Anti-Greenwashing Regulations Emerge in Canada and the EU

Below is an excerpt from ISS-Corporate’s recently released article “Anti-Greenwashing Regulations Emerge in Canada and the EU”. The full article is available on the ISS-Corporate online library.

Regulatory Developments 

In recent months, Canada and the European Union have forged ahead in passing new legislation aimed at reducing false or misleading environmental claims, a practice commonly referred to as greenwashing. Anti-greenwashing regulations aim to fundamentally improve: 

• Increased consumer trust: By establishing clear and standardized guidelines and requiring companies to provide evidence for their environmental claims, consumers are empowered in purchasing a company’s product or service. 

• Supporting the Green Transition: Promoting transparency and accountability in environmental claims encourages companies to make genuine progress in environmental performance. 

• Standardizing claims: Defining and standardizing the methodologies for how companies make credible environmental claims allow for a consistent and fair evaluation for all companies. 

Canada’s Bill C-59 

Canada’s Bill C-59,¹ passed in June 2024, amends the Competition Act, introducing new requirements for companies making environmental claims about activities, products, or about the entity itself. 

When making an environmental claim, corporate entities must ensure the claim is substantiated in accordance with “internationally recognized methodology.” In response to stakeholder concerns about the lack of clear definitions and criteria, the Competition Bureau of Canada, which enforces the Competition Act, has launched a public consultation to gather market feedback. The public consultation period is expected to conclude on September 27, 2024, with the results informing the development of future implementation guidance. 

The amendments include provisions related to the burden of proof. When enforcing allegations of false environmental claims, corporate entities will bear the burden of proof in demonstrating any claims made are properly substantiated. 

EU Green Claims Directive  

The European Green Deal, passed in 2020, introduced commitments to address false environmental claims. The proposed EU Green Claims Directive (GCD)² expands on the commitments by setting requirements for environmental claims or labels to follow specific criteria on how to make such claims, along with independent audit requirements. 

The GCD targets explicit claims related to the environmental impacts or performance of a company’s product or the company itself. Under the GCD, such claims must be substantiated, clear and accurate, based on scientific evidence, third-party accredited, relevant, and consistent with other EU labeling regulations. 

The proposed directive includes considerations for assisting SMEs including measures to ensure awareness of requirements, financial support or access to financing, training, and technical assistance. 

With the proposed directive published in March 2023, the EU Council expects to work with the European Parliament to finalize the directive when the next legislative cycle begins in late 2024. Member States will then have 18 months to transpose the directive into national law, with a prospective enactment date set to early 2026.  

READ THE FULL ARTICLE >