Competition watchdog finalizes anti-greenwashing guidelines for businesses
Canada's competition watchdog has finalized its guidelines for new federal anti-greenwashing provisions without imposing new rules but offering more indication of which corporate communications could be scrutinized.
The Competition Bureau said on Thursday that it is unable to make changes to the legislation, which has been the subject of heated debate. The guidelines are designed to help businesses ensure compliance, it said.
Companies, especially in natural resource industries, have complained the provisions prevent them from publishing anything about their environmental records and plans by putting them at risk of stiff penalties under the Competition Act.
The guidelines follow two rounds of public consultation about the new provisions in the act, which came into force almost a year ago with the passage of Bill C-59.
Is Ottawa's anti-greenwashing law helping or hurting Canadian companies?
Companies are at legal risk for making environmental assertions that do not stand up to scrutiny. Corporate communications over such things as emission reduction plans and net-zero ambitions must be backed up by international standards. Individuals and companies could face sizable fines if found liable.
Later this month, private parties will be able to make their own complaints to the federal Competition Tribunal in what is known as private right of action.
The bureau said its guidelines, which closely follow a draft version, do not prescribe whether companies can make environmental claims.
'Companies are free to make any environmental claims they wish, as long as they are not false or misleading, and have been adequately and properly tested or substantiated where required,' it said in a statement.
The finalized guidelines point out that provincial securities commissions, not the bureau, are responsible for securities regulation, and that disclosure requirements involving environmental factors are evolving. The agency said it will not review corporate filings made to regulators.
The catch, said Beth Riley, a competition lawyer with McMillan LLP, is that some material risks come under scrutiny in a private action if disclosure is reused, for example, on a corporate website or other public forum to promote a business interest or product not connected with the sale of securities.
'The sense of accountability for disclosure is a good thing, but I think the legislation, these new greenwashing provisions, are a bit unwieldly,' Ms. Riley said. 'When you capture them with the private right of action that's been granted at the same time, without transition or any case law on the new greenwashing provisions, the bureau is no longer the watchdog, or the gatekeeper, of how to engage in claims.'
Some large organizations have scrubbed their websites of environmental materials they had previously trumpeted.
In recent weeks, the Canada Pension Plan Investment Board abandoned its net-zero carbon emission target, citing 'recent legal developments in Canada' that have changed how such commitments are interpreted, including requiring adoption of standardized metrics and interim emission-reduction targets.
Its announcement came after Royal Bank of Canada dropped sustainable finance targets from its public communications, citing Bill C-59 provisions as one reason for the move.
Some business groups as well as the Alberta government criticize the legislation as overreach, though supporters say corporate decisions to expunge materials show it is working.
Still, environmental groups said they were disappointed the guidelines do not include more detail and practical advice for companies, as is the case in other countries.
'The recent changes to the act already appear to be weeding out greenwashing, but the federal government must continue to enact legislation and policy that mandate transparency and accountability from Canada's biggest polluters – as well as the financial institutions that enable them,' Matt Hulse, lawyer for the group Ecojustice, said in a statement.
Deciding which standards are used to back up assertions are a top concern. The bureau said it will recognize methodologies deemed credible in two or more countries that result in 'adequate and proper substantiation.' Many of them will be based in science.
Ms. Riley's colleague, Radha Curpen, McMillan's group head, sustainability and ESG, said several methodologies are widely recognized in areas such as tallying emissions and setting targets, including Greenhouse Gas Protocol, the International Organization for Standardization's life-cycle assessment and the Science Based Targets Initiative.
The key for companies when publishing environmental materials is to make sure they are subject to internal controls and governance, and determine who in the organization needs to sign off, Ms. Curpen said. 'Lots of people have already started this, but they need to align disclosures with risk management frameworks and all that. And be prepared for what could be a private right of action,' she said.
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