The government of Canada passed a series of new rules into law aimed at tackling greenwashing, or unsupported claims by companies about the environmental benefits of their products or business activities.

The new laws were passed as part of amendments made to Canada’s Competition Act, based on proposed changes introduced in the Government’s Fall Economic Statement in November 2023, which the government stated would “enhance protections for consumers, workers, and the environment, including by prohibiting misleading “greenwashing” claims.”

Under the newly amended law’s “Deceptive Marketing Practices” section, the Act now prohibits representations to the public about “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,” in addition to representations “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.”

Notably, with respect to claims about products, businesses and business activities, the law states that the proof of the claims “lies on the person making the representation,” indicating that instead of relying on the Competition Bureau to prove that claims are misleading, the burden is instead on the companies making the claims to prove their validity.

The Act includes significant penalties for companies breaching the deceptive marketing provisions, with fines up to the greater of $10 million, or $15 million for subsequent orders, or three times the value of the benefit derived from the deceptive conduct, or 3% of the company’s annual revenues.

Following the passage of the new greenwashing rules in the Competition Act, legal experts warned that while aiming to protect consumers from misleading claims, the amended law could also introduce significant risks for companies and even slow corporate progress on environmental initiatives. In a memo released following the passage of the legislation, law firm Blake, Cassels & Graydon LLP warned that the “amendments create substantial uncertainty, risks and potential liability for businesses.” The firm added:

“This increased risk may undermine not only companies’ abilities to communicate about their environmental initiatives and commitments but potentially also the initiatives and commitments themselves.”