Be careful when you paint it green: As they become more aware of the practice of greenwashing, customers are demanding more transparency from companies when it comes to environmental claims.dimdimich/Getty Images/iStockphoto
Julien Beaulieu is a law lecturer at the University of Sherbrooke and a researcher with the Quebec Center for Environmental Law. Wren Montgomery is an associate professor of sustainability at Ivey Business School at Western University.
In November, after months of public consultations, the federal government released its plan for the third phase of its competition law reform, including new rules meant to prohibit “misleading greenwashing claims.”
The changes come at a time when allegations of greenwashing are becoming increasingly pervasive globally, leading to a rise in corporate green-hushing and consumer skepticism. According to a 2023 Deloitte study, 57 per cent of Canadian consumers do not trust the environmental claims made by brands any more, and 46 per cent are not willing to pay a green premium because of the difficulty of identifying genuinely sustainable products.
Prior to these amendments, the Competition Act already prohibited false or misleading advertising, and at least eight greenwashing complaints have been filed with the Competition Bureau – the agency responsible for the statute’s enforcement – over the past two years.
Under the new rules, firms making environmental claims will have to back them with “adequate and proper” tests. This will ensure that they conduct serious studies and maintain records to prove their green credentials. A similar requirement already existed for performance claims in general, but the new rules are specific to claims about the climate, ecological and environmental benefits of a product.
However, the new greenwashing rules proposed by the government will not put an end to greenwashing in Canada. In fact, the proposed changes will only confirm something that was already clear to everyone under the Competition Act: Environmental claims, as with any other types of performance claims, must be backed by “adequate” evidence. But the amendments fail to provide clearer substantiation standards, information disclosure requirements or enhanced penalties.
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For example, the Competition Bureau will keep relying primarily on consumer complaints to identify greenwashing cases and launch investigations. However, consumers are unlikely to detect most cases of environmental disinformation, as there is no requirement for firms to publicly disclose the evidence substantiating their environmental claims. If someone tries to sell you a falsely “carbon neutral” apple, how can you detect that you are being greenwashed? Good luck.
In addition, the current rules do not recognize any industry standards that would allow firms to know which evidence is considered sufficient to back an environmental claim under the act. For example, which carbon accounting methods are acceptable when making climate-related claims? What are the minimal requirements for aspirational claims such as a commitment to achieve net zero by 2050? Can a company say a product is carbon neutral even if it relies on voluntary carbon offsets? The Competition Act is and will remain silent about these questions.
The federal government’s minimalist changes are surprising, as the need for clearer, more stringent greenwashing rules is one of the few areas where civil society groups, academics and companies seemed to agree. Two weeks ago, a group of 92 firms and experts publicly called for a clearer legal framework to counter greenwashing, restore consumers’ trust in Canadian firms and allow well-intentioned companies to reap the rewards of their investments in green innovation. Similarly, during last spring’s public consultation on the future of the Competition Act, a group of 40 environmental NGOs and academics called for more ambitious and predictable greenwashing rules, including clearer substantiation standards and new information disclosure requirements.
The new rules are also unambitious when compared with those recently proposed in other jurisdictions. For example, California recently enacted the Voluntary Carbon Market Disclosures Act, which introduces new disclosure obligations concerning net zero, carbon neutrality and emission reductions claims, as well as emissions-related claims using voluntary carbon offsets. These rules will complement California’s existing greenwashing laws, which include the right to request the information substantiating a firm’s environmental claims.
The changes to the Competition Act have not yet been adopted by Parliament, and there is still time to propose more stringent greenwashing rules. Interestingly, the government has shown ambition in other aspects of its reform, like introducing a certification scheme to exempt certain sustainability agreements from the act’s cartel provisions, which will allow firms to collaborate on climate issues. The government also committed to consult on the introduction of mandatory emissions disclosures for major corporations, two months after California announced similar requirements.
We urge the government to show the same degree of ambition for the regulation of greenwashing. Canada needs a more effective regulatory framework to break consumer skepticism and incentivize firms to invest in green innovation. Without environmental transparency, we might as well throw “green markets” and “stakeholder capitalism” in the trash can.