The current political climate has led to a stampede of companies, including a large number of Franchises, promoting that "going green" pedigree. As scientists and politicians debate the impact or existence of global warming, green industry practices enjoy favourable public sentiment, largely dependent on supportive government policies, leading to ever-increasing profitability. 1 As with any pioneering activity, it is not surprising that there is no widely accepted definition as to what constitutes "going green". Accordingly, many commercial practices have been criticized of being nothing more than "greenwashing." This article will analyze what exactly greenwashing is, how Canadian regulatory bodies are attempting to combat it, and provide commentary on how greenwashing/ the regulations surrounding it may impact franchisors and franchisees.
What is Greenwashing?
Greenwashing is when a company promotes its products or services as being environmentally conscious for marketing purposes, while in practice they are not actually taking any notable sustainability efforts.2 It is essentially a situation where an organization spends more time and money on marketing itself as environmentally friendly than on actually minimizing its environmental impact. It is a deceitful marketing gimmick which misleads consumers who prefer to buy goods and services from environmentally conscious brands. This issue of greenwashing is quickly becoming a priority for enforcement agencies, notably Canada's Competition Bureau. ("Bureau")
Greenwashing is problematic not only because it is ethically wrong and illegal but because it has created a situation where many consumers do not actually believe companies when they make claims about their sustainability practices. This has created a world where companies big and small are afraid to tell society what they are doing to combat environmental issues for the fear people will say their actions are not enough, or people just will not believe them.
Why does Greenwashing occur?
Greenwashing can occur for a variety of reasons. One of these reasons stems from the fact that many CEOs and Corporate Boards are not as engaged with sustainability strategies as they should be. While 90 percent of corporate executives think sustainability is important, only 60 percent of companies have a sustainability strategy.3 Fewer still have anyone in a leadership role responsible for this activity. Often, companies adopt the sustainability bandwagon but do not support their marketing with leadership and budgets.
How is Greenwashing Challenged?
Aside from Consumer and Competitor activities, greenwashing has become an increased priority for enforcement agencies in Canada, notably the Bureau. One of the very few areas where the Bureau has been effective has been in its pursuit of misleading advertising claims by investigating and prosecuting deceptive marketing practices, to ensure consumers receive truthful information allowing them to make informed buying decisions.4 The Competition Act prohibits businesses from making a materially false/misleading representation to the public in order to promote the supply or use of a product/service or a business interest. In assessing whether a representation is deemed to be "material," the Bureau looks to see if the representation could influence consumer behaviour, such as influencing them to buy or use the advertised products or services.5
The Bureau has sent a clear message to the business community that it has a significant role to play in Canada's transition to a greener economy and in achieving growth goals, and that greenwashing is a high enforcement priority. As a result, while the Bureau may not have the resources to deal with every potentially offside advertisement, businesses can expect to see increased scrutiny and higher risks in potentially misleading claims.
Past Examples of Bureau Greenwashing Enforcement
In 2019, Ecojustice, Canada's largest environmental law charity, applied to the Bureau triggering an inquiry regarding claims made by Keurig Canada ("Keurig") that its coffee pods are recyclable. Keurig had just modified their single use coffee pods to be made from a recyclable plastic, a modification that presumably would have involved significant cost increases regarding their technological and manufacturing processes. To market this positive performance change, Keurig promotes via its website, social media, and on its packaging that their single-use coffee pods were recyclable, when consumers followed the instructions to move the metallic lid and empty the pod.6
The Bureau investigated these claims and determined Keurig's assertions regarding the recyclability of its single-use coffee pods were false or misleading in municipalities that did not accept them for recycling. The Bureau found that, outside the provinces of British Columbia and Quebec, K-Cup pods are currently not widely accepted in municipal recycling programs.7 In other words, the Bureau found that these claims were false or misleading because they claimed to have more environmental truth benefits than they had. The Bureau also concluded that Keurig's claims about the steps involved to prepare the pods for recycling are false or misleading in certain municipalities. Keurig's claims gave the impression that consumers can prepare the pods for recycling by simply peeling the lid off and emptying out the coffee grounds, but some local recycling programs require additional steps to recycle the pods. Keurig voluntarily settled this claim for $3 million. 8 Additionally, at least one class action has been commenced against Keurig, with respect to its K-Cup or Keurig Coffee machines since Keurig began making these false misrepresentations on April 15, 2016.9
Royal Bank of Canada:
In October 2022, the Bureau decided to investigate charges of misleading advertising against the Royal Bank of Canada ("RBC"). The claim accuses RBC of touting its commitments to climate action while continuing to finance fossil fuel development. It is an inquiry by the Bureau "seeking to determine the facts relating to allegations that RBC has contravened the Competition Act by making false or misleading environmental representations.10" The inquiry and investigation by the Bureau are still underway.
Other Sustainability Legislation:
The Consumer Packing and Labelling Act contains prohibitions against making false or misleading representations.11 The Trademark Act carries a prohibition against making materially false and misleading statements about the character, quality, quantity, composition, origin, production or performance of goods and services.12 The Canadian Advertising Standards Code states that Advertisements must not contain inaccurate, deceptive, or otherwise misleading claims, statements, illustrations or representations. All representations must be supported by competent and reliable evidence.13
Companies, including franchisors and franchisees should not refrain from enhancing their products and services that are consistent with sustainability. In doing so, however, they must exercise caution in the scope and scale of their marketing activities. Businesses making environmental claims should avoid bold, broad statements, and instead ensure they make claims which are specific and accurate. The following best practices should be followed, as highlighted by the Bureau.14
- Make sure your claims are truthful and are not misleading;
- Make sure they are specific claims that are substantiated and verifiable;
- Make sure they are not claims that either result in a misrepresentation, or an extreme exaggeration of the environmental benefits of your product; and
- Do not imply your product is endorsed by a third-party environmental organization if it is not.
At Sotos LLP, we advise franchisors and franchisees on all aspects of their business including their sustainability strategies. We would be happy to provide tailored advice on the applicable regulations and codes in place in the jurisdictions you are operating in and how they apply to your products or services.
1. "Green Industry Analysis 2020- Costs & Trends" Franchise Help 2020, Online: https://www.franchisehelp.com/industry-reports/green-industry-analysis-2020-cost-trends/
2. Carlyann Edwards, "What is Greenwashing" Business News Daily, August 5th 2022. Online: https://www.businessnewsdaily.com/10946-greenwashing.html
3. Talal Rafi, "Why Sustainability is Crucial for Corporate Strategy," Race to Resilience. June 16th, 2022. Online: https://climatechampions.unfccc.int/why-sustainability-is-crucial-for-corporate-strategy/#:~:text=90%25%20of%20executives%20believe%20sustainability,consumer%20demand%2C%20and%20regulatory%20requirements.
4. "Misleading Representations and Deceptive Marketing Practices" Government of Canada. Online: https://ised-isde.canada.ca/site/competition-bureau-canada/en/deceptive-marketing-practices/types-deceptive-marketing-practices/misleading-representations-and-deceptive-marketing-practices
5. "False or Misleading Representations" Government of Canada. Online: https://ised-isde.canada.ca/site/competition-bureau-canada/en/deceptive-marketing-practices/types-deceptive-marketing-practices/false-or-misleading-representations
6. Mia Rabson, "Keurig to pay $3 million fine for false, misleading claims on recycling of its K-CUPSs" Toronto Star. January 6th, 2022. Online: https://www.thestar.com/politics/2022/01/06/keurig-to-pay-3-million-fine-for-false-misleading-claims-on-recycling-of-its-k-cups.html
7. "Keurig to pay $3 million penalty to settle Competition Bureau's concerns over coffee pod recycling claims" Government of Canada. January, 6th 2022. Online: https://www.canada.ca/en/competition-bureau/news/2022/01/keurig-canada-to-pay-3-million-penalty-to-settle-competition-bureaus-concerns-over-coffee-pod-recycling-claims.html
9. "Keurig K- Cups" Sotos Class Actions. Online: https://www.sotosclassactions.com/cases/keurig-k-cups/
10. James Bradshaw, "Competition Bureau launches inquiry into RBC's green advertising" The Globe and Mail. October 11th, 2022. Online: https://www.theglobeandmail.com/business/article-rbc-green-advertising-competition-bureau/
11. Consumer Packaging and Labelling Act, R.S.C., 1985, c. C-38
12. Trademarks Act, R.S.C., 1985, C. T-13
13. The Canadian Code of Advertising Standards, Ad Standards. 1963. Online: https://adstandards.ca/code/the-code-online/
14. "Environmental Claims and Greenwashing" Government of Canada. Online: https://ised-isde.canada.ca/site/competition-bureau-canada/en/how-we-foster-competition/education-and-outreach/publications/environmental-claims-and-greenwashing
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.