The European Union (EU) has taken significant steps to protect consumers from misleading advertising by banning certain words that promote products as environmentally friendly without sufficient evidence. Words like "eco-friendly" or "green" can influence purchasing decisions based on consumers' expectations, making unsubstantiated claims a form of misleading advertising.
Why should this matter to Canadian retailers?
Historical trends show that regulatory actions in European markets often influence North American markets, particularly regarding climate change and sustainability. The EU has been a leader in adopting regulatory measures, such as the historic Paris Agreement in 2015, which aimed to limit global warming to below 2°C above pre-industrial levels. Since then, the EU has introduced initiatives such as the European Green Deal, which aims for carbon neutrality by 2050, and the EU Circular Economy Action Plan, focused on reducing waste.
In 2019, Canada committed to achieving net-zero emissions by 2050, introduced a national carbon pricing system in 2021, and pledged to meet the UN's 17 Sustainable Development Goals by 2030. Given these parallel actions, it’s unsurprising that similar legislation to curb misleading environmental claims has followed in Canada.
What specific claims are being banned in the EU?
The new EU regulations prohibit:
Generic environmental claims on products without proof;
Claims about neutrality, reduced environmental impact, or offsetting emissions without evidence;
Sustainability certifications not approved by recognized regulatory bodies or authorities.
Additionally, the regulations restrict claims about product durability. Companies can no longer advertise products as repairable unless they actually are, or make unsubstantiated durability claims. Most importantly, products with design features that may shorten their lifespan can no longer be marketed as sustainable. EU countries must adapt to these new rules by January 2026.
Canada's Response
In line with global efforts to tackle greenwashing, Canada introduced similar legislative developments. In June 2024, Bill C-59 amended the Competition Act to specifically address deceptive environmental claims. The law now requires that any environmental benefit claims be substantiated with appropriate evidence, and places the burden of proof on the party making the claim. Starting in mid-2025, private individuals, activists, and advocacy groups can directly challenge deceptive advertising claims before the Competition Tribunal.
This increases the risks for companies making unverified claims about their products' environmental benefits, as anyone can challenge these claims in the public interest. Responding to such challenges can lead to financial and reputational damage for the company.
To prove a violation of the Competition Act, the Commissioner only needs to establish the likelihood of misleading conduct, not necessarily that anyone was deceived. The advertisement will be assessed based on the general impression they create and its literal meaning.
Consequences for a Violation of the Act include:
An Order to cease the misleading advertising;
A monetary penalty of up to $10,000,000, with an additional $15,000,000 for any subsequent violations if not remedied;
A penalty of up to three times the benefit derived from the deceptive conduct, or, if that is not possible, 3% of the corporation's annual worldwide gross revenues.
There is also the option to enter a consent agreement with the Commissioner to cease the deceptive conduct, issue a corrective notice, and pay an administrative penalty.
The Lululemon Example
A notable case of greenwashing under investigation in Canada involves fashion retailer Lululemon. The company is facing a complaint filed with the Competition Bureau regarding its "Be Planet" campaign, which highlights the use of recycled fabrics and promises to reduce greenhouse gas emissions. However, advocacy group Stand.earth, which filed the complaint, pointed to Lululemon’s own Impact Report, revealing that the company’s emissions have actually doubled since 2020, contradicting its claims in its advertising.
The investigation is ongoing, and a decision is yet to be made. A settlement, similar to the one made with Keurig, which agreed to pay $1.5 million in penalties over misleading claims about the recyclability of its K-Cup beverage pods, is a possibility.
Takeaway
Consumers are increasingly more aware of greenwashing and unsubstantiated claims. The changes in Canadian and EU laws empower individual consumers to hold companies accountable for violating laws against greenwashing.
To avoid reputational loss and financial penalties and fees, marketing teams should familiarize themselves with legislation in both jurisdictions and adjust their strategies accordingly.
Aligning advertising practices with Canadian amendments and the EU guidelines can help businesses reduce the risk of litigation, investigation, and reputational damage.
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