CPA Canada on anti-greenwashing provisions in Competition Act

With new anti-greenwashing amendments now enshrined in the Competition Act, CPA Canada has issued vital recommendations to support the successful implementation of these measures in response to the Competition Bureau’s public consultation on its upcoming enforcement guidance.  

The amendments include adding two paragraphs that require companies be able to substantiate environmental claims made to promote a product or business interest. While the new provisions are only a few short paragraphs, their impact cannot be underestimated – they are broad, affecting a range of companies and communications. In particular, they require that:  

1. claims about the environmental benefits of a product be supported by adequate and proper testing; and 
2. claims about the environmental benefits of a business or business activity be based on adequate and proper substantiation in accordance with an internationally recognized methodology 

There is also a reverse onus placed on businesses to prove the claims they make; and there are significant penalties for non-compliance. 

Read More 

CPA Canada submissions on ESG-related standards setting and regulatory proposals 

CPA Canada Panel Discussion: Shades of Green: A look at Canada's anti-greenwashing landscape  

International Sustainability Standards Board (ISSB): Resources and guidance 

Sustainability reporting updates

Sustainability assurance resources 

Given the significant impact on Canadian companies, CPA Canada weighed in. 

“It is vital that Canadian companies take these new measures seriously,” says Taryn Abate, CPA Canada’s director of research and thought leadership. “The penalties involved are steep, and the provisions are in some cases vague and unclear. That’s why we issued our recommendations to the government to ensure that enforcement is clear and transparent.” 

CPA Canada’s recommendations were informed by research and engagement on the trends and challenges related to sustainability reporting, as well as consultation with our Sustainability Advisory Committee and Sustainability Preparers Working Group, comprised of assurance practitioners as well as preparers of sustainability reporting at Canadian public companies. CPA Canada also hosted a panel discussion with subject matter experts in August to foster awareness, education, and to understand concerns.   

Here are five key areas of concern highlighted in CPA Canada’s comment letter:  

Vague and unclear provisions – the new provisions are vague and unclear and have caused significant confusion and uncertainty; organizations will face significant costs and challenges in applying and interpreting them. We believe that some amendments to the new provisions and significant guidance is needed to alleviate these concerns.  

Current sustainability reporting landscape – Companies are increasingly being asked by investors and other interested and affected parties about their net-zero targets and carbon emission reduction activities. Additionally, the IFRS Sustainability Disclosure Standards require disclosures around quantitative and qualitative forward-looking information which may be subject to significant judgments, assumptions and estimation uncertainty. We are concerned with the chilling effect of the new provisions on these disclosures, particularly if the Bureau does not provide clear and useful guidance to drive transparent and predictable enforcement. 

Interaction with new international and Canadian sustainability disclosure standards and regulatory developments in progress in Canada – it is unclear how the new provisions consider and will interact with the oversight regimes of other Canadian regulatory bodies such as the Canadian Securities Administrators and the Office of the Superintendent of Financial Institutions. There is also potentially unnecessary regulatory burden for companies that are subject to oversight by multiple regulators, in respect of the same disclosures, and with potentially differing and incompatible requirements to be met. We encouraged the Bureau to work closely with other Canadian regulatory bodies to minimize this burden. 

Substantiation of claims based on an “internationally recognized methodology” – This provision is particularly concerning as it is both novel and vague. A key concern is that “internationally recognized methodology” is not defined and it is not clear what methodologies would be acceptable. Examples of questions that should be addressed in the Bureau’s guidance are outlined in our comment letter. Additionally, in our view, IFRS Sustainability Disclosure Standards, and by extension Canadian Sustainability Disclosure Standards, should be considered “internationally recognized methodologies.”  

Independent third-party assurance – It is unclear what the Bureau considers to be “substantiation” and whether this includes independent third-party assurance over the information. There are significant sustainability assurance developments underway domestically and internationally. In September, the International Auditing and Assurance Standards Board unanimously approved International Standard on Sustainability Assurance 5000, General Requirements for Sustainability Assurance Engagements (ISSA 5000); the final standard is expected to be published in December 2024. Further, the Canadian Auditing and Assurance Standards Board has approved a project to adopt ISSA 5000 concurrently as a Canadian Standard on Sustainability Assurance (CSSA) 5000, General Requirements for Sustainability Assurance Engagements. We recommended that the Bureau explain if and how the new provisions consider third-party assurance over sustainability information.  

Consistent and comparable sustainability information plays a critical role in enabling informed purchasing and investment decisions. However, CPA Canada believes that the new provisions in their current form are challenging to operationalize, and significant guidance is needed to enable consistent application. It is very important that organizations carefully review all their public representations, sustainability reporting, and carbon reduction commitments to ensure they comply with the new provisions. We will continue to monitor developments in this area and provide updates to help those that are on the front lines of developing these disclosures and providing assurance over them.