ARTICLE
20 October 2025

Greenwashing – Out With The Old, In With The New

ML
McMillan LLP

Contributor

McMillan is a leading business law firm serving public, private and not-for-profit clients across key industries in Canada, the United States and internationally. With recognized expertise and acknowledged leadership in major business sectors, we provide solutions-oriented legal advice through our offices in Vancouver, Calgary, Toronto, Ottawa and Montréal. Our firm values – respect, teamwork, commitment, client service and professional excellence – are at the heart of McMillan’s commitment to serve our clients, our local communities and the legal profession.
Walk into almost any store and you'll be greeted by products promising eco-friendliness, low emissions, and carbon neutrality. The imagery is soothing—leaves, rivers, and bright green logos all signalling...
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A new perspective on greenwashing risk and opportunity

The Green Label Dilemma

Walk into almost any store and you'll be greeted by products promising eco-friendliness, low emissions, and carbon neutrality. The imagery is soothing—leaves, rivers, and bright green logos all signalling, "You're making a better choice." But are you? That's the question regulators, investors, and consumers are asking. And increasingly, the answer is not always.

Green claims of various types are not new. Businesses have been making them for years with various degrees of veracity and accountability. Historically, regulators and stakeholders have been only mildly interested. Forward-thinking companies devoted resources to ensuring that their green claims had some basis. Others regarded the exercise as primarily a marketing one and treated it accordingly.

But things have changed because the demands of the market have changed. Making green claims, and showing yourself to be green, in time went from being just clever marketing to being a hallmark of responsible business. Not surprisingly, the scrutiny given to such claims also changed. Alongside it came new terminology.

Greenwashing – the act of overstating or misrepresenting environmental benefits – is today much more than a marketing misstep. Greenwashing across most advanced countries attracts serious scrutiny and can have serious consequences. It not only misleads consumers but it also distorts markets. When false claims about the green attributes or characteristics of a product or service flood the market they penalize those who genuinely invest in making themselves and their products or services sustainable. In this way, companies compete not on performance but against illusion. The result is confusion for consumers and disincentive for innovation. Over time, this erodes the credibility of sustainability itself – a cost that reaches far beyond marketing.

As greenwashing increasingly creates material reputational, legal, and financial risk for companies, and as regulatory and others scrutiny intensifies, the era of vague, easy and feel-good sustainability messaging is coming to an end. A new approach is needed.

Trust and Transparency

Trust is the currency of the modern economy. However, recent surveys suggest it is in short supply when it comes to corporate sustainability. Over 57% of Canadians say they no longer believe environmental claims made by businesses. Globally, there has been a surge in ESG-related litigation, particularly in the U.S. and the EU where consumers, investors, activists and regulators have begun to actively challenge unsupported or misleading environmental claims. Even organizations that promote environmental certifications such as B Corp have been hit with accusations of greenwashing.

This breakdown in trust reflects deeper issues within the sustainability landscape. Businesses are operating under increasing pressure to signal their environmental and social commitments. But many lack the systems, data, and internal governance required to deliver on those promises in a credible way.

The Legal Exposure Is Growing

At the same time, regulators everywhere are taking notice. In Canada, the Competition Bureau has made it clear that environmental claims must be based on "adequate and proper" testing and documentation. In the EU, proposed Green Claims legislation would prohibit generic or unverifiable environmental marketing. The U.S. Federal Trade Commission is reviewing its Green Guides to tighten the rules around environmental advertising.

Securities regulators, meanwhile, are pushing companies toward detailed climate-related disclosures and alignment with global frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB). In this regard, Canadian regulators haven't stood still. The Canadian Securities Administrators (CSA) and the Office of the Superintendent of Financial Institutions (OSFI) have issued guidance on climate-related disclosures and ESG risk management. Companies that fall short may find themselves out of step with capital markets and institutional investors.

While the regulatory landscape continues to evolve, the legal risks associated with greenwashing are already here. We have seen a notable uptick in sustainability-related lawsuits, particularly in the U.S., where claims of misleading investors and consumers are now being actively pursued by regulators and class-action law firms. We have also seen house-hold name companies in Canada and globally quietly and not so quietly "retire" various claims regarding sustainability out of fear of becoming the target of an accusation of greenwashing (and obviously also out of a concern that if push comes to shove they would be unable to adequately back up their claims).

Boards of directors are also coming under increasing pressure to ensure that corporate disclosures are accurate and defensible. In several jurisdictions, failure to exercise adequate oversight of sustainability risks may amount to a breach of fiduciary duty.

As the legal risk increases, so too does the cost of failing to get this right. Companies are not only at risk of regulatory action; they also face reputational backlash, investor flight, customer churn, and talent loss. All of this makes it clear that it is in the best interest of every business that the sustainability credibility gap be closed.

The Legal and Forensic Imperative

This is where law and forensics come together. Legal guidance can help companies understand the evolving standards and liabilities around sustainability and ESG disclosures and marketing. Forensic tools, in turn, provide the evidence companies need to meet and verify those standards.

The lawyers advise on regulatory compliance, litigation risk, disclosure obligations, and governance structures. The forensic accountants dig into the numbers and operational realities to help verify sustainability and green claims, uncover risks, and build a foundation for credible sustainability practices including reporting. This offers a dual-track process designed to help organizations reduce greenwashing exposure, build defensive strategies and provide a solid basis for their future sustainability claims.

Phase One: Review of Green Claims

In many organizations, environmental claims had their origin before there was a clear framework or methodology in place to support them. These legacy statements, while often well-intentioned, may now pose a serious liability if still in use.

A review of legacy claims can include:

  • Claim verification: Comparing past or existing green claims to internal records such as procurement data, supply chain documentation, operational outputs, and product specifications.
  • Gap analysis: Identifying where inconsistencies or unsupported assertions may be exposing the organization to regulatory or reputational risk.
  • Forensic substantiation: Preparing clear, defensible documentation that either supports the basis of these claims or explains their limitations.
  • Litigation readiness: Ensuring that if questions arise—from regulators, investors, lenders or plaintiffs—the company is in a position to respond with data, transparency, and a viable legal defence.

This type of review can help companies better assess and improve their public carbon footprint, correct historical practices and the record where necessary, and take proactive steps to mitigate and manage this risk. It is not about pointing fingers—it's about identifying risk and helping companies prepare defensible positions should regulators, investors, shareholders, activist groups or class action plaintiffs come knocking.

Phase Two: Roadmap to Real Greenness

Once the historical risk is understood and addressed, companies need to look forward. A credible sustainability strategy must be built on measurable outcomes, robust controls, and transparent reporting. This is where the rubber meets the road.

We assist clients in designing and implementing:

  • Baseline environmental metrics: Establishing a starting point for performance measurement.
  • Internal controls and reporting processes: Ensuring that all future environmental claims can be verified through reliable and consistent data collection and integration.
  • Disclosure best practices: Advising on sustainability communications that meet regulatory requirements as well as stakeholder expectations.
  • Third-party assurance: Assisting with certification, verification, and independent review of sustainability data and claims.
  • Governance structures: Strengthening the internal policies, roles, and responsibilities that support effective sustainability risk management at all levels of a corporation.

A Solution That Also Creates Value

Put together, the result of the two phases is a tailor-made system that not only helps entities risk-manage and support compliance but one that also strengthens credibility in the marketplace. Third party verification has a place but having your own purpose-built system will make it less likely that you will face legal and other challenges and if you do, you will be in a better position to resist them. More importantly, having such a system will in time make it more likely that you will be rewarded with investor confidence, customer loyalty, and marketplace leadership.

At the core of both phases lies data. Gone are the days when high-level pledges and anecdotal evidence were enough. Today, stakeholders expect companies to provide:

  • Quantifiable emissions reductions;
  • Supply chain transparency;
  • Product lifecycle analysis;
  • Waste and water usage data; and
  • Renewable energy procurement details.

All on a continuous, real-time and verifiable basis. This can only be done through data.

From sourcing raw materials to end-of-life product impacts, every aspect of the business would be monitored, measured, and managed. This involves robust data systems and analytical tools capable of capturing environmental performance in real-time, a comprehensive system of real-time sustainability intelligence.

With this in place, you transform sustainability from an external reporting obligation to an internal operating advantage, enabling you among other things to identify inefficiencies, reduce energy costs, lower waste and enhance supply chain resilience. When data is integrated into core business systems in this way, it becomes a driver of value creation.

A Leadership Opportunity

Greenwashing concerns offer thus much more than a challenge; they offer a leadership opportunity open to any business in any sector. Companies that build their sustainability strategy on verifiable data and sound management frameworks will become trusted leaders in their industry.

The benefits of getting sustainability right are significant:

  • Enhanced brand trust and reputation;
  • Access to capital and favourable financing;
  • Stronger stakeholder relationships;
  • Competitive differentiation; and
  • Improved operational efficiency and innovation.

But this trust must be earned. The age of unverified environmental claims is over. Today, it is all about transparency, accountability, and verifiable results.

If your organization—or your clients—are facing sustainability pressures or looking to take a more defensible and credible approach to sustainability, we can help. Together, McMillan LLP and Forensic Restitution offer a unique combination of legal expertise and forensic capability designed to:

  • Uncover and address sustainability-related risks;
  • Support credible sustainability strategies; and
  • Help organizations thrive in a trust-based, sustainability-driven economy.

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

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