Greenpeace activists protest outside the BP Canadian offices in downtown Calgary, in April, 2010.Todd Korol/Reuters
Jennifer A. Quaid is a professor in the civil law section of the University of Ottawa. Julien O. Beaulieu is a doctoral candidate at Imperial College London.
Toward the end of April, Royal Bank of Canada RY-T quietly abandoned its pledge to mobilize $500-billion in sustainable finance by 2025. RBC is hardly alone. Across the corporate world, companies are scaling back climate claims and disclosures – a trend now widely dubbed “greenhushing.” But this one hit differently. Unlike other companies that cite shifting political winds to justify their retreat, RBC blamed something more specific: new anti-greenwashing provisions added to Canada’s Competition Act in June, 2024.
Given RBC’s size and influence, the bank’s move sent a ripple through boardrooms nationwide. Some analysts warned that it could trigger a broader corporate retreat from climate transparency – especially coming just a few days after securities regulators dropped plans for mandatory climate disclosures.
But let’s be clear: This reaction is based on a distorted view of the law.
The notion that good-faith environmental disclosures are fair game for anti-greenwashing enforcement is wrong and dangerous. It overstates the risk of liability and gives cover to companies walking away from commitments they may never have intended to honour.
What’s the fuss about?
The new anti-greenwashing provisions are based on a simple premise: If a firm makes an environmental benefit claim, it should be able to prove it using sound, generally accepted methods.
This isn’t radical. It reflects a core principle of fair markets: Consumers and investors need credible information to make informed choices. When it comes to claims about environmental performance, especially ones that set future targets (“net zero by 2030”) or are comparative (“greenest in the sector”), it’s hard for consumers and investors to check them independently. That’s why the law requires that firms that make these claims be able to back them up. Insisting on substantiation guards against deception, promotes trust and supports competition, key ingredients to fostering the innovation needed to transition our economy.
Other countries – and other Canadian regimes, such as food and health product regulation – already impose similar or stricter standards on this kind of claim. This is hardly uncharted legal territory. So why the panic?
Much of the hand-wringing has focused on a provision that requires companies making general forward-looking environmental claims to have “adequate and proper substantiation” based on internationally recognized methodology. Some firms assert that this novel phrase is too vague, making it difficult to determine what they can and can’t say. The Competition Bureau issued draft guidance on the topic, but the guidance isn’t binding and doesn’t spell out a list of approved substantiation methods.
The upshot is an increasing number of firms have concluded that the safest option is to pull back entirely from climate disclosures. They point to the risk of enormous fines – up to 3 per cent of global revenues and the threat of lawsuits from private parties once a new right of action comes into effect in June. Some go further, claiming the law chills free expression and discourages green investment, and it overlaps with disclosure requirements under securities law.
But these arguments don’t entirely hold up to scrutiny.
The floodgates have not been opened
Yes, the term “internationally recognized methodology” is new in Canadian law. But it’s not a high bar. It doesn’t mean firms need formal endorsement from a global body for every metric they use. What’s expected is evidence that a claim rests on science-based, expert-informed principles – not vague aspirations or marketing fluff.
The Competition Tribunal will interpret this provision with common sense, in line with Parliament’s intent: to protect consumers and investors from deception, not to punish honest attempts at transparency. A rigid, overly narrow reading that limits firms to a fixed menu of certification schemes would defeat the purpose.
In practice, many widely used sustainability metrics and frameworks will likely qualify. New methodologies developed by Canadian firms that align with internationally accepted scientific and accounting principles should, too. As international and Canadian initiatives continue to develop clear methodologies, uncertainty will diminish, as is always the case following the introduction of new law.
The threat of litigation and catastrophic penalties is exaggerated. The Competition Bureau has limited law enforcement resources. Its past practice shows it will target clear-cut, egregious cases. Private claims will have to be authorized by the tribunal and deemed in the public interest to proceed – a high bar that will deter frivolous lawsuits. Class actions are also unlikely to become frequent, as the law does not provide for a damages regime from which lawyers could be paid.
As for penalties, they are not automatic and don’t apply to cases in which a firm shows it exercised reasonable diligence. Any penalties imposed must consider relevant aggravating and mitigating factors. And it’s important to note that scalable penalties based on a firm’s size are designed for cases in which the tribunal concludes that the appropriate penalty exceeds $10-million. Moreover, using global revenues to calculate a penalty is a fallback to be used only when it’s not possible to calculate the amount of benefit a firm derived from its misleading claims.
As for securities law, the Canadian Securities Administrators (the national umbrella group for provincial and territorial securities regulators) has abandoned its plan for mandatory climate disclosures, which means that reporting issuers will only have to disclose climate-related information that is material to investors. Such disclosures are unlikely to be caught in the scope of the Competition Act, which only applies to claims made to promote a product or business interest – not claims aimed at complying with a regulatory disclosure requirement.
The way forward
The bureau is still finalizing its enforcement guidance on the new rules. Some stakeholders have rightly called for more detail – especially on what counts as adequate substantiation. Effective greenwashing enforcement must be grounded in science, but also must be attentive to real-world constraints. The bureau should provide companies with actionable guidance about what claims they can make, when and how. The bureau must also be prepared to regularly update its guidance by co-ordinating with federal and provincial experts, as well as international peers.
The federal government also has a role to play. It can issue regulations that would define safe-harbour methodologies under the Competition Act without legislative amendments. This cross-cutting effort could draw on the federal government’s past work on net-zero targets, carbon accounting rules and the upcoming sustainable finance taxonomy.
Transparency doesn’t threaten sustainability – it protects it. Let’s not allow a sensible check on greenwashing to become a convenient excuse for silence and inaction.