Canada’s anti-greenwashing rules are good business. Critics exaggerate the dangers

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Julien Beaulieu is a law lecturer at the University of Sherbrooke and a researcher with the Quebec Environmental Law Center.

Wren Montgomery is an associate professor of sustainability at Ivey Business School at Western University.

Empty net-zero pledges, dubious eco-labels and vague green claims may now be a thing of the past in Canada – at least in theory. Last Thursday, despite intense pushback from fossil-fuel lobby groups and the governments of Alberta and Saskatchewan, the Governor-General gave royal assent to Bill C-59, which introduces new anti-greenwashing rules in the Competition Act.

The changes have already been impactful, leading the Pathways Alliance – a lobby group of the fossil-fuel industry – to shut down its website and social-media feeds, and the Alberta government has shut down its energy ‘war room,’ the Canadian Energy Centre.

That has fed into the debate over the bill. Although the measure obtained support from all parties in the House of Commons, it faced serious opposition during the Senate’s review. Critics argued the new rules would limit the ability of companies to advertise their environmental practices. Alberta’s Minister of Environment, Rebecca Schulz, even referred to the provisions as an “undemocratic gag order” that urgently needed to be stopped.

So is this a gag order or just good business based on long-standing economic principles?

Opponents are failing to recognize a fundamental fact: Canada’s green markets are broken and urgently needed fixing. According to a 2023 Deloitte survey, 57 per cent of Canadian consumers no longer trust firms’ environmental claims. Moreover, studies have found that up to 50 per cent of green claims have no supporting evidence and weak or non-existent verification. In short, greenwashing is rampant.

Deceptive environmental claims prevent consumers and investors from making informed decisions, and breed skepticism for all green products. This, in turn, prevents honest firms from reaping the rewards of their investments in sustainability, and stifles innovation. It is a basic economic principle: markets need accurate and complete information to function properly. Whether you care about climate change or you are a staunch follower of free-market economist Milton Friedman, who called for “open and free competition without deception and fraud,” the amendments should be considered a win for the Canadian economy.

The oil and gas industry’s fear of greenwashing accusations is not surprising: since 2015, of the 12 greenwashing cases initiated under the Competition Act, half targeted fossil-fuel organizations.

Here’s what critics of the bill take issue with: Under the new rules, organizations failing to substantiate their environmental benefits claims with “adequate and proper” evidence will be exposed to severe penalties. Importantly, green claims about businesses and business activities must be substantiated according to “internationally recognized methodology,” a term not defined in the Competition Act. Opponents also argued that the new rules could lead to aggressive lawsuits from non-governmental organizations (NGOs) against major polluters, as Bill C-59 introduces a new private right of access to the Competition Tribunal.

Ottawa’s anti-greenwashing bill will cripple cleantech innovation

While these rules should be taken very seriously, they are much less menacing than opponents make them sound. First, to address any concerns about legal uncertainty, the Competition Bureau has already committed to develop green marketing guidelines that will clarify which standards are acceptable in the Canadian context. In the meantime, firms may refer to widely used international standards, such as the standards of the International Organization for Standardization. Second, the statute’s new private right of action will be limited by the requirement for private plaintiffs to obtain leave from the Competition Tribunal, which will act as a gatekeeper against frivolous claims.

What should be of greater concern to Canadians is that the amendments won’t be enough to eradicate greenwashing. While the new rules require firms to support their green claims with evidence, these materials only have to be disclosed to the public if they are sued. This is hardly practical for consumers trying to verify green claims while shopping. Other jurisdictions have allowed consumers to access this information either upon request, as in California, or through mandatory disclosure, as in France. Canada should follow suit.

Another issue that remains is the selective disclosure of information, another common form of greenwash. Even if a firm provides adequate evidence to back its climate-related claims, this does not provide any insight into its performance in other environmental areas such as biodiversity or water use. Standardized environmental scores could be developed offering a concise summary of a product’s environmental impact across multiple indicators. France is currently working on such a labelling requirement.

Canada has taken an important first step in combatting greenwashing. But this is just the beginning of the journey to getting Canadians the credible and transparent green products they are demanding – and that our planet needs.