A Failure of Process and Policy: Canada’s Greenwashing Amendment to the Competition Act in Bill C-59

A new paper from the McDonald-Laurier Institute, authored by Sonya Savage and Heather Exner-Pirot, in partnership with the Canadian Chamber’s Net-Zero Council, goes beyond talking points and headlines to describe the process by which the “greenwashing” amendment to the Competition Act under Bill C-59 became law and the impact it has had since then.

The purpose of the report is to:

• Describe the making of the amendment (74.01(1) (b.2))
• Identify the most ill-conceived features of the greenwashing amendment
• Document the many criticisms of the amendment
• Outline Canada’s approach to greenwashing claims compared to international peers
• Make recommendations for the fixing of the Competition Act

What Is Greenwashing?

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First coined in 2013, greenwashing describes tactics used by corporations to mislead the public into thinking they are doing more to protect the environment than they really are.

The Greenwashing Amendment

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On April 30, 2024, a late-stage amendment to the Competition Act was introduced and accepted by the House of Commons Standing Committee on Finance. The amendment was passed without consultation with stakeholders or fulsome discussion as in the ordinary course of parliamentary procedure. The change became law when C-59 received Royal Assent on June 20, 2024.

Instead of applying only to products, the amendment applies broadly to anybody making a representation about a business or business activity that relates to the environment. It is not limited to protecting consumers from false advertising in the traditional sense — it covers what a company, or its employees or representatives, can say to investors, financial institutions, stakeholders, business partners and even regulators and governments. It applies to businesses that don’t offer services or products to the public, and includes industry and business associations, as well as advocates.

The new section regulates and impacts almost every sector of the Canadian economy. Under the late-stage amendment, environmental representations do not even have to be false or materially misleading to be actionable. A communication can be true but illegal unless substantiated in accordance with an undefined “internationally recognized methodology.”

The late-stage amendment also has a reverse onus of proof: this means that the person or company making a representation must be able to prove that it is based on an “internationally recognized standard”, not the Competition Bureau or the complainant seeking a review. Thus, there are minimal cost risks to the complainant, and the process is less onerous. It is very likely that this will increase the number of claims brought by environmental groups and others.

Finally, companies found greenwashing in breach of the amendment now face new penalties of up to $10 million for a first offense or 3% of the corporation’s annual worldwide gross revenues, whichever is greater.

Consequences of the Amendment

Fallout from the late-stage amendment was immediate with many oil and gas industry groups and companies taking down information from their websites and social media. However, concerns over the amendment were not limited to the oil and gas industry but were held across multiple sectors, including agriculture and agrifood, chemistry, forestry, mining, construction, manufacturing, the financial sector and especially businesses pursuing low carbon and energy transition projects and technologies.

Following June 2024, the Competition Bureau opened up a consultation, focusing on how to provide guidance and clarification on such things as the “internationally recognized methodology” test. The Bureau received 208 public submissions from oil and gas companies as well as others like the Canadian Paint and Coatings Association, the Canadian Canola Growers Association, the Alberta NDP and Elizabeth May, the leader of the federal Green Party.

Criticisms of the Amendment

Not only was the late-stage amendment unnecessary and duplicative of reporting frameworks already in place by the Canadian government, but it is also at odds with the purpose of the Competition Act itself, which has historically been focused on protection of consumers and ensuring competition among businesses. The amendment moves the Competition Act towards unfamiliar territory. Other legislation and policies are better suited to address legitimate social and environmental objectives.

Unintended Consequences of the Amendment

In the case of the amendment, the unintended consequences are serious, should have been anticipated, and must be addressed:

1. Uncertain tests and risk will lead to greenhushing
   Because of the vague, undefined “internationally recognized methodology” standard set in the amendment, companies face enormous uncertainty and likely will decline to speak about their environmental performance or climate strategies due to the fear of financial and reputational risk.
   
2. Uncertainty for companies setting net-zero targets
   The uncertainty surrounding the internationally recognized methodology tests are making it more difficult for businesses to set and communicate goals to reduce emissions or achieve net zero targets.
   
3. Duplicate regulation and over-regulation
   Viewed in its entirety, the Bill C-59 amendments appear to represent another lever to address climate policy in legislation that was not designed for such purposes. The Competition Act amendments duplicate and even contradict other mandatory climate and ESG disclosure efforts underway.

Canada’s Legislative Approach to Greenwashing

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No other jurisdictions around the world have created the level of uncertainty that Canada has with its legislation, nor have they combined uncertain tests like the “internationally recognized methodology” with a reverse onus, expanded private rights of access and massive fines.

Differences between Canadian greenwashing legislation and other jurisdictions:

Recommendations

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Many of the ways that Canada can mitigate the uncertainty, risk and other negative impacts resulting from the greenwashing amendment in Bill C-59 have been presented in the 208 submission the Competition Bureau received in its public consultation. However, the most appropriate course of action is to not only repeal 74.01(1) (b.2), the amendment concerning business activities and the undefined international methodology for substantiation, but all of the greenwashing and deceptive marketing amendments passed under Bill C-59.

Alongside existing and developing frameworks, including the Sustainability Accounting Standard Board (SASB), the International Sustainability Standards Board (ISSB), and the Taskforce on Climate-Related Financial Disclosure, and the Global Reporting Initiative (GRI), this report finds Canadians to be sufficiently protected from deceptive marketing practices and greenwashing.