The Battle Over Greenwashing – A Critical Examination of Bill C-59
Bill C-59, the Fall Economic Statement Implementation Act (“Bill C-59”) enacted into law on June 20, 2024, introduces various amendments to the Competition Act, and in particular, amendments that purport to address “greenwashing” in Canada – the practice of making misleading claims about the environmental benefits of a product or business practice. While these changes purport to enhance consumer protection and promote transparency, they also appear to be part of a broader Federal regulatory trend that directly impacts the energy sector, particularly the oil and gas industry. This article examines these amendments, their implications for businesses and advocacy groups, especially within the energy sector, and their potential impacts on the regulatory and business landscape.
Definition of Greenwashing
The term “greenwashing” lacks a universal definition but is commonly understood as making unsubstantiated or misleading claims about an entity’s environmental performance. It can include selectively disclosing positive environmental or social impacts of a company's operations, while omitting negative aspects. In the context of energy companies, greenwashing often refers to making debatable statements about the industry's direct and indirect impacts on the climate and environment, as well as their efforts to reduce carbon emissions.
Discussion of Select Amendments
The amendments introduced by Bill C-59 target deceptive marketing practices in environmental claims in three primary ways:
Enhanced provisions to prohibit what is known as “greenwashing”
Expanded private rights of action
Clearance for environmental collaboration
These three particular amendments will be discussed below.
Enhanced Provisions Prohibiting Greenwashing
Sections 74.01(1)(b.1) and (b.2) have been added to the Competition Act. Section (b.1) prohibits representations about a product's environmental benefits that are not based on “adequate and proper tests.” Section (b.2) requires that anyone who claims that their business or activity protects or restores the environment or mitigates the environmental or ecological causes or effects of climate change must base those claims on “internationally recognized methodologies.” However, the Competition Bureau has not yet clarified what constitutes an “adequate and proper test” or which “internationally recognized methodologies” will apply.
The amendments to Sections 74.01(1)(b.1) and (b.2) create a requirement for proper and adequate testing to back any environmental claims. While the standard that companies will have to meet is not yet clear, nor is there any indication yet of what may or may not be acceptable within the context of the amended Competition Act, companies can no longer make vague or unverified statements about their products' or services' environmental benefits without facing potential legal consequences.
Additionally, both amendments introduce a reverse-onus provision, placing the burden of proof on the entity making the environmental claim to substantiate and defend their statements. Violations under the Competition Act can result in steep financial penalties: up to $750,000 for individuals and $10 million (or 3% of annual gross revenues) for businesses on a first offence, escalating to $1 million for individuals and $15 million for businesses for subsequent offences. The Competition Act also allow for criminal prosecution if the claims are made knowingly or recklessly.
Private Party Use of Public Interest Criterion
The amendments introduced by Bill C-59 significantly expand the ability of private parties to bring actions before the Competition Tribunal by incorporating a "public interest" criterion for granting leave. This is a notable shift aimed at increasing the enforcement of the Competition Act through private litigation.
Pre-Bill C-59, private litigants were required to show that their business was "directly and substantially" affected by the alleged conduct to obtain leave to bring a private action before the Competition Tribunal. Now, private individuals can apply to the Competition Tribunal to make an application under the greenwashing provisions of the Competition Act if: (1) it is in the public interest; or (2) if the private party can show any loss or damage as a result of conduct contrary to the Competition Act. What "public interest" means in the context of environmental claims hasn't been clearly defined. This provision is expected to lead to increased scrutiny and potentially more cases being brought to the Competition Tribunal.
The available relief available to private litigants is extensive, running from temporary injunctive relief to permanent relief such as ordering the cessation of conduct, compelling the issuance of corrective notices, and fines to a maximum of 3% of worldwide revenues.
Clearance for environmental collaboration (Environmental Collaboration Certificates)
The amendments brought by Bill C-59 to the Competition Act also introduces an additional mechanism that would protect stakeholders from Competition Act scrutiny: the environmental collaboration certificate. Parties intending to form agreements specifically aimed at environmental protection can apply for this certificate. Such agreements may involve adopting greener manufacturing processes or eliminating inefficient products from the market. By obtaining such a certificate, parties are granted immunity from the criminal conspiracy and civil competitor collaboration provisions of the Competition Act, as long as these agreements do not significantly hinder competition.
Pre-Bill C-59 Complaints in front of the Competition Bureau
Even prior to the announcement of the Bill C-59 amendments, certain environmental NGOs were already making use of existing “false advertising” provisions of the Competition Act to target companies they suspect of greenwashing.
June 18, 2024: Environmental Defence filed a complaint against a major retailer. The complaint focuses on the retailer’s claims that its products are made from recycled materials and are biodegradable. Environmental Defence argues that these claims are misleading as the retailer fails to provide adequate evidence of the products’ environmental benefits. Environmental Defence asserts that such misleading claims can influence consumer choices, leading to unjust competitive advantages.
April 5, 2024: Greenpeace Canada filed a complaint against an oil company for allegedly misleading advertisements about its renewable energy investments. Greenpeace claims that the company’s advertisements exaggerate its commitment to renewable energy and mask its ongoing investments in fossil fuels. Greenpeace argues that these claims mislead the public about the company’s environmental impact.
May 12, 2024: The Canadian Association of Physicians for the Environment (“CAPE”) filed a complaint against a natural gas company. CAPE alleges that the company’s marketing materials promote natural gas as a clean and sustainable energy source without sufficient evidence to back these claims. CAPE contends that the advertisements downplay the environmental and health impacts associated with natural gas extraction and usage.
April 2023: The Competition Bureau confirmed it had commenced a formal inquiry into the marketing practices of Pathways Alliance following a complaint from Greenpeace. The complaint alleged that Pathways Alliance made false and misleading advertising claims by failing to account for the lifecycle of their products, suggesting they had a transparent plan to reduce emissions while continuing to expand production, and making assumptions about future technologies that were not established.
November 2022: The Competition Bureau launched an inquiry into the Canadian Gas Association's (“CGA”) "Fueling Canada" marketing campaign following a complaint from the CAPE. The complaint accused CGA of misleading the public by claiming natural gas is "clean" and "affordable." CAPE argued that the production and use of natural gas release significant greenhouse gases, contribute to indoor air pollution, and that natural gas is not as affordable as other energy options, with its price expected to rise due to climate policies and carbon pricing.
November 2021: Greenpeace Canada filed a complaint against Shell Canada Limited. The complaint targeted Shell Canada's "Drive Carbon Neutral" program, claiming it contained false and misleading representations. Greenpeace argued that Shell's claims about offsetting emissions through carbon credits were not substantiated by direct and accessible evidence and raised concerns about the effectiveness and transparency of forest-based offsets used in the program.
It is anticipated that the number of complaints from NGOs and individuals will increase dramatically in light of the Bill C-59 amendments.
Impact on Business and the Energy Industry
The implications of Bill C-59 are significant for various businesses and sectors. Companies now face increased compliance costs as they must conduct rigorous tests, obtain certifications, and possibly revise entire marketing strategies to ensure compliance with the new regulations. These costs could be substantial, particularly for smaller and medium-sized businesses that lack the resources to meet these stringent requirements. Moreover, the heightened risk of legal action from both the Competition Bureau and private individuals may deter companies from making environmental or sustainability disclosures at all.
The oil and gas sector in particular, which is already under significant public and regulatory scrutiny, will face even greater challenges. The need for substantiating claims about renewable energy usage, carbon footprint reduction, and other green initiatives will require substantial investment in testing and documentation. This could divert resources from actual environmental improvements to legal and regulatory compliance, ultimately hindering progress towards sustainability.
A further caution is that although the intent of Bill C-59 is to prevent misinformation the uncertainties relating to objective standards as well as the capacity for private citizens and private interest groups to initiate proceedings, these amendments may have a chilling effect on environmental disclosure altogether. This concern has already been evidenced by the fact that some energy companies have removed environmental disclosure altogether. For example, The Pathways Alliance, a consortium of Canada's largest oilsands companies, has already removed all its content from its website, social media, and other public communications due to the "significant uncertainty" created by the amendments. The Alliance, along with other industry players, has expressed that while they are committed to environmental progress, the vagueness of the new requirements complicates their ability to communicate their efforts transparently.
Next Steps and Response
The enactment of Bill C-59 has not gone without notice or reaction. The provincial Governments of Alberta and Saskatchewan have condemned the new legislation as a "gag law" that censors free speech, contrary to the Charter, and have vowed to challenge it in court. The Government of Alberta has specifically responded that it is actively exploring the use of every legal option, including a constitutional challenge or the Alberta Sovereignty Act, to push back against the legislation.
In response to these developments, industry groups are calling for specific guidance from the Competition Bureau to help direct their communications approach and ensure compliance. While the formal public submission and feedback period for Bill C-59 closed on March 31, 2023, the Competition Bureau is still open to receiving feedback on its guidance documents in light of the amendments. The current guidance in respect of the environmental claims can be found here.
Conclusion
Bill C-59's amendments to the Competition Act aim to enhance transparency and consumer protection, but these goals may come at a significant cost to traditional principles of procedural fairness.
Key considerations include:
allowing private parties to initiate prosecutions, a role traditionally reserved for the Crown in Canada.
implementing a reverse onus of proof, mandating that companies making environmental claims must prove the accuracy of those claims, instead of the burden being on petitioners to prove them false.
establishing standards of conduct that are uncertain and defined by unelected bodies outside of Canada.
Moreover, these changes could lead to substantial compliance costs and heightened legal risks, particularly impacting the energy sector. There is a balance to be struck between fostering genuine environmental progress and ensuring that businesses are not unduly burdened. With Bill C-59, the potential exists for resources to be diverted from meaningful sustainability efforts towards regulatory compliance, which could inadvertently hinder the very progress the amendments seek to promote.
For stakeholders interested in learning more about Bill C-59 and its implications, please reach out to the managing partner at Blue Rock Law LLP (managingpartner@bluerocklaw.com) or visit www.blurerocklaw.com.
Feedback on Competition Act’s Greenwashing Provisions Now Open
The Competition Bureau is inviting Canadians to share their opinions on new rules against greenwashing. These rules, added to the Competition Act on June 20, 2024, require businesses to adhere to new requirements regarding to certain environmental claims. The Bureau is gathering feedback to help develop guidelines on these rules.
They encourage people to email their feedback by September 27, 2024. All feedback will be published online unless confidentiality is requested.
Interested parties can find the page for comments here: Competition Bureau seeks feedback on Competition Act’s new greenwashing provisions - Canada.ca
If you would like more information, or assistance providing your feedback, please contact Blue Rock Law LLP (managingpartner@bluerocklaw.com).
If you’re interested in learning more about Bill C-59, check out episode S1E29: Bill C59 with Courtney Burton and Dave Mann KC on the Definitely Not Legal Advice Podcast.