A Syncrude oil sands mining facility near Fort McKay, Alta, on Sept. 6, 2022.ED JONES/Getty Images
Janis Sarra is professor of law emerita at Peter A. Allard School of Law at the University of British Columbia.
We have been hearing much criticism of two amendments to the Competition Act on deceptive marketing practices regarding climate-related claims that received royal assent on June 20. Reactions include oilsands companies removing their environmental performance claims from their websites and the Alberta government threatening to “use every legal option” to push back against the legislation.
These moves mask the reality that companies have been getting away with bold unsubstantiated climate-related claims and now they need to withdraw them or temper them to be realistic.
The purpose of the Competition Act is to encourage competition in Canada to promote the efficiency and adaptability of the Canadian economy. And part of healthy competition is that companies accurately represent their products and services to consumers. The two new provisions augment existing protection of consumers from deceptive market practices.
Under the first provision, the Competition Bureau, as the independent law enforcement agency, can review a company’s conduct to investigate its public-facing claims. The bureau can investigate a company if it represents to the public (directly or indirectly) a product’s benefits as protecting the environment or mitigating the environmental, social and ecological causes or effects of climate change.
Critics have cried foul over this provision, saying it overly polices their marketing claims. But companies have an easy defence built into the statute – that they have adequately tested their claims.
Is that so hard? If companies find that burdensome, what does it say about them – that they had previously made claims without any verification, and want to continue doing so?
The second new provision limits how a company can make a representation to the public with respect to the benefits of a business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change. A company cannot do so for a claim that is not based on adequate and proper substantiation in accordance with internationally recognized methodology.
Here, again, an easy defence exists. The defence is new, but creates a lot of protection as a company need only demonstrate that it relied on any internationally recognized methodology in making a claim.
Companies are using the amendments as an excuse to back away from existing unsubstantiated claims and reset their claims to be accurate, which is a good thing. While companies are spending a small fortune on new disclaimer clauses, qualifying climate-related claims is good business practice.
Disclaimers, such as that the claims are based on best available science, make sense as climate science is continuing to evolve. What is key here is that consumers need protection from the plethora of claims regarding environmental performance so they are able to make informed decisions in their purchases.
What also seems lost in the frenzied concern that companies will stop making claims that they will reach net-zero carbon emissions is that all publicly traded companies already need to report material climate-related and other environmental risks and how they are managing them.
The Competition Act amendments give protections to consumers that investors already have under securities law and also creates a baseline of accountability in respect of the environmental claims made by both private and public companies.
The Competition Bureau, as it always does, will issue guidance to companies on the new provisions and is consulting with Canadians as it develops this guidance. It is in all our interests to have companies base their environmental claims on real data and accepted methodologies, including international sustainability accounting standards.
The amendments will help advance Canada’s goal of financial sustainability, and by requiring claims to be accurate, will ensure that the markets for green and net-zero products operate to incentivize production that actually generates these effects.