Greenwashing Update – Federal Budget And The Government Climate Competitiveness Strategy

On November 5, 2025, as part of the Federal Budget 2025, the Federal government announced a significant change to the greenwashing provisions in the Competition Act, to "support investment certainty and the adoption of energy efficient goods" as part of the government's Climate Competitive Strategy.

Background – the Greenwashing Provisions

Recall that Bill C-59,¹ which received Royal Assent on June 20, 2024, introduced the greenwashing provisions under the Competition Act, which:

1. expanded the general misleading representation provisions to specifically require that all environmental claims in respect of a product or business be substantiated, including requiring businesses comply with a "internationally recognised methodology", and
2. provided a right of private of action to third parties, to file applications with the Competition Tribunal (with leave) to challenge environmental claims.

Many businesses – including in particular those in the energy industry that had been subject to challenges by environmental NGOs – responded to the new greenwashing provisions by withdrawing or limiting their environmental disclosure. While some argue that compliance with the greenwashing provisions is relatively straightforward and that the reduced disclosure by businesses is evidence that the new greenwashing provisions were effective in combatting misleading environmental claims, this position ignores the issues and risks facing businesses seeking to be transparent about their environmental actions and goals arising from the greenwashing provisions, i.e., businesses arguably did not have the tools to comply with the new greenwashing provisions. Concerns include:

• the challenges to comply with the new greenwashing provisions, in part due to
• • the breadth and uncertainty of the language of the provisions, including using terminology that did not have a defined meaning (such as requiring businesses comply with an "internationally recognised methodology"); and
  • the potential conflicts with provincial and federal legislation;
• the provisions require a business to conduct substantiation prior to making any disclosure – it is not a defence that the environmental claim is truthful and not misleading;
• the provisions arguably apply to all disclosure (including government submissions) that may become public, not traditional 'marketing' focused on consumers;
• the introduction of the new right of private enforcement, meaning any third party (including competitors or environmental NGOs) may initiate a challenge of any environmental claim;
• the absence of any transition period, meaning all disclosure existing when the provisions came into effect on June 20, 2024 was immediately subject to the new substantiation provisions; and
• the significant penalties associated with failure to comply – up to 3% of worldwide revenues of the business.

In June 2025, following a comprehensive public consultation process, with more than 400 submissions, the Competition Bureau issued final enforcement guidelines², which provide a practical approach to the interpretation of the new greenwashing provisions focussed on claims made for the purpose of marketing and promotion.

Notwithstanding the issuance of the Guidelines, the risks continued to apply, given in part due to the breadth of the provisions, and also that the Guidelines are not binding on the Bureau, the Competition Tribunal or the courts, and cannot restrict private parties seeking to take action against businesses under the greenwashing provisions.

Budget 2025 – Greenwashing Provisions and the Climate Competitiveness Strategy

The proposed amendments are part of the government's Climate Competitiveness Strategy to help "drive investment needed to build an affordable net-zero future in which Canadian businesses are well-positioned to compete and succeed in the global economy", which is a key element of the government's plan for Canada to become the strongest economy in the G7.

As part of this strategy, Budget 2025 proposes to update the Competition Act to respond to the uncertainty arising from the greenwashing provisions by:

1. removing the requirement for businesses to substantiate their environmental benefit claims based on internationally recognised methodology standards, thus arguably eliminating a requirement that many businesses felt was difficult if not impossible to comply with, and
2. removing the ability for third parties to bring cases directly to the Competition Tribunal for greenwashing complaints, thus reinserting the Competition Bureau as the "gatekeeper" to challenge misleading environmental claims.

What is the law, now?

At this time, we do not have insight into the scope of the proposed amendments or when these amendments will become effective. The 'green' provisions remain the law for the moment, along with the right of private enforcement. It is possible that the amendments will be retroactive such that violations of the repealed provisions that occurred during their (short) life will not create liability. The precise wording of the amendment/repeal will determine how the transition will occur, and how the remaining provisions will operate. However, the Competition Act will continue to require businesses make environmental claims that are not misleading or false and are supported (i.e., substantiated).

Until these amendments become effective, businesses continue to be required to comply with the current greenwashing provisions, especially in light of the fact that third parties continue to be able to file applications challenging environmental claims directly with the Competition Tribunal.

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We look forward to the proposed legislation to better understand the likely impact on businesses and we will provide updates as they develop.

Footnotes

1. See Bill C-59 – Fall Economic Statement Implementation Act, 2023.

2. See "Environmental claims and the Competition Act".

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2025