Canadian property and casualty insurance underwriters aren’t the only ones focused on preventing “greenwashing.”
Amendments to Canada’s Competition Act in July will force companies to be much more specific about how their products and services will affect the environment, Nick Noonan and Cole Southall of the law firm Fillmore Riley note in a blog for Mondaq.
“As consumer awareness of environmental and social issues has grown, so too has the focus on deceptive marketing practices, particularly “greenwashing” — where businesses exaggerate or falsely claim the environmental benefits of their products or services,” the authors write in a blog post published Monday. “The 2024 amendments reflect this trend, introducing stricter regulations around environmental representations.”
Directors’ and officers’ (D&O) insurance underwriters are already aware of the need for companies to be mindful about their environmental claims. Underwriters have been asking their business clients more pointed questions about marketing claims related to the environment, noting an increase in shareholders’ lawsuits against board directors for exaggerated claims. The concern is that companies are trying to attract eco-friendly consumers by making spurious or unproven claims.
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Now boards need to be even more careful, because Canada’s Competition Law has now been changed to require support for these claims.
“Before the 2024 amendments, the [Competition] Act already prohibited misleading advertising and deceptive marketing, but the rules around greenwashing were relatively vague,” Noonan and Southall write. “Businesses were required to ensure their claims were truthful, but the specifics of what constituted ‘misleading’ or ‘deceptive’ in the context of environmental benefits were not clearly defined…
“Under the updated rules, businesses must substantiate any claims about the environmental benefits of their products or practices with clear, verifiable evidence.”
For example, if companies are making claims about the environmental benefit of a product, they must show their assertions are based on adequate and proper testing. And claims about the environmental benefits of a business or business activity will now require “proper substantiation in accordance with an internationally recognized methodology,” the authors add.
The Competition Bureau has started public consultations to guide businesses on how to properly substantiate environmental claims.
The amendments bring Canada more into line with international trends in combating misleading environmental marketing practices, the authors note.
Greenwashing and environment-related liability claims are increasingly appearing in courts these days.
Earlier this year, young Canadians won a case against the federal government this year in federal court, which allowed a Charter lawsuit to proceed based on allegations that the Canadian government failed to meet its climate change emissions targets in the Paris Agreement. The youth say this has disadvantaged them particularly, because the failure to meet these targets affects their futures disproportionally.
The courts have not dealt with the merits of the case. But a victory by youth in the courts could increase boards’ exposure to lawsuits if their businesses fail to meet greenhouse gas emissions targets.
Feature image courtesy of iStock.com/Tanaonte
