Over the last several years, increasing demand from consumers for environmentally-friendly products and services has led to an increase in “greenwashing,” which involves the practice of conveying false, misleading, incomplete, or unsubstantiated information to consumers about a product or business’ environmental credentials.
Canadian courts and adjudicative bodies have started recognizing the harm associated with greenwashing and, in some instances, have heavily penalized organizations for employing marketing tactics that misled consumers into believing products, goods or services were more environmentally-friendly than they are.
In this article, we outline how organizations can and have been held responsible for environmental harm in Canadian courts and by adjudicative bodies in the context of breaches of both environmental protection legislation and competition legislation.
A hefty greenwashing fine under the Canadian Environmental Protection Act
In September 2015, Environment and Climate Change Canada (“ECCC”) launched an investigation of Volkswagen Aktiengesellschaft (“Volkswagen AG”) to assess their compliance with the federal On-Road Vehicle and Engine Emission Regulations.[1] In the investigation, ECCC found that Volkswagen AG had imported into Canada vehicle models that were equipped with “defeat devices,” which contain software that reduces the effectiveness of a vehicle’s emission control system while it is operating and in use. Between January 2008 and December 2015, Volkswagen AG imported into Canada nearly 128,000 two and three-litre diesel engine Volkswagen and Audi vehicles equipped with defeat devices. ECCC also revealed that the use of the defeat devices “involved significant deception and showed that the company knowingly circumvented national vehicle emissions regulations.”[2] In a 2020 decision on this matter, the Ontario Court of Justice ordered Volkswagen AG to pay $196.5 million after it pled guilty to 60 charges of offences under the Canadian Environmental Protection Act for misleading information and unlawfully importing vehicles that failed to meet vehicle emissions standards.[3]
The Competition Bureau takes on Greenwashing Investigations
Canada’s Competition Bureau, a federal government agency which “protects and promotes competition” to benefit consumers and businesses,[4] has investigated multiple complaints against organizations regarding allegations of greenwashing.
As part of its mandate, the Competition Bureau investigates alleged violations of the laws it enforces. The laws that pertain to greenwashing under the Competition Bureau’s purview are as follows:
The Competition Act
The Competition Act contains provisions addressing false or misleading representations[5] and deceptive marketing practices[6] in promoting the supply or use of a product or any business interest. The Competition Act provides two adjudicative regimes to address false or misleading representations and deceptive marketing practices: a criminal regime and a civil regime, respectively.
The criminal regime, outlined in section 52(1) of the Competition Act, creates a general criminal prohibition against misleading advertising by prohibiting all materially false or misleading representations made knowingly or recklessly. The civil regime, outlined in section 74.01 of the Competition Act, specifically prohibits making representations to the public for the purposes of promoting a product, service or business interest that is false or misleading in a material respect.
The Consumer Packaging and Labelling Act
The Consumer Packaging and Labelling Act contains provisions regarding representations on labelling for non-food consumer goods. Section 7 of this Act prohibits a dealer from making false and misleading representations about a product which relates to or may reasonably be regarded as relating to that product.[7]
The Textile Labelling Act
The Textile Labelling Act contains provisions regarding the labelling, sale, import and advertising of consumer textile goods. Similar to the Consumer Packing and Labelling Act, section 5 of the Textile Labelling Act prohibits a dealer from making false and misleading representations about a product which relates to or may reasonably be regarded as relating to that product.[8]
In recent years, the Competition Bureau has begun conducting inquiries on certain organizations based on complaints that have alleged breaches of the above noted provisions.
Keurig pays nearly $4M for false recycling claims
In early 2022, the Competition Bureau concluded that Keurig Canada Inc. (“Keurig”) had made false or misleading claims about the recyclability of its single-use coffee pods, given that K-Cup pods are currently not widely accepted in municipal recycling programs outside of British Columbia and Quebec.
The Competition Bureau and Keurig agreed to a settlement agreement in which Keurig paid a $3 million penalty as well as made an $800,000 donation to a Canadian charity focused on environmental causes and paid $85,000 to cover the Competition Bureau’s investigation costs.[9] As part of this agreement, Keurig is also required to change its packaging and widely publish notices about these changes.[10]
Ongoing inquiry into the Canadian Gas Association
Last fall, several doctors, nurses and public health advocates, with the support of the Canadian Association of Physicians for the Environment, filed a complaint to the Competition Bureau alleging that the Canadian Gas Association (“CGA”) made false and misleading representations to the public that natural gas is “clean” and “affordable.”
As natural gas is composed of 70-90% methane, which is significantly more powerful at trapping heat than carbon dioxide,[11] the complainants argued that it is misleading to refer to natural gas as clean. The complainants also disputed that natural gas is affordable, given that heat pumps are typically less expensive than gas residential energy systems, and the cost of natural gas is expected to increase significantly in coming years due to climate policies.[12]
In November 2022, the Competition Bureau informed the CGA that it had opened an inquiry regarding messaging around natural gas. The inquiry remains ongoing at this time. Should the Competition Bureau find that the statements are false and/or misleading, the company would be forced to halt the advertisements, issue a retraction, and could be ordered to pay a fine of up to $10 million.[13]
The Competition Bureau also has an ongoing greenwashing inquiry against one of Canada’s biggest banks regarding its messaging on climate action.[14]
Complaint filed against the Sustainable Forestry Initiative
In December 2022, several large Canadian environmental organizations filed a complaint with the Competition Bureau alleging that the Sustainable Forest Initiative’s (“SFI”) descriptions of its forestry certification standard as “sustainable”, “certified sustainable”, or achieving “sustainably managed forests” were false and misleading.
The complainants allege that SFI’s forestry certification standard outlines steps which could result in sustainable forestry, but does not require any practices that meet definitions of “sustainable” or “sustainable forestry” or “sustainable forest management.”[15]
The SFI is the largest forest certification system in North America and has certified more than 140 million hectares of forest in North America.[16] The complainants allege that the SFI provides assurances of sustainable forestry while contributing to unsustainable logging globally and in Canada on an immense scale.[17]
The Competition Bureau has yet to publicly launch an inquiry into the SFI.
Complaint filed against Gazoduq
In June 2021, the Centre Québécois du Droit de L’Environnement (“CQDE”) filed a complaint with the Competition Bureau against Gazoduq Inc. (“Gazoduq”) and its majority shareholder, Société en commandite Symbio Infrastructure (“Symbio”), arguing that Gazoduq and Symbio repeatedly made false and/or misleading representations to the public about their proposed project to construct and operate a pipeline to transport methane gas from Western Canada to Saguenay, Quebec. In the complaint, the CQDE alleged that Gazoduq and Symbio falsely claimed this project would be carbon neutral and globally reduce greenhouse gas emissions.[18]
The Competition Bureau has yet to publicly launch an inquiry into this complaint, and the project is currently being assessed through an integrated impact assessment led by the Impact Assessment Agency of Canada.[19]
Takeaways
As evident from the investigations of Keurig and the CGA, the Competition Bureau is taking an active role to address greenwashing in Canada. In 2021, the Competition Bureau archived a 2008 document prepared by the Competition Bureau and the Canadian Standards Association to guide industry and advertisers on environmental claims,[20] stating that the document “does not reflect the latest standards and evolving environmental concerns.”[21] This, unfortunately, leaves businesses with little guidance from the Competition Bureau on greenwashing.
This past March, the European Commission proposed several amendments to the Unfair Commercial Practices Directive and the Consumer Rights Directive which, if adopted, would provide further clarity for companies to avoid greenwashing within the European Union. Companies would be required to substantiate environmental claims using the Product/Organization Environmental Footprint Methods, which call for the use of 16 environmental impact categories to measure the environmental performace of a product or organization through its entire value chain and lifecycle.
The proposed amendments also call for the prohibition of several commercial practices, including the following:
- displaying sustainability labels that are not based on a certification scheme or established by public authorities;
- making an environmental claim about an entire product when the claim only concerns a certain component of the product;
- failing to inform consumers about features that limit the durability or repairability of a product or making false claims about the durability or repairability of a product; and
- failing to inform consumers that a product uses consumables, spare parts or accessories that are not provided by the original producer.[22] [23]
As domestic and international laws and policies to address greenwashing continue to evolve, businesses ought to tread carefully before making environmental claims about their products, goods and services. Businesses ought to ensure that any claims made are:
- Not misleading or likely to result in misinterpretation;
- Accurate and specific: ensure that broad claims that a product is environmentally beneficial are accompanied by a supporting statement and that claims do not imply a product is endorsed by a third-party organization unless it is;
- Substantiated and verifiable; and
- Relevant: claims should be specific to a particular product, good, or service and should consider all of the relevant aspects of a life cycle.[24]
If you have any questions about greenwashing or understanding how to avoid greenwashing, please contact Christie McLeod ([email protected]), Amanda Cutinha ([email protected]) or any other member of our ESG and Carbon Finance Group.
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[1] Government of Canada, “Government of Canada opens investigation into Volkswagen’s alleged use of defeat devices to circumvent emissions regulations,” (22 Sept 2015), online: <www.canada.ca/en/news/archive/2015/09/government-canada-opens-investigation-into-volkswagen-alleged-use-defeat-devices-circumvent-emissions-regulations.html>.
[2] Government of Canada, “Volkswagen Aktiengesellschaft ordered to pay $196.5 million fine after pleading guilty to 60 charges for offences under federal environmental legislation,” (22 Jan 2020), online: <www.canada.ca/en/environment-climate-change/services/environmental-enforcement/notifications/volkswagen-aktiengesellschaft-fined-offences-federal-environmental-legislation.html>.
[3] R v Volkswagen AG, 2020 ONCJ 398.
[4] Government of Canada, “Competition Bureau Canada,” (22 Sept 2022), online: Government of Canada <ised-isde.canada.ca/site/competition-bureau-canada/en>.
[5] Competition Act, RSC 1985, c C-34, Part VII.2, s 52(1).
[6] Ibid, s 74.01.
[7] Consumer Packaging and Labelling Act, RSC 1985, c C-38, s 7.
[8] Textile Labelling Act, RSC 1985, c T-10, s 5.
[9] Government of Canada, “Keurig Canada to pay $3 million penalty to settle Competition Bureau’s concerns over coffee pod recycling claims,” (6 Jan 2022), online: <www.canada.ca/en/competition-bureau/news/2022/01/keurig-canada-to-pay-3-million-penalty-to-settle-competition-bureaus-concerns-over-coffee-pod-recycling-claims.html>.
[10] The Canadian Press, “Keurig Canada fined $3 million for misleading claims over coffee pod recycling,” (7 Jan 2022), online: CBCNews <www.cbc.ca/news/business/keurig-fined-3-million-fine-1.6307150>.
[11] Karine Lacroix et al, “Should it be called “natural gas” or “methane”?” (1 Dec 2020), online: Yale Program on Climate Change Communication <climatecommunication.yale.edu/publications/should-it-be-called-natural-gas-or-methane/#:~:text=Natural%20gas%20is%20composed%20of,)%20or%20coal%20(39%25)>.
[12] Canadian Association of Physicians for the Environment, “Canada’s Competition Bureau opens investigation into the Canadian Gas Association’s alleged greenwashing of methane gas as clean,” (10 Nov 2022), online: <cape.ca/press_release/canadas-competition-bureau-opens-investigation-into-the-canadian-gas-associations-alleged-greenwashing-of-methane-gas-as-clean/>.
[13] Competition Act, RSC 1985, c C-34, s 74.1(1).
[14] Jaela Bernstien, “Why Environmentalists went after Canada’s biggest bank for alleged greenwashing,” (16 Oct 2022), online: CBCNews <www.cbc.ca/news/science/rbc-greenwashing-investigation-1.6617129>.
[15] Ecojustice, “Application for Inquiry: False and Misleading Representations by the Sustainable Forest Initiative about their Forest Certification Standard”, (undated), online (pdf): <ecojustice.ca/wp-content/uploads/2022/12/SFI-CB-Complaint-Final.pdf> [“SFI Inquiry Complaint”], at 1.
[16] Sustainable Forestry Initiative, “SFI’s Conservation Impact: A Decade of Success,” (June 2022), online (pdf): <forests.org/wp-content/uploads/SFIs-Conservation-Impact-A-Decade-of-Success.pdf>.
[17] SFI Inquiry Complaint, at 1.
[18] Centre Québécois du Droit de L’Environnement, “Gazoduq project: the CQDE files a complaint with Competition Bureau Canada for false or misleading information” (29 June 2021), online: <www.cqde.org/en/news/gazoduq-project-the-cqde-files-a-complaint-with-competition-bureau-canada-for-false-or-misleading-information/>.
[19] Government of Canada, “Gazoduq Project” (last modified 19 Dec 2022), online: <iaac-aeic.gc.ca/050/evaluations/proj/80264?culture=fr-CA&wbdisable=true>
[20] Government of Canada, “Environmental Claims: A Guide for Industry and Advertiser,” (June 2008), online: <ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/publications/environmental-claims-guide-industry-and-advertisers>.
[21] Government of Canada, “Environmental Claims and Greenwashing,” (20 Jan 2022), online: <ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/publications/environmental-claims-and-greenwashing>.
[22] Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information, COM/2022/143 final, online: <eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52022PC0143&qid=1649327162410>]
[23] Anna Gumbau, “EU to tackle ‘green claims’ with unified product lifecycle methodology” Euractiv (last updated 4 Feb 2022), online: < www.euractiv.com/section/circular-economy/news/eu-to-tackle-green-claims-with-unified-product-lifecycle-methodology/>
[24] Competition Bureau of Canada, “Calling it “organic”, “green” and “eco-friendly” isn’t enough, that’s greenwashing, and it’s against the law,” (23 Jan 2017), online: Competition Bureau <www.canada.ca/en/competition-bureau/news/2017/01/not-easy-being-green-businesses-must-back-up-their-words.html>.
