Federal changes could reshape how firms back up climate claims and impact investor confidence
Canada’s federal government is set to roll back key greenwashing rules, a move that could reshape how financial and investment professionals assess corporate sustainability claims, according to recent budget announcements and legal analysis.
The government’s 2025 budget proposes to remove the requirement that business environmental claims be supported by “internationally recognized methodology” and to eliminate the ability for third parties, such as environmental groups, to challenge those claims directly at the Competition Tribunal.
The government said these provisions, introduced last year under Bill C-59, have “created investment uncertainty and had the opposite of the desired effect with some parties slowing or reversing efforts to protect the environment,” as reported by BNN Bloomberg.
Since the introduction of these rules, some major Canadian companies have withdrawn or revised their sustainability disclosures.
For example, the Pathways Alliance group of oilsands producers removed its social media and website content the day the law came into effect, and Royal Bank retired its $500bn sustainable finance commitment, citing changes in the Competition Act, according to CBC News back in July.
KPMG’s ESG law leader Conor Chell told BNN Bloomberg that, even a year after the law’s passage, organizations still struggled to substantiate their sustainability disclosures.
He said, “When you actually look at the disclosures, the sustainability disclosures, we were still observing quite a noticeable gap between what those disclosures were and organization's ability to actually back them up.”
Legal experts say the proposed amendments will maintain the prohibition against misleading or false environmental claims but may lower the bar for what constitutes adequate evidence.
According to law firm Gowling WLG, the government does not appear to be removing the requirement for “adequate testing,” while McMillan LLP cautions that the scope of the amendments remains unclear.
The business community has voiced concerns about the vagueness of the “internationally recognized methodology” standard.
Michael McCain, executive chair of Maple Leaf Foods, described the effect as “green hushing,” arguing that the rules discourage companies from promoting their environmental efforts due to legal uncertainty and a lack of credible standards for some sectors, such as agriculture and carbon offsets.
“This is a case of very good intentions in the underlying policy with a very grossly negative unintended consequence, which by definition makes it bad policy,” McCain told CBC News.
On the other hand, environmental groups and some legal scholars argue that robust standards are necessary to ensure credibility and a level playing field.
Emilia Belliveau of Environmental Defence said that holding companies to international methodologies prevents data manipulation and ensures rigour.
Matt Hulse of Ecojustice told CBC News that complaints from companies may signal the legislation is achieving its goal of curbing unsubstantiated claims.
He said, “They made ambitious claims around climate and environmental action and have been accused of not following through on those things.”
The Competition Bureau’s guidance, released in June, has not fully resolved the uncertainty.
According to BNN Bloomberg, University of Ottawa law professor Jennifer Quaid noted that it remains unclear whether the government will remove the entire rule on substantiating business claims or only the methodology requirement.
She emphasized that the details of the amendments will be critical.
Meanwhile, the government is also moving forward with broader climate finance initiatives, including a commitment to develop a Canadian taxonomy for sustainable investments by 2026 and to explore a sustainable bond framework, as reported by Responsible Investor.
These steps aim to align Canadian standards with international best practices and support the country’s net-zero ambitions.
