Over the past year, certain industries have been crying wolf to federal Competition Act changes that strengthen the rules against false green advertising. The June 2024 changes require companies have some proof before making public claims that their products or business benefits the environment or climate.
Not surprisingly, fossil fuel companies – Canada’s most polluting industry – have been the most vocal. Just days before the changes were made, the oil sands lobby group, Pathways Alliance scrubbed their entire website of their climate commitments citing the new anti-greenwashing rules.
Now, we are seeing a similar reaction creep into the banking industry — with the Royal Bank of Canada (RBC) retiring its $500 billion sustainable finance commitment and not disclosing certain sustainability information, while also blaming the anti-greenwashing rules. Of note, started by public complaints, both Pathways Alliance and RBC were under investigation for greenwashing about their supposed climate action before the new anti-greenwashing rules.
In our opinion, the strong reaction does not indicate a problem with the anti-greenwashing rules, rather it shows the rules may be doing exactly as intended: weeding out false, unproven, or exaggerated claims.
What is greenwashing? And what are these laws?
Greenwashing is false, misleading, or unsupported statements about the environmental benefits of a product or business.
By building a false public image, greenwashing dupes consumers, fools policy-makers, pushes out green competitors, and makes progress towards our environmental goals even more difficult.
Unfortunately, greenwashing has been rampant in Canada. While pre-existing false advertising laws in the Competition Act applied to green claims too — these general laws were not deterring greenwashing.
Last summer, Parliament made changes requiring companies to have (but not publicly disclose) some proof before making claims that their business or products are benefiting the environment or helping to address climate change. For product claims, the new rules require “adequate and proper testing”. The loudest outcries however, have been about the requirement that green business claims be backed up by “adequate and proper substantiation in accordance with internationally recognized methodology” (Competition Act, sections 74.01(1)(b.1) and 74.01(1)(b.2)).
Mandating evidence-based green claims makes sense. It supports truth-in-advertising and requires a careful approach to multiple environmental crisis, like climate change and biodiversity loss.
So, what just happened with RBC and its green claims?
In its Sustainability Report 2024, published April 29, 2025, RBC scrapped its commitment to provide $500 billion in sustainable finance by 2025, saying that:
- In reviewing its methodology, RBC “concluded that it may not have appropriately measured” some of its sustainable finance activities “on a cumulative basis”; and
- The new anti-greenwashing laws now require substantiation of business claims.
Together, those developments led RBC to retire its $500 billion commitment, stop using its in-house “sustainable finance” methodology, and reconsider its overall approach to sustainable finance.
RBC announced a sustainable finance commitment in 2019, then in 2021 it set the $500 billion commitment. The commitment was a key pillar of its climate plan, that it claimed supported the goals of the Paris Agreement, an international climate change treaty.
However, RBC’s actions did not appear to align with the Paris Agreement goals. In 2022, Ecojustice filed a complaint under the Competition Act on behalf of six people alleging that RBC’s claims of ambitious climate action were actually greenwashing, used to attract and retain customers who wanted their bank to be doing some good in the world. The complaint argued that RBC’s claims are false and misleading because it is one of the largest private funders of fossil fuels in the world and some of its “sustainable finance” was actually going to fossil fuel companies, like Enbridge. This complaint is still under investigation by the Competition Bureau. In January 2024, a securities complaint was also brought by the group Investors for Paris compliance against RBC on its sustainable finance claims.
RBC also says that the anti-greenwashing rules are why it cannot disclose its energy supply ratio (i.e., its financing of low-carbon/renewable energy compared to fossil fuel energy) or low-carbon energy lending. RBC’s sustainability report says that “given the nascent nature of climate-related metrics, there are limited and evolving recognized methodologies for claims in these areas”.
This didn’t seem to stop Desjardins, who recently published its energy supply ratio based on methodology used by Bloomberg New Energy Finance (BloombergNEF). However, under that methodology RBC does not fare well, as in January, BloombergNEF calculated that RBC had the lowest energy-supply ratio of the 10 largest energy financers in the world.
I’ve heard the term greenhushing, is this greenhushing?
In our opinion, no.
“Greenhushing” is when a company does not talk about its true and proven environmental actions for fear of backlash — not when its claims are untrue or not proven.
Greenhushing is part of a broader narrative in Canada — largely perpetuated by fossil fuel companies and others — that the anti-greenwashing laws restricts freedom of speech and is preventing businesses from taking action to address climate change and talk about the environmental benefits of their business.
The anti-greenwashing rules do not stop companies from taking any environmental action and do not stop business claims that can be adequately and properly substantiate based on an internationally recognized methodology.
Can you explain what an “internationally recognized methodology” is?
An “internationally recognized methodology” (IRM) is part of a new requirement in the amended Competition Act. It requires companies making environmental claims about their business (not their products) to develop proof to support these claims using procedures that are also recognized elsewhere in the world.
Therefore, an IRM helps increase the comparability of businesses green claims, and as the Honourable Lucie Moncion stated:
“This approach will enable us to stay on the cutting edge of best practices and remain responsive to the progress achieved elsewhere. Ultimately, this plays a vital role in our ability to remain competitive on the global market and ensure a prosperous future for Canada.”
While we are still awaiting the final version, the Competition Bureau’s draft guidelines on green claims shows a broad and permissive approach on IRM, explaining that:
- Substantiation: is established by proof or competent evidence but does not necessarily involve testing.
- Methodology: a procedure used to determine something. While it must be suitable, it does not have to be the best methodology available, nor have third party verification.
- Internationally recognized: means recognized in two or more countries, but not necessarily by the governments of those countries.
This broad approach may mean that United Nations standards, the scientific method, or even general accounting standards could be appropriate IRMs depending on the specific business and claim sought to be made. General accounting standards and the scientific method may be particularly appropriate for any truly novel green business claims (i.e. where there isn’t already an IRM available).
The Bureau also says in the draft guidelines that its focus is on marketing and promotional representations, rather than representations made exclusively to investors and shareholders in securities filings.
The Bureau’s guidelines, even when finalized, are not law; but would be expected to be considered by courts and the Competition Tribunal.
What if a company isn’t confident in the methodology for their green claim?
If, after deciding on a methodology, a company feels it could benefit from some assurance on the IRM requirement, it can apply for a written opinion on its specific environmental benefit claim. Section 124.1 of the Competition Act allows any person to apply to the Commissioner of Competition for a written opinion on conduct they are proposing to engage in. The Bureau advises that such opinions take 4 to 8 weeks and have an associated fee of $5,000.
Companies can also take some comfort in the guardrails in the Competition Act, including that a person can only bring a greenwashing complaint to the Competition Tribunal if it is in the public interest to do so. Further, the Act has a due diligence defence that protects against administrative penalties, restitution or corrective notices for companies who have taken appropriate steps to try to follow the rules.
Now what?
Aside from final guidelines — hopefully ones with more rigour, examples and substance – we must keep the anti-greenwashing rules and make sure we don’t backslide.
With the United States going in the direction of climate catastrophe, more than ever we need to pull together in the opposite direction.
As we can see from RBC’s backtracking on its commitments, leaving climate action to voluntary initiatives is insufficient.
Implementing climate-aligned financial laws is the way forward. The federal government must establish a regime so the financial industry remains strong in the face of climate change, pulls its weight in reducing emissions, and helps the transition to a low-carbon economy. Prime Minister Mark Carney is a former banker who warned of the climate tragedy on the horizon, and Ecojustice will be urging him to pass climate-aligned finance laws as soon as possible.
