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Canada Releases New Corporate Greenwashing Regulation into Law

Canada Releases New Corporate Greenwashing Regulation into Law

Canada
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  • New regulations target unsubstantiated environmental claims by businesses.
  • Significant penalties for non-compliance, including private litigation starting June 2025.
  • Companies must urgently review and substantiate all environmental claims.

Canada has amended the Competition Act to address greenwashing, imposing strict requirements for substantiating environmental claims. Businesses face substantial penalties and increased litigation risks if found non-compliant. Urgent review of public representations and robust compliance programs are necessary to mitigate these risks.

Canada Cracks Down on Greenwashing

Canada’s federal government has amended the Competition Act to tackle “greenwashing,” targeting unverified or exaggerated environmental claims by businesses. The changes, effective June 20, pose new challenges and risks for companies, requiring immediate action to ensure compliance.

New Greenwashing Provisions

  • Product Benefit Claims: Any environmental claims about a product must be backed by “adequate and proper” testing, with the burden of proof on the claimant. This includes statements about resource use and emissions savings.Example: Claims about a product’s reduced emissions must be tested under controlled circumstances, reflecting real-world usage to eliminate external variables and subjectivity.
  • Business Activity Claims: Statements about a business’s environmental impact must be substantiated according to internationally recognized methodologies, a term not yet defined by regulatory bodies.Example: A company’s goals regarding carbon neutrality or emission reductions must be substantiated with recognized best practices.

These provisions demand businesses conduct rigorous testing and use established methodologies for environmental claims, shifting the proof burden to the companies.

Enforcement and Litigation Risks

Penalties for greenwashing under the new amendments are severe, including:

  • Administrative monetary penalties up to C$10-million (C$15-million for repeat offenses) or 3% of worldwide gross revenues.
  • Private litigation commencing June 2025, allowing individuals and groups to seek action if deemed in the public interest.

Given the significant volume of greenwashing complaints, businesses should expect increased scrutiny from both regulators and private parties.

Related Article: Canada to Mandate Plastic Reporting, Tracking from Plastic Manufacturers and Importers

Strategic Recommendations

Businesses should:

  • Review and substantiate all environmental claims urgently.
  • Follow best practices for testing and substantiation as recommended by reputable international bodies.
  • Implement strict compliance programs to avoid enforcement actions and litigation.

The broad and ambiguous requirements of the new laws pose enhanced risks, potentially stifling environmental communication and initiatives. Companies must navigate these complexities carefully to maintain compliance and avoid unintended consequences like “greenhushing”—where firms minimize environmental claims to avoid liability.

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