This blog was written by our Senior Marketing & Communications Manager, Gaby Beaudoin
Summary:
Both the EU and Canada have strengthened regulations on environmental claims, shifting the burden of proof to companies. The EU’s Empowering Consumers for the Green Transition Directive (ECGT), effective September 27, 2026, prohibits vague terms such as “green” or “eco-friendly” and restricts offset-based neutrality claims. In Canada, Bill C-59 established a reverse onus for environmental claims under the Competition Act, while Bill C-15 introduced some flexibility without reducing the requirement for substantiation. Key takeaway: continue communicating on sustainability, but ensure all claims are supported by verifiable data and a documented decarbonization plan.
The EU Claims Directive Update
In mid-2025, some headlines suggested the EU was relaxing greenwashing enforcement after the European Commission announced plans to withdraw the proposed Green Claims Directive. The Commission has not formally withdrawn the proposal, and its status remains unresolved. However, this development does not indicate deregulation.
The Green Claims Directive was intended to be stricter than the overlapping Empowering Consumers for the Green Transition Directive (ECGT), which has already been adopted and will apply from September 27, 2026, regardless of the status of the Green Claims Directive proposal.
Here’s what the ECGT does:
- Prohibits vague, unsubstantiated claims. Generic terms such as “eco-friendly,” “green,” or “sustainable” are not permitted unless supported by evidence.
- Restricts offset-based “climate neutral” claims at the product level. Claims relying on carbon offsets, rather than actual in-value-chain reductions, are no longer accepted. German courts have affirmed that offsetting and real reductions are not equivalent and must be clearly distinguished for consumers.
- Prohibits self-created sustainability labels and seals unless they are supported by independent, third-party certification.
- Imposes significant penalties. Fines under the Unfair Commercial Practices Directive can reach up to 4% of a company’s annual turnover in the relevant member state.
National enforcement under the Unfair Commercial Practices Directive remains active. Greenwashing investigations and litigation continue across member states, regardless of the Green Claims Directive proposal’s outcome.
Canada: Bill C-59 Raised the Bar, Then Got Recalibrated
Canada addressed greenwashing through Bill C-59, which received Royal Assent in June 2024, amending the Competition Act to directly target misleading environmental and social claims. This means companies making environmental claims, now bear the responsibility to substantiate their claims rather than the Competition Bureau or complainants.
Two provisions matter most:
- Product-level claims must be based on “adequate and proper testing.”
- Business-level claims, which concern a company’s operations rather than its products, were initially required to be substantiated using an “internationally recognized methodology.” Many businesses found this standard vague and challenging to implement, leading some to reduce their public sustainability messaging to avoid non-compliance.
Bill C-59 also allows private parties, including advocacy groups, to bring greenwashing complaints directly to the Competition Tribunal without requiring prior action from the Bureau. This provision took effect in June 2025 and is already influencing the risk landscape. Investigations and challenges have involved companies such as Lululemon, RBC, and major oil and gas firms. At least one constitutional challenge on freedom of expression grounds is currently before the courts.
In March 2026, Bill C-15 further amended the regime by removing the “internationally recognized methodology” requirement for business-level claims and narrowing the scope of certain private actions. This represents a modest adjustment rather than a withdrawal. The reverse onus and substantiation requirements remain in effect, though companies now have greater flexibility in how they substantiate their claims.
The Competition Bureau finalized its guidance on environmental claims in June 2025, following two rounds of public consultation. This provides businesses with a clear, though still evolving, understanding of what constitutes “adequate and proper” substantiation in practice.
The Common Thread
Despite jurisdictional differences, the EU and Canada are aligning on three key expectations:
- Prioritize specificity over slogans. Vague terms such as “sustainable,” “green,” and “eco-friendly” are increasingly risky unless supported by measurable, disclosed evidence.
- Emphasize real reductions over offsets. Neutrality claims based solely on offsetting, without clear disclosure, are losing legal support in both regions. For businesses, this means real reductions should be prioritized over offsets.
- The burden of proof is on companies. Regulators and courts now require companies to substantiate claims proactively, rather than relying on challengers to disprove them.
It is important to note that these changes do not signal a retreat from corporate climate action. The adjustments under Bill C-15 reflect regulators’ responsiveness to concerns about practicality, while maintaining core expectations. Companies executing real climate action initiatives should view this as an opportunity to share their initiatives with the proof to back it up. Consumers increasingly seek value-driven organizations, and there is a strong business case for adopting sustainable practices and leveraging existing technologies to achieve long-term cost savings.
How to Communicate Sustainability Confidently in This Environment
These developments do not suggest that companies should stop communicating about sustainability; in fact, silence can result in reputational risks. Organizations that continue to communicate carefully and credibly will distinguish themselves, especially as others become more cautious. The key is not less communication, but more substantiated communication. Remember, these regulations are in place to prevent greenwashing, so as long as your climate communication is honest and verifiable, you shouldn’t have a problem.
A few principles worth keeping in mind:
- Communicate only what you can substantiate, providing the level of detail regulators now require. For example, instead of stating “we’re reducing our carbon footprint,” specify “we reduced Scope 1 and 2 emissions by X% year over year, verified against a Y baseline.” This precision is possible only with robust underlying data and comprehensive emissions accounting across your value chain, rather than relying on estimates or industry averages.
- Clearly distinguish between reductions and offsetting. If a claim involves offsets, state this explicitly and separate it from claims regarding actual operational reductions. Avoid the term “carbon neutral” and instead say “purchased carbon offsets” to avoid this contentious term. Regulators are closely monitoring for any blending of these concepts.
- Ensure every public claim is supported by a real plan, action or data. Claims about future targets, such as “net zero by 2040,” require a credible decarbonization strategy that identifies specific levers (energy, fleet, procurement, materials) and outlines a realistic trajectory. Vague ambitions without a modelled plan are precisely the type of claims targeted by these new regulations.
- Identify where investments will have the greatest impact. Not all reduction opportunities offer the same value; some are more cost-effective and deliver greater results. Conducting a modelled analysis of the highest-impact, most cost-effective reduction opportunities strengthens external claims and builds a compelling internal business case for stakeholders, board members, and executives regarding the value of company-wide climate action.
At its core, effective sustainability communication now relies on robust data and strategy. Companies that succeed under the EU’s ECGT and Canada’s Competition Act amendments will be those that prioritize substantiation, maintain credible carbon accounting, implement a comprehensive decarbonization strategy, and use modelling to identify the most impactful and cost-effective reductions.
Since the strength of your sustainability claims depends on the quality of your underlying data, it is important to assess the robustness of your foundation. We can assist with preparing your carbon accounting for audit, developing a decarbonization roadmap, or modelling the most impactful and cost-effective reductions.
This post is for general informational purposes and does not constitute legal advice. Companies should consult qualified legal counsel to assess specific compliance obligations under the EU’s ECGT and Canada’s Competition Act.
References
Latham & Watkins, “European Commission Announces Intention to Withdraw EU Green Claims Directive Proposal, Although the Status Remains Unclear,” lw.com, June 2025.
Gorrissen Federspiel, “The European Commission Withdraws the Green Claims Directive Proposal,” gorrissenfederspiel.com, June 27, 2025.
Loyens & Loeff, “ESG Update: Green Claims Directive is here to stay?,” loyensloeff.com, July 7, 2025.
EUROPEN, “Green Claims Directive on Hold: Turning Point or Temporary Pause?,” europen-packaging.eu, July 17, 2025.
European Economic and Social Committee, “Current Affairs: Withdrawal of Green Claims Directive,” eesc.europa.eu.
Osler, Hoskin & Harcourt, “Further Amendments to the Environmental Claims Provisions of the Competition Act,” osler.com, April 15, 2026.
MLT Aikins, “Federal government narrows scope of the Competition Act’s anti-greenwashing provisions as Bill C-15 receives royal assent,” mltaikins.com, March 30, 2026.
Gowling WLG, “Legislation passes to amend environmental claims prohibitions of the Competition Act,” gowlingwlg.com, March 31, 2026.
Lawson Lundell, “Canada’s Bill C-15: New Amendments to Anti-Greenwashing Laws,” lawsonlundell.com, April 9, 2026.
CPA Ontario, “Bill C-59: What CPAs Need To Know,” cpaontario.ca, April 30, 2026.
Norton Rose Fulbright, “Bill C-15 proposes amendments to Competition Act greenwashing provisions,” nortonrosefulbright.com, November 2025.
