Bill C-59: Combating Greenwashing and Strengthening ESG Reporting

Bill C-59 represents a significant step in Canada’s ongoing effort to strengthen the Competition Act, focusing on combatting greenwashing. Greenwashing refers to the misleading practice of making false or exaggerated claims about a product or company’s environmental benefits. As the world increasingly demands environmental accountability from businesses, Bill C-59 holds companies to higher standards, especially in their environmental claims. The bill also intersects deeply with ESG reporting. However, the challenges associated with ESG reporting make compliance with Bill C-59 both a legal and operational challenge for businesses.

Here’s why this bill is important, the challenges it introduces, and its broader implications for ESG reporting.

Key Provisions of Bill C-59 and Its Impact on Businesses

1. Tackling Greenwashing Head-On: Bill C-59 addresses greenwashing by introducing provisions that place the onus on businesses to prove the accuracy of their environmental claims. Companies must ensure that their claims, whether about their products or business activities, are based on “adequate and proper testing” and internationally recognized methodologies. Failure to meet these standards could result in significant financial penalties, up to $15 million for repeat offenses, and damage to a company’s reputation.
2. Private Entities Can Now Initiate Legal Action: A notable aspect of the bill is the empowerment of private entities, such as environmental advocacy groups, to bring deceptive advertising cases directly to the Competition Tribunal, starting in 2025. This increases the exposure of businesses to litigation, making it more crucial than ever to ensure their environmental claims are well-documented and substantiated.
3. Heightened Reputational and Legal Risks: With consumers more focused on sustainability, businesses making false claims can suffer significant reputational damage, eroding trust and loyalty. Additionally, the risk of legal action from both regulators and private parties will lead businesses to adopt stricter internal controls over their environmental messaging.

The Interconnection with ESG Reporting

Bill C-59’s focus on greenwashing brings ESG reporting into sharper focus, as businesses are now required to ensure that their environmental, social, and governance disclosures are accurate and transparent. ESG reporting has become an essential tool for companies to showcase their sustainability efforts to stakeholders, including investors, regulators, and consumers. However, this process is not without its challenges:

1. Lack of Standardization: ESG reporting frameworks are numerous and varied, creating confusion for businesses about which aspects to report on. The absence of a unified standard for ESG metrics complicates the ability of companies to provide consistent and comparable data, leading to potential discrepancies in what they report versus what stakeholders expect.
2. Complex Data Collection and Management: ESG reporting covers a broad range of issues, including carbon emissions, diversity and inclusion, and corporate governance. The data required for comprehensive ESG reporting often comes from different departments, making data collection fragmented and inefficient. This issue is further compounded by the fact that many organizations lack centralized systems of record to manage this data, increasing the chances of inaccuracies and inconsistencies.
3. Verification and Transparency: The emphasis in Bill C-59 on substantiating environmental claims with proper testing creates a direct link to the challenge of data verification in ESG reporting. Businesses must ensure the reliability and accuracy of their ESG data to avoid being accused of greenwashing. However, manual data collection methods, data silos, and limited governance structures often undermine the quality of ESG reports, making third-party verification difficult.

Sector-Specific Challenges and Evolving Regulations

Different industries face varying degrees of scrutiny when it comes to ESG reporting and compliance with Bill C-59. High-impact sectors such as energy, mining, and forestry must provide detailed disclosures on their environmental impact, while sectors like finance are now required to assess climate-related risks within their investment portfolios. The evolving nature of ESG regulations further complicates matters. Businesses must continuously adapt to new standards while keeping pace with the growing demands for transparency from both regulators and stakeholders.

The Importance of Compliance and Long-Term Opportunities

While Bill C-59 presents challenges, it also offers opportunities for businesses willing to align themselves with the new standards. Companies that embrace transparency and authentic climate actions can enhance their market reputation, gaining consumer trust and a competitive edge. By focusing on accurate and comprehensive ESG reporting, businesses can differentiate themselves in a marketplace where sustainability is becoming a critical purchasing factor.

Moreover, companies that invest in improving their data collection and management systems for ESG reporting are better positioned to meet not only the requirements of Bill C-59 but also the broader trend toward environmental accountability. Integrating ESG data across departments and implementing robust governance frameworks will reduce the risk of legal and reputational harm, providing a foundation for long-term market success.

Bill C-59 is a landmark piece of legislation that signals Canada’s commitment to combatting greenwashing and promoting environmental transparency. For businesses, this bill represents both a challenge and an opportunity. While the risk of litigation, hefty fines, and reputational damage looms large, companies that take proactive steps to improve their ESG reporting processes and ensure compliance will benefit from increased consumer trust and long-term viability. As governments and consumers alike prioritize sustainability, businesses must rise to the challenge by ensuring that their environmental claims and actions are both genuine and substantiated.

Join our upcoming CANADA | Certified Sustainability Practitioner Program, Leadership Edition 2024, on Oct. 24-25 & 28, 2024 to gain the latest practical tools and resources required to be ready for the legal, operational, and reputational challenges that are coming.