Canada Greenwashing Laws: What Businesses Need to Know to Stay Compliant

On June 20, the federal government amended the Competition Act to curb Canada greenwashing laws, targeting unverified or false claims about the environmental benefits of products or business activities. These amendments introduce considerable uncertainty and potential liability for businesses, potentially undermining environmental initiatives by Canadian corporations. Companies must immediately review their public representations and implement strict compliance measures to avoid enforcement actions or private greenwashing litigation.

Canada Greenwashing Laws: Background and Details

The greenwashing amendments are part of Bill C-59, omnibus legislation following the federal government’s Fall Economic Statement from November 2023. For a comprehensive overview of the changes, refer to the June 2024 bulletin, "Canadian Competition Law Changes Now in Force," and the Blakes Competition Act Amendments page.

New Canada Greenwashing Provisions

The amendments prohibit public representations that directly or indirectly promote products or business interests without adequate substantiation:

1. Product Benefit Claims: Statements, warranties, or guarantees about a product’s environmental benefits must be based on adequate and proper testing. The burden of proof lies with the company making the claim.
2. Business Activity Claims: Claims about a business’s environmental impact must be substantiated according to internationally recognized methodologies, with the burden of proof on the company.

Practical Considerations

While the amendments cover overlapping areas, they create distinct prohibitions:

• Product Benefit Claims: Must be supported by rigorous testing, conducted before making the claims, under controlled conditions, minimizing subjectivity, and reflecting real-world usage.
• Business Activity Claims: Require substantiation using internationally recognized methodologies, a standard not yet clearly defined, leading to uncertainty. Companies should follow the best practices recommended by reputable international bodies.

Despite their broad scope, generic claims like "green" or "eco-friendly" may not be directly targeted but should still be reviewed carefully to avoid deceptive marketing practices.

Increased Enforcement and Litigation Risks

Penalties for greenwashing under the new amendments are severe and include administrative monetary penalties up to:

• C$10 million (C$15 million for repeat offenses)
• Three times the value of the benefit derived from deceptive conduct, or 3% of worldwide gross revenues if the benefit cannot be reasonably determined

Starting June 2025, private parties can seek Tribunal leave to initiate proceedings in the public interest, potentially leading to significant litigation risks and restitution orders for affected customers.

Unintended Consequences: Greenhushing

The broad and ambiguous requirements of the new laws, combined with pressures to make environmental claims, may lead to enhanced compliance risks and possibly hinder companies' environmental communication and initiatives.

Key Takeaways

• Environmental claims about products must be backed by adequate testing.
• Claims about business activities must be substantiated with recognized methodologies, an undefined term.
• Penalties for non-compliance are significant, and private litigation can commence from June 2025.

Companies should act promptly to align their practices with these new requirements to avoid substantial penalties and litigation risks.

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