June 25, 2024

From greenwashing to green trust: How Bill C-59 strengthens regulations and protects Canadians

On June 5, 2024, António Guterres, Secretary-General of the United Nations, urged “every country to ban advertising from fossil fuel companies.” He also asked news media and tech companies to stop taking fossil fuel advertising money. In a powerful speech, Guterres summoned fossil fuel companies for “distorting the truth, deceiving the public and sowing doubt” about climate science and for their insufficient investments in clean energy solutions.

Earlier this year, Matthew Boswell, Head of the Competition Bureau, Canada’s independent law enforcement agency that regulates and protects Canadians from misleading marketing practices, asked regulators to strengthen rules governing greenwashing. Boswell along with other Canadian leaders like Sonia Furstenau, who proposed an anti-greenwashing bill in British Columbia, are pushing for greater and stronger greenwashing regulations to protect Canadian consumers and increase the transparency and integrity of companies’ claims.

Greenwashing is the practice of conveying false, misleading, or unsupported information about the environmental or climate benefits of an organization’s product, service, activity, or brand. Greenwashing manifests itself in different ways and it promotes false solutions and actions.

In November 2023, the government introduced Bill C-59, the Act to implement the Fall Economic Statement, which includes some considerations that aim to improve greenwashing regulations through the Competition Act. While welcomed by many, some argue that the bill is insufficient to effectively tackle greenwashing and protect consumers in Canada. Others have concerns that the proposed changes will negatively impact the economy.

Pamela Wallin, Senator and Chair of the Senate Banking Committee, asked the Competition Bureau to respond to the concerns of Pathways Alliance, Canada’s largest fossil fuel producers consortium that has a net-zero target by 2050. Pathways Alliance believes that the new greenwashing provisions to be added to the Competition Act would prevent companies from making statements about their environmental performance or plans.

Bill C-59 was passed without amendments on June 19, 2024 and received Royal Assent on June 20, 2024. Pathways Alliance followed with a notice on its website, removing all content from its website, social media, and public communications. It also stated that the consortium remained committed to its work and reducing environmental impacts from oil sands production.

While companies must be careful with their statements to avoid greenwashing risks and the other risks arising therefrom, they should not fear or refuse to publicly disclose climate-related information. This practice is called greenhushing. Instead, companies should engage in real climate actions, avoid boilerplate disclosures, get third-party verification, and be transparent in their communications.

By mitigating greenwashing risk, companies will also reduce the reputational, litigation, and regulatory risks they may face from greenwashing allegations. Greenwashing accusations can damage a company’s reputation and impact its clients’ trust. Consumers increasingly care about buying sustainable products, and pay attention and hold companies accountable for their products, services, and statements related to sustainability. Information travels fast with the internet and social media. Companies need to be aware of how even suspicions of greenwashing can negatively impact their brand, credibility, the general public’s trust, and consumers’ loyalty.

Canadian companies are under scrutiny

Companies that engage in greenwashing practices may face sanctions and litigations for non-compliance with the law and misleading or false allegations. Currently, several Canadian companies from various industries are under scrutiny for greenwashing.

Stand.earth filed a complaint against Lululemon for misleading its customers about its environmental impact. The “Be Planet” campaign presents the company’s actions and products as contributing to a healthier environment and planet while its greenhouse gas (GHG) emissions reporting shows an increase of 83% between 2019 and 2021. The investigation is not open yet as the Competition Bureau needs to investigate the case confidentially.

In 2022, Ecojustice filed a complaint against the Royal Bank of Canada stating its financing of the fossil fuel industry outweighs the bank’s statements regarding climate and its goal of achieving net-zero by 2050. The Competition Bureau is still investigating the case.

The Canadian Association of Physicians for the Environment also filed a complaint in 2022 against the Canadian Gas Association. The association alleges that claims in the “Fuelling Canada” campaign were false and misleading. It argues that calling natural gas sustainable, clean, budget-friendly, and good for the planet and human health is deceptive. The complaint is still under investigation by the Competition Bureau as of July 2024.

Other greenwashing allegations and complaints against Canadian companies are under investigation and we can anticipate more greenwashing cases in the future if regulations to prevent greenwashing are not strengthened.

There are climate-related litigation precedents where companies were held accountable for their greenwashing practices. In Canada, Keurig paid a $3 million penalty and donated $800,000 to a Canadian charity organization focused on environmental causes for its false and misleading claims regarding the recyclability of its single-use coffee pods. Keurig removed all the recyclability claims on its website, social media, and packaging, paid an additional $85,000 to cover the cost of the Bureau’s investigation, published corrective notices, and enhanced its corporate compliance program to promote compliance with the law and prevent deceptive marketing practices.

In 2023, DWS, an asset management company subsidiary of the Deutsche Bank, paid $25 million US for anti-laundering violations and misstatements on environmental, social, and governance (ESG) investments. The United States Securities Exchange Commission found that between August 2018 and late 2021, DWS “failed to adequately implement certain provisions of its global ESG integration policy as it had led clients and investors to believe it would.”

As companies navigate the evolving landscape of sustainability and climate-related reporting, and regulations, and advance in their journey of reducing their climate impact and GHG emissions, it is crucial boards of directors and senior management understand and mitigate greenwashing and greenhushing risks. As recent cases have shown, the cost of misleading environmental claims can be high, but with proactive measures, companies can build trust and truly act on climate.

The Canada Climate Law Initiative offers free-of-charge educational sessions that can help boards of directors navigate greenwashing concerns and understand their legal duties with respect to climate change, as well as the best practices in effective climate governance. Contact us to schedule a call and discuss how we can support your company.