New tool to challenge greenwashing claims goes live as companies weigh strategy
TORONTO — It's been a year now since a new law took effect that requires companies to back up their environmental claims, but there's still a lot of unknowns about how the anti-greenwashing rules will play out.
What is clear so far is that they've already reduced what companies are choosing to say about their environmental record, even as the biggest source of worry for many — an option for the public to initiate claims — is only now kicking in.
The pullback started as soon as the law came into effect on June 20 last year, when the Pathways Alliance group of oilsands companies scrubbed all content from its website and social media feeds.
Since then there have been other high-profile moves blamed on the law, including RBC dropping its sustainable finance target and several climate metrics, and CPP Investments ditching its net-zero emission by 2050 target, but there have also been numerous other companies that have made quieter adjustments.
'I can say with 100 per cent certainty that many organizations across many industries in Canada are revisiting their disclosure,' said Conor Chell, national leader of ESG law at KPMG in Canada.
'There's a lot of disclosure that was pulled from the public domain.'
Companies have raised concerns about the broad, vague wording of the provision in Bill C-59 that requires them to backup environmental claims with 'internationally recognized methodology,' and the threat of penalties of up to three per cent of global revenues if they're found to be in violation of the law.
Many companies and groups have called for the additions to be scrapped, while the Alberta Enterprise Group and the Independent Contractors and Businesses Association have launched a constitutional challenge, alleging the law is a breach of freedom of expression protections.
The Competition Bureau has tried to address at least the uncertainty of the law by providing guidelines, with a finalized version out just over two weeks ago.
Some have said the guidelines are still too vague, while others like the Pathways Alliance say they provide no assurance at all, because the Competition Bureau isn't bound by them, while the Competition Tribunal doesn't have to adhere to them.
And it's the Competition Tribunal that many companies are especially worried about. A clause in the law that went into effect Friday allows the public to bypass the bureau, and directly ask the tribunal to hear a case.
'From the perspective of many of our clients, the real risk lies in that private right of action,' said Chell.
The clause has raised fears of a flood of cases against companies, tying them up in legal wrangling at the court-like tribunal, possibly for years, and the costs that come along with such disputes.
'We believe the amendments ... should be removed to allow businesses to speak openly and truthfully about what they are doing to improve environmental performance and without fear of meritless litigation by private entities," said Pathways president Kendall Dilling in a statement.
But environmental groups have played down the threat.
Ecojustice finance lawyer Tanya Jemec said the narrative that there is going to be a wave of filings is overblown, since bringing a case is time consuming and resource intensive, while they will have to meet a public-interest threshold before being allowed to proceed.
'I think there is a lot of fearmongering going on out there, and efforts, whether intentional or not, to undermine these anti-greenwashing provisions.'
Some, including Green Party Leader Elizabeth May, have questioned whether the new greenwashing laws were needed at all, given deceptive marketing practices were already covered by the Competition Act.
But Jemec said the existing process takes years, with no updates along the way from the bureau, while being able to take cases to the tribunal will increase transparency and relieve pressure on the bureau.
She said the reaction to the new laws, which also set elevated standards and penalties to the existing general protections, shows they were needed.
'The fact that companies are looking at what they are saying and changing course just may be an indication that the provisions are doing their work.'
Pushing companies to make sure they can back up their environmental claims improves competition, by making room for those legitimately trying to do better, said Wren Montgomery, associate professor at Western University's Ivey Business School.
'It's often these smaller, newer, really sustainable, pure-play sustainability companies that the innovation is coming from,' she said, noting she's seen in sectors ranging from fashion to wine.
'In my research, we see that greenwash is driving them out, so it's making it really hard for them to get rewarded for bringing that value to the market.'
Others, including Calgary-based clean-tech investor Avatar Innovations, have raised concerns that the higher reporting standards could hold back startups, both because of the compliance burden and the lack of established testing standards for emerging technology.
Montgomery said there are many established standards, and more being added, to cover environmental claims.
'My larger concern is not that a reporting standard is going to inhibit innovation. It's that greenwashing is going to inhibit innovation, and I think the latter is a much bigger concern for Canada.'
It's not just smaller companies affected.
Chell at KPMG said that for a while every company was clamouring to get out net-zero targets for the competitive advantage, but that advantage kept fading as more and more did it.
He said if the law works as intended, only companies that can actually substantiate claims will be able to do so, especially for those "big ostentatious claims like net zero, carbon neutrality."
'So there is actually, I think, a competitive advantage for companies that can make those claims and back them up credibly.'
Whether the law is truly effective, or just forcing companies to say less out of caution, is still unclear, but it's certainly brought more focus to the problem, said Chell.
"If the intent was to draw attention to greenwashing as an issue, I would say that that objective has certainly been achieved."
This report by The Canadian Press was first published June 22, 2025.
Ian Bickis, The Canadian Press
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