Canada's Competition Act was significantly amended on June 30, 2024 to specifically address deceptive environmental marketing, known as greenwashing, with further enforcement consequences effective June 20, 2025. These changes require businesses to substantiate environmental claims with adequate testing and internationally recognized methodologies, shifting the burden of proof onto the businesses themselves and introducing substantial penalties for violations.
Under the Competition Act, a business is engaged in reviewable conduct if, for the purpose of promoting the supply or use of a product or a business interest, it makes a representation that is:
- false or misleading in a material respect
- not based on an “adequate and proper test — in the form of a statement, warranty, or guarantee of the performance, efficacy, or length of life of a product — the proof of which lies with the business
The new greenwashing provisions require businesses to conduct adequate and proper testing or substantiation before making any environmental claims, which include:
- Products: Any representation about the environmental benefit of a product must be supported by adequate and proper testing, with the burden of proof on the person making the representation. This extends the general requirement for adequate and proper testing of performance representations.
- Business or business activity: Any representation about the environmental benefit of a business or business activity must be based on adequate and proper substantiation in accordance with internationally recognized methodologies, with the burden of proof on the person making the representation specifically to environmental benefits.
Upon a finding of greenwashing, the Tribunal may order a business to pay an administrative monetary penalty (AMP) up to the greater of $10 million ($15 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct. If that amount cannot be reasonably determined, the penalty may be up to 3% of the corporation’s annual worldwide gross revenues. These significant remedies were increased in 2022, but the Tribunal has not yet ordered any AMP based on a corporation’s annual worldwide gross revenues. The worldwide turnover limit is currently being challenged as unattainable.
The June 2024 amendments also introduced a new enforcement right, effective June 20, 2025, allowing private parties to directly file applications with the Competition Tribunal seeking leave to apply for an order against a business allegedly making misleading representations. The test for leave is a finding by the Tribunal that the application is in the “public interest.” However, there is no guidance on how this “public interest” test will be applied, and no private parties have filed an application under the new greenwashing provisions at the time of writing.
On June 5, 2025, the Bureau released final enforcement guidelines (Guidelines) after extensive public consultation. These Guidelines outline the Bureau’s approach to interpreting and enforcing the new greenwashing provisions and environmental representations in general. They emphasize that the Bureau’s focus will be consumer protection and fair competition, consistent with the purpose of the Competition Act. The Guidelines clarify that the Bureau is concerned with representations made for marketing and promotion, rather than those made solely for other purposes or regulated by other government agencies.
However, the Guidelines leave some practical questions unanswered, such as the use of environmental representations initially made for other purposes but later used or disclosed for marketing, including posting on a business’s website. The Tribunal's support for the Bureau’s pragmatic approach remains to be seen. The Guidelines are not binding on the Tribunal or the Bureau and do not restrict private parties from taking action against businesses under the greenwashing provisions. Therefore, some uncertainty will remain until case law develops.
With this brief overview of the new greenwashing provisions, we dive into some key questions that arise from these changes.
Q: Why has the proposal to ensure truth in environmental efforts sparked controversy?
A: While the idea that businesses should not mislead consumers is widely supported, the recent amendments to the Competition Act have stirred mixed reactions.
In September 2024, the Commissioner noted, "These changes are significant, but it's crucial to remember that prohibitions against greenwashing and unsupported claims already existed in our laws." While true, if this were the whole truth these amendments would not be controversial. The "nothing to see here" stance overlooks the additional risks businesses face under the new greenwashing provisions, even if the Tribunal accepts the Bureau's interpretation in the Guidelines. Here are some key concerns:
- Broad and uncertain provisions: The new greenwashing rules include vague terms that haven't been defined or considered by the Tribunal. Initially, businesses lacked guidance from the Bureau, making compliance challenging. For example, businesses must substantiate each environmental claim using an "internationally recognized methodology" – a term that is both undefined and broad. While the Bureau's Guidelines help, more clarity is needed.
- Inconsistent standards: The standards for substantiation may not align with other Canadian regulatory regimes or government programs, leading to confusion. A mandatory regulatory regime might not use internationally recognized methodologies, and such methodologies may not exist for new technologies. The Guidelines suggest using multiple or similar methodologies, but this isn't always feasible.
- No transition period: The amendments took effect on June 20, 2024, without a transition period. This means that an environmental statement made under the previous legal framework could now violate the new provisions if not properly substantiated.
- Shift in onus of proof: Unlike general misleading representation provisions, the new greenwashing rules require businesses to prove their claims meet substantiation requirements, including using internationally recognized methodologies. This shifts the burden of proof to businesses, increasing compliance costs, especially for small and medium-sized enterprises.
- Significant penalties: Non-compliance can result in penalties of up to 3% of a corporation's worldwide revenues. These penalties could be disproportionately large compared to the potential harm caused and may be deemed unconstitutional.
- New right of private enforcement: The amendments allow private parties, with Tribunal approval, to challenge businesses' environmental claims. This could lead to increased litigation, especially against energy companies, as environmental NGOs and others become more active.
- No safe harbour for plans/targets: The new provisions do not accommodate the inherent uncertainty of future-oriented environmental claims, such as targets or goals. Under Canadian securities laws, public companies can make future statements if they are reasonable and properly qualified, but the greenwashing provisions lack similar accommodations.
Q: What has happened in the marketplace since these provisions were passed more than a year ago, and what has happened since they came into force this June?
A: Business commentators note that recent amendments have unintentionally reduced the disclosure of environmental actions and objectives, contrary to the goal of promoting transparency. For instance, many large Canadian corporations, particularly in the oil and gas industry, have decreased or removed their public disclosures.
As an example, Millani’s 8th Annual ESG Disclosure Study found that 6.7% of S&P/TSX Composite Index constituents (15 companies) blocked “sustainability” disclosures due to these amendments. RBC retired its sustainable finance targets, and the Canada Pension Plan decided to no longer maintain a net-zero by 2050 commitment to avoid legal risks.
While some companies claim they remain committed to sustainability, environmental commentators argue that the reduced disclosure indicates these companies were likely engaged in greenwashing. They believe the amendments are effective, as businesses are no longer making unsubstantiated environmental claims.
In December 2024, the Alberta Enterprise Group and the Independent Contractors and Businesses Association launched a constitutional challenge against the Canadian Federal Government, arguing that the new greenwashing provisions violate the right to freedom of expression under section 2(b) of the Charter. There are no updates on this action's progress at this time.
Q: What is a counsel of prudence with respect to environmental representations in the current environment?
A: In the current environment, businesses must navigate complex questions to comply with misleading advertising and new greenwashing provisions. Developing and maintaining credible compliance programs is crucial to mitigate risks, defend against investigations, and rely on the due diligence defense under the Competition Act.
Each business should tailor its compliance program to its size, resources, and operations, following the principles in the Bureau’s Compliance Hub. Key protocols include:
- Inventory of environmental statements: Identify all environmental statements made by the business, including when, to whom, and in what context. Modify statements as needed to ensure compliance and consistency.
- Review processes: Assess how the business identifies, prepares, and reviews environmental representations. Ensure processes are in place to maintain the integrity of these representations.
- Compliance with misleading representation provisions: Ensure all environmental representations are truthful and not misleading, both in literal meaning and general impression. Test and substantiate claims using internationally accepted methodologies before making any representation.
- Goals and objectives: For representations about goals, ensure they are reasonable, have a clear plan with interim targets, and meaningful steps are underway to achieve them.
- Documentation and management: Document all processes and supporting information in an internal system to support compliance and due diligence defense.
- Monitoring and updating: Regularly review and update the status of representations and associated plans to reflect current risks and circumstances.
By following these guidelines, businesses can effectively manage the risks of greenwashing and ensure their environmental representations are credible and compliant.
Stay tuned for the second installment of our Greenwashing Series, where we will explore more greenwashing and practical aspects of these provisions.
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James Musgrove, Partner | Competition, Antitrust & Foreign Investment
James Musgrove is co-leader of McMillan’s Competition, Antitrust & Foreign Investment Practice Group, and active in its advertising/consumer protection practice. He serves in the Leadership of the ABA Section of Antitrust Law as Co-Chair of The Pricing Conduct Committee and past member of Council. James a two time GCR award winner: for Behavioural Matter of the Year, 2014 for his successful defence of Mastercard; and for Cartel Matter of the Year, 2022 for his successful defence of Micron. He was named 2015 advertising and marketing lawyer of the year, Toronto, by Best Lawyers. He is recognized as a leading competition and advertising lawyer by various rating organizations, including Chamber Global, GCR, Lexpert, Best Lawyers and Who's Who Legal, amongst others. Leading cases include representation of Mastercard, NutraSweet, Volkswagen, Suncor, Polaroid, West Fraser, Micron and Meta, amongst others. James practises in the areas of competition, antitrust, foreign investment and marketing law. He advises on cartel, merger, distribution, investment review, foreign corrupt practices and misleading advertising amongst other issues. James makes regular representations and submissions to the Competition Bureau. He has experience in a wide variety of industries.
Beth Riley, Partner | Competition, Antitrust & Foreign Investment
Beth Riley is widely regarded as the leading competition lawyer in Alberta. She has been instrumental in securing merger clearances for hundreds of transactions – including the most significant M&A transactions in the energy sector – in addition to advising clients in respect of conduct under the Competition Act. With extensive capital markets experience and experience as a case officer at the Competition Bureau, she is able to offer unique insight into addressing complex business issues and the needs of clients. She recently joined McMillan to be part of a team with deep competition law proficiency that values working in a collaborative environment across a truly national platform, at which time she commenced working with the Toronto and Vancouver offices on Domtar Corporation’s divestitures under a consent agreement with the Competition Bureau and an acquisition of a target company in a sensitive foreign investment sector. She has been teaching the M&A corporate/securities law course at the University of Calgary Faculty of Law since 2017.