On December 23, 2024, the Competition Bureau (the “Bureau”) published its proposed guidelines (the “Proposed guidelines”) concerning environmental claims, for the purpose of public consultation prior to their finalization.

With the archiving of the Bureau’s previous detailed guidance, Environmental Claims: A Guide for Industry and Advertisers (Canada’s “Green Guide”), and only high-level updated Bureau guidance available to assist businesses in navigating the recent modifications to the Competition Act to regulate environmental claims more explicitly (see our articles on this here and here), businesses have been eagerly waiting for new guidance on how the Bureau will regulate environmental claims.

The Proposed guidelines respond to growing concerns about greenwashing—false or misleading environmental claims—and provide a framework for businesses to ensure compliance under the Competition Act. In this article, we delve into the key provisions and guiding principles outlined in the draft guidelines and examine their implications for businesses seeking to substantiate their environmental representations with confidence.

The relevant civil provisions of the Competition Act:

As a reminder, with the recent amendments to the Competition Act, there are now four civil provisions regulating environmental claims:

  1. The general prohibition: Paragraph 74.01(1)(a), which prohibits a person from making “a representation to the public that is false or misleading in a material respect” when promoting a business interest. Per the Bureau, this prohibition captures a broad range of claims, whether they pertain to a specific product, or to claims about the environmental attributes of a business.
  2. Performance, efficacy or length of life of a product: Paragraph 74.01(1)(b) prohibits a person from making “a representation to the public in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product that is not based on an adequate and proper test thereof, the proof of which lies on the person making the representation”, when promoting a business interest. This prohibition is expressly limited to performance claims about products.
  3. NEW! A product’s environmental impact: Paragraph 74.01(1)(b.1) prohibits a person from making “a representation to the public in the form of a statement, warranty or guarantee of a product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change that is not based on an adequate and proper test, the proof of which lies on the person making the representation”, when promoting a business interest. This prohibition is new (in effect as of June 20, 2024) and is expressly limited to specific kinds of environmental claims that concern the environmental benefit of a product.
  4. NEW! A business’ green efforts: Paragraph 74.01(1)(b.2) prohibits a person from making “a representation to the public with respect to the benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change that is not based on adequate and proper substantiation in accordance with internationally recognized methodology, the proof of which lies on the person making the representation”, when promoting a business interest. This prohibition is new (in effect as of June 20, 2024) and is expressly limited to specific kinds of environmental claims that concern the environmental benefit of a business or business activity.

The Bureau’s Proposed guidelines focus on the civil provisions outlined above. However, it is important to note that there is also a broad criminal provision under Paragraph 52(1) of the Competition Act, which prohibits anyone from knowingly or recklessly making false or misleading representations to the public when promoting a product or any business interest.

This criminal provision can be applicable to forms of greenwashing, for which there is a current statutory right of action available to private parties.

The six proposed guiding principles

Many businesses and stakeholders will be disappointed to note that the new Proposed guidelines do not include detailed guidance to assist businesses in making compliant environmental claims in a similar fashion to the archived Green Guide. Rather, the guidelines outline six high-level principles to help businesses assess whether their environmental claims are in line with the requirements of the Competition Act.

These principles were first set out in Volume 7 of the Deceptive Marketing Practices Digest published by the Bureau in July 2024, which the Proposed guidelines re-introduce with some modification based on the amended Competition Act, as follows:

  • Principle 1: Environmental claims should be truthful, and not false or misleading: This means that an environmental claim must be true “both in terms of its literal meaning and the general impression that it conveys.” On this note, the Bureau references its own Deceptive Marketing Practices Digest (Volume 1), more specifically, its section on disclaimers and fine print (which can be accessed here).
  • Principle 2: Environmental benefit of a product and performance claims should be adequately and properly tested: The Bureau has confirmed in the Proposed guidelines that it will generally assume that the considerations and interpretation given to the “adequate and proper” test standard in the context of the existing paragraph 74.01(1)(b) will also apply to the new paragraph 74.01(1)(b.1). Businesses must be able to show that performance claims and claims about the environmental benefit of a product are based on adequate and proper testing, which must be conducted before making the claims. The Bureau also reminds businesses to always “have regard to the general impression conveyed to the public by a claim when thinking about whether testing is adequate and proper.”
  • Principle 3: Comparative environmental claims should be specific about what is being compared; Notably, the Bureau recommends being specific about what is being compared and the difference that is claimed (in our view, ideally via a quantified measure).
  • Principle 4: Environmental claims should avoid exaggeration.
  • Principle 5: Environmental claims should be clear and specific – not vague: Per the Bureau, this includes “being transparent about whether the claim applies to a part of or to the whole of a product, business or business activity, or only to a specific part of it.” And when in doubt, spell it out!
  • Principle 6: Environmental claims about the future should be supported by substantiation and a clear plan: Before making claims about the future, the Bureau states that businesses should ensure that such claims are well-founded and are adequately and properly substantiated in accordance with internationally recognized methodology. Further, the Bureau recommends that businesses have:
  • A clear understanding of what needs to be done to achieve what is being claimed.
  • A concrete, realistic, and verifiable plan in place to accomplish the objective, with interim targets.
  • Meaningful steps underway to accomplish the plan.

The Bureau further notes that there is a “wealth of information available to businesses regarding internationally recognized methodologies related to common claims such as those related to net zero.” However, while the Bureau states its belief in the existence of such material, it provides no further information or clear examples of what it is, or where it may be found.

Such vague and non-specific statements will doubtless be disappointing to readers hopeful for more detailed compliance guidance from a regulatory body tasked with enforcing new legal requirements. 

Grace period

The Competition Bureau notes in the FAQ section following the guidelines that while it does not plan for an express grace period following the June 20, 2024 entry into force of the two new provisions outlined above, it will “consider the circumstances of each case when exercising its enforcement discretion.”

With that said, the Bureau states that it will not seek to hold anyone liable for a breach of the new provisions before they came into force (which conceptually they could not do in any event), but liability may nonetheless arise under the pre-existing provisions (e.g. paragraphs 74.01(1)(a) and/or 74.01(1)(b) of the Competition Act).

Organizations would nevertheless be wise to consider whether their environmental statements made prior to the coming into force of the new provisions remain in the market—in which case there would be a potential for them to be evaluated under the new requirements.

Further guidance on private right of action before the Competition Tribunal

The Bureau announced that they expect to publish updated guidance with regards to private access to the Competition Tribunal (i.e., guidance on applying for permission to file an application against businesses under the deceptive marketing practices provisions of the Competition Act).

As of right now, however, there is no timeline for the publication of such guidelines.

Adequate and proper tests and Substantiation

References are made in the Proposed guidelines to prior Bureau guidance and jurisprudence pertaining to the interpretation of the term “adequate and proper tests”, a standard initially used to assess the quality of claim substantiation regarding the performance, efficacy or length of life of a product.

This term is referenced in one of the two new provisions of the Competition Act outlined above. As noted above, the Bureau confirms in its Proposed guidelines that it will generally assume the same Bureau guidance and interpretation by the courts of the “adequate and proper test” language of paragraph 74.01(1)(b) of the Competition Act will remain relevant and instructive when assessing whether “adequate and proper tests” have been conducted with regards to environmental claims captured by the new provision of the Competition Act regulating representations pertaining to the environmental benefit of a product.

Put another way, the Bureau considers that where the same terminology is used in existing and new provisions of the statute, it will be given the same interpretation. Previous guidance from the Bureau regarding the flexible standard applied to and interpretation by the courts of an “adequate and proper” test is set out in The Deceptive Marketing Practices Digest — Volume 2 (which can be accessed here).

However, the Proposed guidelines note that it remains to be seen how the courts will interpret the “adequate and proper substantiation” term in the context of the provision under paragraph 74.01(1)(b.2), regarding environmental claims that concern the environmental benefit of a business or business activity.  In the Bureau’s view, businesses should choose substantiation that is suitable, appropriate and relevant to the claim, and sufficiently rigorous to establish the claim in question. The Proposed guidelines state that this will often require substantiation that is scientific in nature.

Further, while the Bureau acknowledges that third party verification is not specified in the Act, for claims that must be substantiated in accordance with internationally recognized methodology, third party verification will be required in circumstances where it is called for by the internationally recognized methodology being relied upon. Thus, in some instances third party verification may become a de facto requirement.

The Bureau further qualifies that “substantiation” is not necessarily the same as testing—substantiation involves having evidence to show that a claim is true. If a representation is based on adequate and proper substantiation in accordance with an internationally recognized methodology, then the Proposed guidelines advise that the claim will meet the substantiation requirement of the Competition Act, even if that methodology does not involve testing.

That said, organizations should be cautious, and consider whether both paragraphs 74.01(1)(b.1) “adequate and proper testing” and 74.01(1)(b.2) “adequate and proper substantiation in accordance with internationally recognized methodology” apply to their claims.

Internationally recognized methodologies

The concept of “internationally recognized methodologies” is introduced under the new paragraph 74.01(1)(b.2) of the Competition Act, as outlined above. While many had hoped that the Proposed guidelines would offer concrete guidance as to what qualifies as such, the language used by the Bureau is very broad and fragmental. Here are the main takeaways:

  • A methodology will likely be considered internationally recognized by the Bureau if “it is recognized in two or more countries”. The Bureau is further of the view that a methodology does not need to be recognized by the government of those countries, creating uncertainty as to by whom the methodology must be recognized to meet the standard. For example, would adoption of a particular methodology by a corporate group with members in Canada and two other countries meet this requirement? The Proposed guidelines do not clarify. Further, the term “recognized” is not defined in the Proposed guidelines. For example, does recognition entail acknowledging the validity or appropriateness of the methodology, or merely its existence? While we would assume the former, the Proposed guidelines offer no clarity.
  • The Competition Act does not expressly require third party verification—however, it does expressly require that internationally recognized methodologies be used in certain cases, and that the latter often require third party verification. The Bureau will assess each case on its facts, but notes that third party verification may improve the credibility of claims for consumers.
  • Businesses are not obligated to use the “best” methodology available, but they are encouraged to base their substantiation on an internationally recognized methodology that is reputable and robust (such terms are not further defined in the guidelines). Importantly, it is critical for organizations to note that there is a twofold requirement in paragraph 74.01(1)(b.2): the substantiation must be “adequate and proper” and “in accordance with internationally recognized methodology”. Thus, there would be a potential for the Bureau to deem an internationally recognized methodology nevertheless not “adequate and proper”—which highlights to potential risks of blindly relying on third-party accreditations or standards.
  • Businesses are not obligated to comply with international standards—the Proposed guidelines distinguish between standards and methodologies, stating that the latter may or may not be reflected in one or more standards, but the methodology is what truly matters. However, if a standard that contains a methodology is internationally recognized, then the Bureau will likely consider the methodology to be internationally recognized.
  • The methodology must be appropriate for the Canadian context, including with regard to Canada’s geography and climate. Note our earlier comment that the substantiation must be “adequate and proper”, regardless of whether it is conducted in accordance with “internationally recognized methodology.”
  • The Bureau “starts with the assumption” that methodologies required or recommended by government programs in Canada for the substantiation of environmental claims are consistent with internationally recognized methodologies; however, businesses should exercise due diligence to ensure that the methodology they use is internationally recognized, and suitable for the claim, having regard to all circumstances. We would caution that the Bureau’s “starting assumption” may be open to rebuttal.
  • It is possible that there may be more than one internationally recognized methodology that may be used by a business to substantiate their claim. If that is the case, any of such methodologies can be used, as long as it leads to substantiation that is adequate and proper.
  • It is also possible that there is no internationally recognized methodology that exists to substantiate a particular claim, for example in the context of a new green technology. If that is the case, the Bureau recommends that the business either relies on several internationally recognized methodologies that “together can create substantiation for the claim” or that are used for substantiating similar claims. If the business concludes that there is no way to substantiate this claim, the Bureau recommends avoiding making such claim (i.e. as doing so would contravene the new requirements of the Competition Act). Again, we would emphasize that substantially must be adequate and proper, regardless of whether it has international recognition.
  • If an internationally recognized methodology is subsequently developed and directly relevant to a claim a business is making, the business would be wise to substantiate the claim using that new methodology to ensure continued compliance with the law.
  • Small businesses are held to the same standards as larger businesses.

Due diligence defense

The Bureau highlights that there is a due diligence defense available to anyone who can show they exercised due diligence to prevent non-compliance with the above-noted civil deceptive marketing provisions.

Comments

Overall, the Proposed guidelines mainly rehash and somewhat expand (taking into account the amendments to the Competition Act, as outlined above) on the content and approach of the Bureau as outlined in The Deceptive Marketing Practices Digest — Volume 7 (Tips for businesses considering making environmental claims) by outlining six principles for compliance.

Unfortunately, the Proposed guidelines offer little by the way of the detailed compliance advice found in the Bureau’s previous Green Guide, or indeed in the contemporary guidance of major regulators in other jurisdictions, such as the United States Federal Trade Commission’s Guides For The Use Of Environmental Marketing Claims.

Instead, a much broader approach than that of the Green Guide is taken: the Proposed guidelines do not include specific guidance on how to make certain environmental claims, such as those pertaining to recyclability or compostability, nor do they refer to precise international or Canadian standards. The Bureau states that “there is a wealth of information available to businesses regarding internationally recognized methodologies,” but pointedly refrains from clarifying what it considers to meet this standard. This is in sharp contrast to the retired Green Guide, which provided a wealth of such information. 

This approach appears intentional: a broader approach allows the Bureau more flexibility to adapt to changing standards and methodologies in the field of environmental claims without needing to periodically update the content of the Bureau’s guidelines.

For businesses, on one hand, the Bureau’s high-level Proposed guidelines leave room for businesses to make whatever environmental claims they wish (provided they are not false or misleading and have been adequately and properly tested or substantiated as required). However, on the other hand, the Proposed guidelines do not offer businesses significant detail to make compliant environmental claims under the revised Competition Act with certainty.

By re-introducing the six principles previously published by the Bureau, many elements of the new greenwashing provisions of the Competition Act remain left open to businesses to interpret, and to the Bureau to deem inadequate. While this may allow the Bureau to avoid pinning itself to an interpretation of the law it is tasked with enforcing, one might query whether the provision of less prescriptive guidance furthers the public policy goal of facilitating compliance with the law, as opposed to freedom of enforcement for the Bureau.

We would also note that the burden of this vagueness may disproportionately land on small businesses, which may lack the resources and international exposure to identify international methodologies and may look to the regulator for assistance.

It is therefore critical for businesses to develop, implement and document a credible and effective compliance program that encompasses compliance with the environmental claims requirements. A credible and effective compliance program will consist of a primary risk mitigation measure, notably by underpinning a due diligence defence in response to Bureau enforcement via the civil deceptive marketing provisions outlined above.

The next steps

Interested parties are invited to provide feedback on the Proposed guidelines before February 28, 2025. Submissions will be published on the Bureau’s website, unless it is expressly requested that it be kept confidential. Following the consultation, the Bureau will publish final guidelines.

For more information regarding how these changes may affect your business or advertising campaigns, or for assistance in submitting comments on the Proposed guidelines, please reach out to your Gowling WLG Advertising, Marketing and Product Regulatory counsel.