, prompting questions like “is greenwashing illegal in Canada?” and “are non-Canadian companies impacted?”.

Continue reading to learn about the specifics of the bill’s impact on greenwashing and the tools available to keep your environmental claims accurate, transparent, and compliant.

• What is Greenwashing?
• Legal Frameworks to Address Greenwashing
• What is Canada Doing to Address Greenwashing?
• Impact on Businesses and Consumers
• Best Practices for Businesses
• Anti-Greenwashing Tools for Business

What is Greenwashing?

Greenwashing is a practice used by companies to falsely advertise their products as environmentally friendly. This practice aims to capitalize on consumer demand for sustainable products but without making efforts to reduce environmental impact. It is now considered a form of false advertising in the Canadian Competition Act following its recent amendments.

Greenwashing misleads consumers and stakeholders through vague statements, misleading labels, or false information about environmental benefits. Common tactics, as identified by the United Nations, include:

• Claims of reducing emissions without credible plans
• Misleading labels such as “green” or “eco-friendly”
• Vague descriptions of company operations or materials used
• Emphasizing certain environmental attributes while ignoring others
• Exaggerating the impact of improvements or actions

With increasing consumer demand for environmentally sustainable and ethically produced products and services, greenwashing can deceive consumers into making purchases they might otherwise avoid.

Legal Frameworks to Address Greenwashing

In the EU, the Sustainable Finance Disclosure Regulation (SFDR) addresses greenwashing through disclosure requirements, while the EU Taxonomy defines the objectives and conditions for environmentally sustainable economic activities. The CSRD also mandates third-party assurance on sustainability claims.

In the UK, the Sustainability Disclosure Requirements (SDR) ensure that sustainability claims are “clear, fair, and not misleading.” Across the pond, the US has less regulation, with the SEC’s disclosure requirements caught up in courts and the Federal Trade Commission’s Green Guides being voluntary. California recently mandated climate-related disclosures in Bill 1305. And in Southeast Asia, ASEAN member nations developed the ASEAN Taxonomy to define green economic activities and reduce greenwashing.

What is Canada Doing to Address Greenwashing?

On June 20, 2024, Bill C-59 received royal assent, adding a new provision in the Competition Act that addresses environmental claims in marketing material. The amendment requires businesses claiming to protect or restore the environment or mitigate the environmental and ecological causes or effects of climate change to substantiate these claims.

Response to the bill is mixed. Environmental and health groups welcomed the amendment, while some in the energy sector strongly opposed it. Critics, like the Pathways Alliance, argue it could act as censorship, impacting the energy sector negatively. Alberta Premier Danielle Smith stated that the bill might prevent the sharing of truthful information that opposes federal narratives. Her statement concludes with the intent to pursue legal action against the national government.

The Competition Act is administered and enforced by the Competition Bureau and the Public Prosecutions Service of Canada. A June 25, 2024 news release from the Bureau stated, “The [Competition] Bureau will work to implement these changes as openly and transparently as possible.” Comments on the change can be submitted through the Bureau’s Guidance Feedback Form.

Impact on Businesses and Consumers

The update to the Competition Act affects any business operating in Canada, regardless of origin, with penalties for noncompliance including civil and criminal consequences. While consumers benefit from increased protection, there is concern that substantiation requirements may lead companies to share less information about their environmental activities (a phenomenon known as greenhushing).

Best Practices for Businesses

As the adage goes, honesty is the best policy. Businesses should communicate transparently and honestly about their environmental, social and governance matters. While voluntary, standards like the Science Based Targets Initiative (SBTi), Carbon Disclosure Project (CDP), and the International Sustainability Standards Board (ISSB) can help structure, ensure accountability, and promote transparency in managing and communicating environmental impacts.

Anti-Greenwashing Tools for Business

Ensogo can help your business structure, implement, and communicate your sustainability roadmap. Here’s how:

• Accurate Tracking: Collecting, verifying, and reporting data related to environmental claims.
• Enhanced Transparency: Providing verifiable evidence of sustainability efforts and real-time progress.
• Management & Accountability: Managing all aspects of ESG initiatives in one platform.
• Increased Trust: Fostering consumer trust through genuine commitment to sustainability, with the ability to share progress with stakeholders at any time.

Conclusion

With the amendments to the Competition Act, Canada has taken a firm stance against greenwashing, requiring businesses to provide evidence for their environmental claims. This shift aims to protect consumers and promote truthful marketing.

Businesses can use tools like Ensogo to accurately track, verify, and transparently report their environmental initiatives, maintaining compliance and fostering trust among stakeholders.

About the Author

Jennifer Debias leads business development, sales, and marketing at Ensogo, working with ESG and EHS professionals to optimize their sustainability strategies with technology. She has more than 15 years in EHS&S leadership experience in global facilities operations, construction, regulatory compliance, and software. Before joining Ensogo, Jennifer served as EHS Director for AECOM, Director of Business Development at RegScan, and ESG product specialist at Intelex.