The Competition Bureau has released proposed guidelines for environmental claims following the recent greenwashing amendments to the Competition Act. The draft guidelines outline the Bureau's interpretation and enforcement approach, clarifying that the new provisions will not be enforced retroactively and will apply only to environmental claims made to the public for promotional purposes (rather than exclusively for another purpose). Importantly, the guidelines are not binding on private parties pursuing private actions for greenwashing, although we expect the Competition Tribunal will consider the guidelines when adjudicating private actions.
The Competition Act’s new greenwashing provisions require that claims made to the public about a product’s environmental benefits be based on adequate and proper testing, while claims about the environmental benefits of a business or business activity must be based on adequate and proper substantiation consistent with an internationally recognized methodology.
The primary purpose of the Competition Bureau’s guidelines is to indicate how the Bureau intends to interpret and enforce the new greenwashing rules. The Bureau defines greenwashing as environmental claims that are deceptive because they are false, misleading or not adequately and properly tested or substantiated. This includes aspirational claims about the future that are not supported by a clear plan.
The guidelines are not law and do not bind private parties (including public interest groups) who may choose to bring private actions, but the Competition Tribunal may nonetheless consider the Bureau’s approach when deciding whether to grant leave or when adjudicating a private case, and the Bureau may follow the guidelines when deciding whether to intervene in a private case.
Key Updates for Businesses
- The new greenwashing provisions do not apply retroactively. Businesses will not be held liable for breaches of the new greenwashing provisions before the provisions came into force. However, environmental claims made before (or after) the new provisions can still result in liability under the Act’s existing deceptive marketing provisions that prohibit materially false or misleading representations and performance claims about a product that are not based on adequate and proper testing.
- Environmental claims must be made for promotional purposes. The guidelines confirm that marketing and/or promotional representations must be made to the public for the purpose of promoting a product or business. Importantly, the Competition Bureau notes that representations made exclusively for a different purpose, such as to investors and shareholders in materials filed with securities regulators to comply with disclosure requirements, are not the Bureau’s enforcement focus. However, if representations made in securities filings are used by a business in other promotional materials, the Bureau may consider the representations to be marketing representations and within the scope of the Act.
- The concept of an environmental claim is broad. An environmental claim is any representation related to the environment that is used by businesses to promote a positive quality or attribute or to minimize a negative one. They can be about products, services, processes, businesses, business practices and activities. For example, an environmental claim about a product can relate to a product’s impact on the environment, including how its materials are sourced, how it is produced, packaged, distributed, used or how the product is disposed of.
- Internationally recognized methodologies only need to be recognized in two or more countries. The Competition Bureau specifically notes that the amended Act does not necessarily require that the methodology be recognized by the governments of two or more countries. Importantly, “substantiation” is interpreted by the Bureau as establishing by proof or competent evidence, which does not necessarily require lab testing for claims – businesses should ensure that substantiation is suitable, appropriate and relevant to the claim, as well as sufficiently rigorous to establish the claim in question. If an internationally recognized methodology requires third party verification, a Canadian business looking to rely on that methodology would require such third party verification.
- Methodology can be developed or set by an industry. Industry standards that meet the definition of internationally recognized methodology (i.e., are recognized in two or more countries) can be relied upon by Canadian businesses when making environmental claims. If there are multiple methodologies that could be used to substantiate the claim; any such methodology will satisfy the Act’s requirements.
- When no internationally recognized methodology exists to support a claim for new technology. The Competition Bureau notes in its guidance that businesses may be able to rely on internationally recognized methodologies that together can create substantiation for an environmental claim, or that are used for substantiating similar claims.
- Due diligence defence. Businesses can rely on the Act’s due diligence defence to show that they exercised due diligence to avoid the deceptive marketing practice from occurring. According to the Competition Bureau’s guidance, where this occurs, the business cannot be ordered to pay an administrative monetary penalty or restitution, or be required to publish a corrective notice.
Takeaways and Next Steps for Businesses
The proposed guidelines provide Canadian businesses with a clearer understanding of the Competition Bureau’s approach to enforcing the greenwashing provisions of the Competition Act.
With a wide range of industries impacted by the greenwashing provisions – from oil & gas, energy, mining, construction and transportation to fashion apparel, health and consumer products and financial services, Canadian businesses in these industries (and businesses otherwise making environmental claims) are advised to establish and maintain a corporate compliance program. This can assist in advancing a due diligence defence, including conducting proactive assessments of all environmental claims made by the business.
Feedback on the Bureau’s proposed guidelines will be accepted until February 28, 2025. After the consultation period concludes, the Bureau will publish the finalized version of the guidelines.
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