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Turning the tide on greenwashing

It shouldn't be solely on the public to root out misleading claims about companies' climate efforts.

Greenwashing concept

When it comes to greenwashing claims in Canada, holding companies to account is much like a game of Whac-A-Mole. 

If someone says something you think is false, you have to go after them with your mallet, file a complaint with the Competition Bureau, and then wait. 

“Consumers have to take a lot of time to go after the greenwashers one by one. It took us six months to put together this complaint,” says Matt Hulse, a lawyer with Ecojustice whose clients filed a complaint with the Bureau alleging that the Royal Bank is making misleading claims about its climate efforts while financing fossil fuel development. The Bureau recently launched an investigation, a process that can potentially take a year or two. 

“That’s not exactly a very speedy process. And it’s certainly not a comprehensive process to address what is becoming a systemic issue of greenwashing across industries like banking and more broadly.”

He says the current approach may have some productive outputs in terms of changing the behaviour of some consumers and making an example of a company that influences other members of an industry, but “ultimately, it’s too slow for the urgency of climate change.”

“What’s necessary is broader reform,” Hulse says. 

That’s exactly what a new report from the Centre québécois du droit de l’environnement (CQDE) released late last month calls for.

Entitled “Climate-washing: How to Turn the Tide,” the report looked at how the legal and regulatory framework can be improved and strengthened to create a more systematic approach to greenwashing and climate-washing complaints. 

The reality is more and more companies are making climate commitments and offering so-called carbon neutral products to meet consumer and investor demands, says Julien Beaulieu, the competition lawyer who authored the report. Those claims aren’t always based on real greenhouse gas reductions, and that can distort decisions by consumers and other stakeholders. 

As the federal watchdog, the Bureau is responsible for protecting consumers in Canada from companies’ misleading and false statements. Under the Competition Act, it can fine those who are in breach of their claims. 

But currently, the onus is on consumers to identify greenwashed claims and file complaints. The Bureau doesn’t seek them out. 

In the climate realm, “there’s been a lot of focus on ESG and financial disclosures, but I think consumer protections have been a bit under the radar,” Beaulieu says.

“If you look at (the Bureau’s) annual plans or strategic plans, it’s not mentioned. It’s not a priority. They’re taking complaints as they come. They’re really reactive instead of being proactive.”

The report calls for policymakers to make greenwashing and climate-washing a top enforcement priority. As part of that, Beaulieu says the Bureau needs a dedicated team with climate expertise.

“Our point is that climate-related claims are special because they’re really technical. And even if it seems simple, like saying something is carbon neutral, if you dig a bit deeper, it’s super technical, there are a lot of criteria, and it can mean a lot of things,” Beaulieu says. 

“We think we need experts who can understand what these claims mean.”

This team also needs to actively monitor claims made in the marketplace. Beaulieu says the onus should not rest solely on the public to root this out. What’s more, companies making claims aren’t required to publicly disclose how they substantiate them, despite it being a requirement under section 74.01(b) of the Act.

“I can’t even know how a firm came to a particular conclusion, which is an additional roadblock,” Beaulieu says. “Every time you make a climate-related claim, you should be disclosing to the public how you came to that conclusion.”

That kind of disclosure is one of the principles the report sets out as the foundation of an effective legal framework. 

As part of that, it calls for published disclosure guidelines dedicated to climate-related claims. France is out front on this, having recently updated its Environmental Code to impose disclosure requirements on advertisers making carbon neutrality claims. 

Under the new rules, as soon as a company makes such a claim, they must publicly disclose information to consumers, whether it’s through a QR code or a link on the packaging. This includes everything from their greenhouse gas emissions, calculating them, and describing the carbon offset mechanisms used.

“Everything that must be disclosed is set out in the code,” Beaulieu says. ”It’s clear what a firm has to say and how it should say it. That’s a big step forward.”

Ultimately, a standardized information display, like nutritional information on food packaging, would be ideal and extend beyond the financial sector to cover both product-level and organization-level climate-related claims.

Getting there will require consistent standards and clear definitions and underlying methodologies in the legal framework that speak the same language as financial disclosure regulations. Companies currently contend with a host of standards as a new wave of ESG reporting requirements comes to Canada and the United States.

Beaulieu says contending with different reporting standards isn’t ideal.

“It’s super confusing to know what to apply, what to disclose, and when. There needs to be more consistency and consumer protection should be included in that.”

Hulse says clear definitions would be great, though admittedly even that can get complicated and political, as was the case with Europe’s efforts to create a green taxonomy

“In some respects, the Competition Act has the teeth to already oversee greenwashing. What is lacking, I think, is a standard that we all agree on in Canada, that the government can set to define things like net zero targets and what it means to be carbon neutral.”

Beaulieu thinks there is an appetite for change and reform. He points to the Net Zero Challenge the federal government recently launched to incentivize companies to make climate commitments. Although voluntary, the goal is to put plans in place to transition facilities and operations to net-zero emissions by 2050. The program includes a technical guide, which sets out the minimum requirements companies must meet to join the initiative. 

As for the Bureau, it’s also shown it is willing to act on greenwashing. Earlier this year, it fined Keurig $3 million over misleading claims its coffee pods were recyclable. That complaint was brought by Ecojustice and the University of Victoria Environmental Law Clinic.

Asked if there are plans to create a dedicated team to proactively seek out greenwashing claims or enhance the legal/regulatory framework, a spokesperson for Innovation, Science and Economic Development Canada, which oversees the Bureau, pointed to amendments made in June to improve the effectiveness of the Act, including increasing fines and penalties. 

There’s a guide on false or misleading environmental ads online, and recently the Bureau held a Competition and Green Growth Summit where the public was encouraged to report suspected greenwashed claims. The Bureau also got a budgetary bump in Budget 2021, which may bring about reform.

 “A more comprehensive review of the Act will be considering broader changes so it remains fit for purpose in a modern and evolving economy, including with regard to the Act’s deceptive marketing provisions,” the department said.

Beaulieu says that’s good news for consumers and companies, especially those working to do right by the planet with their products and services.

“If nobody can distinguish who’s a real climate leader from a greenwasher, then consumers will be skeptical about what they’re being told,” he says. 

“That prevents good firms from making progress when offering green products. So, in the end, everybody loses.”