Canada’s Competition Bureau announced the release of its final guidelines on environmental claims, aimed at helping companies to comply with new anti-greenwashing laws when making claims about the environmental benefits or attributes of products or businesses.
The new publication includes a guideline for environmental claims about the future – such as net zero goals and timelines – requiring them to be supported by substantiation and a clear plan, noting that “claims about the future can be considered greenwashing if they represent little more than wishful thinking.”
In order to be well-founded and substantiated, the Bureau guides businesses to ensure they have a clear understanding of what needs to be done to achieve the goal, to have a “concrete, realistic and verifiable plan to accomplish the objective, with interim targets,” and meaningful steps underway to accomplish the plan.
The guidelines follow the passage last year in Canada of a series of new rules into law aimed at tackling greenwashing as amendment to the Competition Act’s Deceptive Marketing Practices section.
The new laws included provisions prohibiting representations about products’ environmental benefits that were “not based on an adequate and proper test,” and about the environmental benefits of business or business activity, unless they are “based on adequate and proper substantiation in accordance with internationally recognized methodology.”
The Act includes significant penalties for companies breaching the deceptive marketing provisions, with fines up to the greater of $10 million, or $15 million for subsequent orders, or three times the value of the benefit derived from the deceptive conduct, or 3% of the company’s annual revenues.
Some businesses have already pulled back on some of their sustainability claims since the new law passed, with RBC, for example, recently announcing that it was retiring its target to mobilize $500 billion in sustainable finance, citing the changes in the Competition Act.
Following the passage of the laws, the Competition Bureau held 2 consultations on the new laws, with feedback including requests for more clarity from companies on the environmental claims they can make in their marketing materials.
According to the new guidelines, the requirement for product performance claims to be supported by adequate and proper testing is flexible, but requires “actual testing,” based on “a procedure intended to establish the quality, performance or reliability of something,” rather than on factors such as anecdotal stories or studies of similar products.
For the requirement for claims about the environmental benefits of a business or business activity to be based on adequate and proper substantiation in accordance with internationally recognized methodology, the guideline says that “businesses should choose substantiation that is suitable, appropriate and relevant to the claim, and sufficiently rigorous to establish the claim in question,” noting that this will often require scientific substantiation, and will require third party verification “in circumstances where it is called for by the internationally recognized methodology relied upon for adequate and proper substantiation.”
As an example, the Bureau said that a business, even with “good intentions about reducing greenhouse gases” would not align with the law’s requirements if it made a claim in marketing materials about being on its way to net zero by 2050 if it did not substantiate its claim in accordance with internationally recognized methodology, and did not develop a concrete plan to identify and mitigate its greenhouse gas emissions.
Additional principles set out by the guidelines include requirements for comparative environmental claims to be specific about what is being compared, for environmental claims to avoid exaggeration and to be clear and specific, and not vague.
The Bureau stated:
“Environmental claims matter to consumers and influence their decisions. This is part of the reason why businesses make environmental claims in the first place. Because these claims matter, it is important to get them right. These guidelines provide businesses with tools to help them do just that.”
Click here to access the guidance.
