By Janelle Anderson, Kelsey Sonntag, and Chad Eggerman
In an era where sustainability sells, environmental claims are everywhere: from “carbon neutral” labels on packaging to promises of “net-zero” operations on corporate websites. These claims are now facing heightened legal scrutiny in Canada.
In June 2024, Bill C-59 came into force, amending the Competition Act to include new provisions aimed at combating greenwashing. These amendments raised immediate questions about enforcement and interpretation, prompting calls for further clarification from the Competition Bureau. In response, the Bureau conducted two rounds of public consultation and on June 5, 2025, they released their Final Guidance on the amendments.
While not legally binding, the guidance is intended to help businesses understand how to comply with the Competition Act when making environmental claims and how the Bureau will interpret and enforce the new provisions.
The guidance emphasizes that many of these legal concepts are not new. Similar provisions have long existed under the Competition Act and other federal laws, such as the Consumer Packaging and Labelling Act and the Textile Labelling Act, only now there is a sharper focus on environmental claims.
For Canadian businesses, the message is clear: if your company is making claims about environmental impact, sustainability, or climate goals, these representations must now meet more explicit evidentiary and legal standards.
WHAT’S CHANGED – AND WHAT HASN’T
The basic rule that businesses must not mislead the public hasn’t changed. Under the Competition Act, it has always been unlawful to make false or misleading claims for the purpose of promoting a product, service, or business interest.
What’s new:
- New legal categories for environmental claims in the Competition Act (sections 74.01(1)(b.1) and (b.2))
- Stricter evidentiary standards for different types of environmental representations
- Clearer expectations around how “substantiation” must be done
- Expanded focus on visual messaging, vague claims, and forward-looking statements
- Clarification that rules apply to both for-profit and not-for-profit organizations and foreign companies
KEY COMPLIANCE TAKEAWAYS FOR BUSINESSES
- Environmental Claims Are Broadly Defined: The Bureau adopts a broad definition of environmental claims. It includes any representation that suggests a product, service, business, or activity has a reduced environmental impact, is environmentally superior to alternatives, or contributes positively to sustainability or climate goals.
This includes claims about materials (e.g., “biodegradable” or “recycled content”), processes (e.g., “made using renewable energy”), outcomes (e.g., “reduces carbon emissions by 30%”), future intentions (e.g., “net-zero by 2035”), or corporate practices (e.g., “eco-conscious supply chain”).
If it creates the impression of environmental benefit, even visually or indirectly, it is likely captured by the Act.
- You Need the Right Kind of Evidence Before You Make the Claim: The kind of required proof depends on the nature of the claim.
For product performance claims, a business must have adequate and proper testing already completed before making the claim. Testing must be reliable, reproducible, and appropriate for the product and claim. For example, before claiming a detergent is “phosphate-free” and “eco-safe”, the promoter requires evidence that the formulation is free from phosphates and performs as promised.
For claims about the environmental impact of a business or business activity, it must be based on adequate and proper substantiation in accordance with “internationally recognized methodology”. The Bureau interprets this to include standards from credible international bodies (e.g., ISO, GHG Protocol), regulatory authorities, or widely accepted industry methodologies. Methods recommended or required by Canadian government programs are presumed to reflect international standards, provided they are appropriate and not misleading in context.
- Visuals and Layout Matter – Not Just Words: The Bureau confirms that a claim is not just about what’s said, but how it’s presented. High risk visuals likely to draw scrutiny include generic green packaging with leaves, nature imagery, or “greenwashing” design; large environmental slogans with fine-print disclaimers that contradict the main claim; or visual cues that exaggerate the environmental impact or benefit. The Bureau will apply a “general impression” test with reference to the placement, prominence, and tone of the claim.
- Vague or Feel-Good Claims Are High Risk: The Bureau specifically warns against generic, undefined green language like: “Eco-friendly,” “Green,” or “Sustainable.” If such terms are used, they must be clearly defined in context and supported by evidence that justifies the impression they create. Even if the words are technically correct, they can be offside if they give consumers a materially misleading general impression.
- Future-Oriented Claims Must Be Credible and Backed by Plans: If your business is making forward-looking claims (e.g., “carbon neutral by 2030”), these are not off-limits but they must be substantiated. To comply, you need a credible plan with specific targets and timelines, documented assumptions and baselines, and evidence of ongoing progress or accountability mechanisms. Aspirational goals without a credible roadmap are no longer acceptable.
- The Rules Apply to Non-Profits, Foreign Companies, and Fundraising Campaigns – But Not Investor Disclosures: The guidance confirms that charitable and non-profit organizations are subject to these rules if they make environmental claims in the context of promoting donations or public engagement. Additionally, foreign companies advertising or selling in Canada through packaging, websites, social media, or digital ads must also comply. However, investor-only disclosures (e.g., securities filings) are generally exempt unless those same claims are repurposed for broader public advertising.
- Penalties Are Serious – But You May Have a Defence: As part of enforcement, the Competition Bureau can seek cease and desist orders, administrative monetary penalties, corrective advertising, or restitution to misled consumers. A “due diligence” defence is available, but only for financial and corrective penalties, not for cease orders. To rely on it, a company must show it took reasonable steps to prevent deceptive marketing, such as internal review procedures, third-party verifiers, or documented testing and applied standards.
WHAT YOUR BUSINESS SHOULD DO NOW
In light of this new enforcement landscape, businesses should treat environmental claims like any other high-risk regulatory disclosure. That means getting compliance, marketing, and legal teams on the same page.
- Start with an Environmental Claims Audit: Identify where and how your company is making green claims (product labels, websites, reports, social media). Flag any claims that are vague, forward-looking, or comparative.
- Validate Your Claims Against Recognized Methodologies: Collect and organize testing results, certifications, and documentation. Ensure your substantiation is current, credible, valid, and complete.
- Train Teams on the New Standards: Marketing, compliance, and product teams should understand the rules and how to navigate them. Build internal review checkpoints before claims that could be captured by the Act are released.
- Track Commitments and Public Targets: If you’ve made a net-zero or forward-looking promise, be prepared to show your plan and demonstrate your progress.
The Bottom Line: Environmental Claims Are Now a Compliance Priority
Sustainability remains a powerful driver of brand trust and customer loyalty—but credibility is now a legal obligation. The Competition Bureau’s message is unequivocal: environmental marketing must be truthful, verifiable, and backed by rigorous evidence.
The bar has been raised. Businesses that get ahead of this shift will not only avoid regulatory risk—they’ll also strengthen the trust that makes environmental leadership worth pursuing.
If you’re unsure whether your claims meet the new standards or whether your due diligence processes are sufficient, now is the time to seek legal advice. Procido LLP can help you navigate these changes and reduce your risk of non-compliance. Reach out to our Governance and ESG practice group today for assistance today.
Disclaimer
This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice. Contact Procido LLP (www.procido.com) if you require legal advice on the topics discussed in this article.