TORONTO — A year has passed since the enactment of a new law aimed at combating greenwashing, necessitating that companies substantiate their environmental claims. However, considerable uncertainty remains regarding the law's implications and its practical application in the corporate sector.
The impact of the law, which came into force on June 20, 2022, is evident in the cautious approach many companies are now adopting regarding their environmental claims. For instance, shortly after the law was implemented, the Pathways Alliance, a coalition of oilsands companies, removed all content related to its environmental claims from its online platforms. Other notable companies, including RBC, have also adjusted their sustainability targets in light of the new regulations.
Conor Chell, the national leader of ESG law at KPMG Canada, indicated that numerous organizations across various sectors are reevaluating their disclosure practices. He noted that there has been a significant reduction in public disclosures due to the vague language in Bill C-59, which mandates that companies substantiate their environmental claims using 'internationally recognized methodology.' There is a potential penalty of up to three percent of global revenues for non-compliance, creating further trepidation among businesses.
Various industry groups have voiced concerns over these provisions, with some arguing for their repeal. Notably, the Alberta Enterprise Group and the Independent Contractors and Businesses Association have initiated a constitutional challenge, claiming that the law infringes on freedom of expression rights.
In response to the uncertainty surrounding the legislation, the Competition Bureau has released updated guidelines, although some critics consider them insufficiently detailed. The Pathways Alliance expressed skepticism about these guidelines, arguing that they provide no real assurance, as the Competition Tribunal is not bound to adhere to them.
One particularly contentious aspect of the legislation is the new clause that allows individuals to bypass the Competition Bureau and directly petition the tribunal regarding alleged violations. Many companies are apprehensive about the potential inundation of cases this may provoke, leading to protracted legal disputes and significant costs.
Ecojustice finance lawyer Tanya Jemec, however, downplayed these fears, asserting that the difficulties associated with initiating legal action would likely limit the number of cases brought forth. She emphasized that the narrative predicting a surge in legal filings could be exaggerated. Additionally, she posited that the new provisions could enhance transparency and alleviate burdens on the Competition Bureau, which previously did not provide timely updates to stakeholders.
While some, including Green Party Leader Elizabeth May, argue that these new laws may be redundant since misleading marketing is already covered under existing laws, Jemec contends that the proposed changes are necessary to expedite and streamline the legal process for addressing greenwashing concerns.
Wren Montgomery, an associate professor at Western University’s Ivey Business School, stated that stricter adherence to substantiating environmental claims could foster healthier competition. She noted that smaller and more sustainable companies face challenges due to greenwashing and that the new regulations could ensure a level playing field for genuine innovators in various sectors.
However, concerns have been raised about how the increased reporting standards may impede startups, primarily due to compliance costs and the absence of established testing criteria for new technologies. Montgomery remains optimistic that existing standards can support innovation rather than hinder it, asserting that the actual risk lies in the prevalence of greenwashing itself.
Chell further explained that the competitive landscape has shifted since the law's implementation, as fewer companies are willing to make ambitious net-zero claims without verifiable evidence. The overarching sentiment suggests that while the law's effectiveness is still a matter of debate, it has succeeded in focusing attention on the issue of greenwashing, prompting many companies to reconsider their messaging.
This report has outlined the initiatives and concerns surrounding Canada's enforcement against misleading environmental claims. As stakeholders navigate the evolving landscape of corporate sustainability and compliance, the true impact of the anti-greenwashing legislation continues to unfold.
