Canada’s New Greenwashing Rules - Challenges and Opportunities for ESG Reporting

Grady Semmens

Writer and Communications Consultant in Energy, Sustainability and ESG Reporting.

The Government of Canada’s new rules to crack down on greenwashing have sent many companies back to the drawing board when it comes to public reporting on their work to address climate change.

The legislation came into effect on June 20 as part of an omnibus package of economic policies known as Bill C-59. The package contained long-awaited tax credits for carbon capture and storage (CCS) development, sparking positive investment decisions for several new CCS projects over the summer. However, C-59 also included significant amendments to the Competition Act that require companies to more fully substantiate statements about their management of environmental and social issues – with a particular focus on claims related to climate change activity.

The regulations have introduced much uncertainty, and additional legal risk for how industries across the country can communicate their plans for cutting greenhouse gas emissions and reaching net-zero emissions by 2050.

High Stakes and Unclear Guidelines

The crux of the concern lies in the call for companies to use an ‘internationally recognized methodology’ to report on business interests such as their decarbonization efforts. The government failed to provide guidance for what methodologies meet this standard. At the same time, massive penalties (up to three per cent of a firm’s annual gross global revenues) were introduced for companies found to be making misleading claims. Also added to the mix was the ability for private citizens to lodge complaints with the Competition Bureau (starting June 20, 2025) and placing the onus on companies to prove their claims – effectively making defendants guilty of greenwashing until they can prove their information is valid.

Energy Sector Reacts Swiftly: Greenhushing Amid New Anti-Greenwashing Amendments

Response to the amendments by Canada’s energy sector was swift and dramatic. Almost immediately, the Pathways Alliance – a partnership of Canada’s largest oil sands producers that are pursuing one of the world’s largest CCS projects – gutted its website and its social media channels have gone quiet. Many energy, mining and other resource-based companies have followed suit, resulting in what some are now calling a ‘greenhushing’ that goes counter to years of admirable progress in corporate transparency and reporting on the management of environmental, social and governance (ESG) issues.

Canadian Companies Navigate Uncertainty Amid New Greenwashing Rules

The Competition Bureau gathered public feedback until September 27 on the new greenwashing provisions that it said will be used to provide further guidance for how the rules will be enforced. Hopefully the consultation will result in greater clarity on what methodologies for environmental reporting the government prefers, along with details on how the bureau’s complaints tribunal will determine which complaints are in the public interest to investigate.

In the meantime, Canadian companies are figuring out how to continue reporting on their ESG performance without placing themselves at undue risk of unwarranted and vexatious legal action. For example, in its latest corporate social responsibility report published earlier this month, Cenovus Energy chose to omit information on greenhouse gas emissions and other environmental subjects, while continuing to report on topics including workplace safety, engagement with Indigenous communities, and its progress on meeting equity, diversity and inclusion targets in its workforce.

“Given this uncertainty, we made the difficult decision to defer publication of information about our recent environmental performance and plans. I’d like to be very clear that this does not change our commitment to advancing our environmental work. We firmly stand by the actions we’re taking, the accuracy of our reporting and the information we’ve shared to date about our environmental performance. And, to the extent the Competition Bureau can provide clarity through specific guidance about how these changes to the Competition Act will be interpreted and applied, that will help guide our future communications about the environmental work we are doing,” Cenovus’ CEO Jon McKenzie states in his opening message to the report.

Preparing for Heightened Scrutiny in ESG Reporting

With anti-greenwashing regulations being adopted and/or strengthened in many countries, companies are advised to revisit their targets and performance metrics for key environmental issues to ensure they are realistic and are backed up by accurate and consistent data. Pending further guidance from the Competition Bureau, sustainability teams can examine their organizations’ climate plans and further develop reporting programs that align with international standards such as the Global Reporting Initiative, the Carbon Disclosure Project, the Sustainability Standards Accounting Board, and/or the International Sustainability Standards Board.

When it comes to climate change reporting, which is still a voluntary communications exercise in Canada, it is more important than ever for emissions reduction programs to be developed with clearly defined baselines, for lifecycle assessments to be conducted to ensure emissions sources are adequately identified, and for ongoing reporting of emissions data to be confirmed by third-party verification.

With heightened scrutiny on corporate disclosure in Canada and abroad, it is clear that ESG reporting is following the path of mandatory financial reporting requirements, becoming more prescriptive and material to a company’s value and reputation. As always, the firms that are able to successfully navigate these risks and challenges stand to outperform their competitors and realize the benefits of being considered leaders in long-term sustainability.

For a more in-depth analysis of the implications of Bill C-59 and Canada’s new greenwashing rules, be sure to check out Grady’s extended post on the Calgary Herald at the following link: Anti-Bill C-59: Canada’s new greenwashing rules could hinder climate action.