In our sixth episode of the podcast, Julien Beaulieu, Lecturer in Law at the University of Sherbrooke, drops in to discuss environmental claims, greenwashing, green hushing, net zero pledges, and much more. Julien shares his insights into the legal regimes that apply to greenwashing, regulatory and compliance challenges regarding environmental claims, treatment of environmental claims in other jurisdictions, and other important topics in this complex and evolving area of competition law.
In our sixth episode of the podcast, Julien Beaulieu, Lecturer in Law at the University of Sherbrooke, drops in to discuss environmental claims, greenwashing, green hushing, net zero pledges, and much more. Julien shares his insights into the legal regimes that apply to greenwashing, regulatory and compliance challenges regarding environmental claims, treatment of environmental claims in other jurisdictions, and other important topics in this complex and evolving area of competition law.
You can access the report that Julien authored with the Quebec Environmental Law Center (CQDE) on climate washing and greenwashing in Québec and Canada here.
00:00
Welcome to counterfactual, the podcast brought to you by the Competition Law and Foreign Investment Review section of the Canadian Bar Association. Counterfactual takes a fresh look at issues relevant to business, competition and related areas of regulation, and explores the real and hypothetical worlds to gain practical insights and debate policy. Hope you enjoy the show.
00:29
Hello, and welcome to Counterfactual, the podcast produced by the Competition Law and Foreign Investment Review section of the Canadian Bar Association. My name is Ian Macdonald, and in this episode, I'll be speaking with Julien Beaulieu of the University of Sherbrooke about important and evolving issues and environmental claims. Before we get started a few words about our guest, Julien Beaulieu, holds a Bachelor of Laws and an MBA from the University of Sherbrooke. He worked as a competition lawyer for a few years at a leading Canadian firm, before going back to school to do a Master of Economics with a specialization in policy economics at the Erasmus School of Economics in Rotterdam. He currently works as a law lecturer at the University of Sherbrooke, where he teaches the classes of Advanced Business Law and Corporate Social Responsibility Law. He frequently collaborates with the Quebec Environmental Law Center or CQDE, which offers independent environmental law expertise to citizens in Quebec. Last fall, he published an extensive research report with the CQDE on climate washing and greenwashing in Quebec and Canada.
01:52
Julien, hello, and welcome to counterfactual. We're so glad you could join us.
01:58
Well, hello, I'm very happy to be here. Really excited to speak about this topic. I think, you know, a few years ago, maybe a podcast on this topic would not have been possible because it was not yet on the radar. But it seems like these days, everybody's talking about environmental claims, greenwashing, ESG washing, climate washing. So I think we're gonna have a great chance to look at what all these words mean. And if they are more than buzzwords
02:23
Just I guess, a housekeeping matter, before we jump in this area is evolving, I wouldn't say at the speed of light, but fairly quickly. And so it's probably worth stating that today is Friday, March 3, at approximately 8pm. And this much anticipated snowstorm is just getting underway, but hasn't really hammered us too hard yet. And I really just raised that because people will listen to this over time. And this will just be a reference point as to what facts were in existence when we when we spoke as there will undoubtedly be more developments in in the coming days. So let's start with some general overview questions. Surely, many people have some degree of familiarity with the terms greenwashing, climate washing and green hashing, or at least some of those terms. What do these terms involve?
03:19
Yeah, that's a very, very good question. Let's start with the main one and the one that most people probably know already greenwashing. Broadly speaking, green washing happens whenever an entity makes false or misleading statements about the environmental attributes of its activities, products or services. So it's, it's not only about products, it can be about what the firm does as a whole. It can be about its products and production processes, about how its disposing of waste disposal, for instance, as it's really broad anything any type of claim about an organization's environmental performance, that is false or misleading. So it can be false, vague, ambiguous information, also the omission of important information, because sometimes, it can be tempting for the green washers to provide very positive information about whether you're doing well, but omit the less prestigious information about what they're doing with you in a less performant way. So why why are firms greenwashing and why is that such a big thing? Well, first, there are increasing expectations right now from consumers and investors, also government and employees that firms are going to should be sustainable and this should contribute to the green transition. So we're asking a lot from firms these days, and being green can certainly pay off. But it can also be expensive. And it greenwashing can be a strategy or illegitimate strategy, but it's a strategy indeed, to reap the rewards of being perceived as sustainable as environmentally friendly. Without needing to make the investments needed to transition to net zero to reduce your environmental footprint reduce your pollution levels. The problem with greenwashing is that it distorts stakeholders’ decisions. So consumers might purchase less sustainable products because they are being misled. So that's going to prevent them from transitioning to better alternatives. It can also even convince governments that they should not regulate certain industrial activities, because apparently there's no problem there. Some firms could be saying that they're taking care of the problem, they're voluntarily developing more sustainable alternatives. And that can also lead investors to invest in in firms and projects in products that are maybe riskier than they appear to be if there's a climate related risks. So it's a big issue. It's a big issue for all stakeholders involved. And it's also a big issues for the firms that want to do good that want to invest your millions of dollars and decarbonizing your activities offer better products and unfortunately, they cannot reap the rewards of all these investments because not only be consumers are becoming skeptical, or investors are becoming skeptical, and and they won't invest in an ESG fund, or they won't buy this new carbon neutral product. So that's for greenwashing is a long, long definition long introduction. I'll go a bit faster on some other terms. You've mentioned, climate washing. So
06:26
These are these are important. So yeah, okay, give them the attention they deserve.
06:30
Perfect. Perfect. Well, thanks. And so another one climate washing, simply put its greenwashing as it applies to climate related claims. So I think these recyclability compostability claims they've been around for many decades. Yeah. And you have more experienced than me, so maybe you've been hearing them for for some time. I don't know if these the these things are new to you. But I think climate related claims are more recent. It's been only in the past few years that firms have been talking about netzero, climate, carbon neutrality, GHG emissions, that's more recent. And so this new term of climate washing has appeared these days, honestly, I feel I cannot even go to the supermarket without finding a new product. I think the other day, it was some apples that were carbon neutral. And it seems like there's all these new labels that are appearing, which is not a bad thing for sure, as long as the claims are true. And finally, another term that you've mentioned is green hushing. And that's also something new green washing takes place. Actually, it's when firms refrain from making green claims because they fear that this will bring them bad press or maybe legal risks. So some firms are starting to be afraid of greenwashing accusations. And these accusations can have a chilling effect on on green claims and also green differentiation because of consumer skepticism, fears of legal risks. And there was a very interesting study. That study surveyed 1000 global firms, and 20 to 23% of them indicated that they would not publish information about their climate progress so they would not disclose where they stand in terms of GHG emissions to avoid accusations of greenwashing. Greenwashing isn't a bad thing in itself, it prevents some firms to to be more prudent, be cautious. We're not going to disclose information, if we're not sure where we stand if it's solid, that substantiated, but it can be also symptomatic of a legal framework that lacks clarity, product predictability firms don't exactly know where the line is, you don't know what they can and can't say and then therefore be preferred to see nothing. But then everybody loses because consumers cannot make the right choices, investors and, and whatsoever.
08:50
You can you can see the policy objective and getting that balance right about a discouraging conduct you don't want without chilling conduct that you do want. Not probably not an easy problem to solve. And we'll get more into that as we as we go through here. How is greenwashing different from other types of deceptive marketing.
09:10
Yeah, because deceptive marketing is also not a new phenomenon. But there are some differences. green washing often involves advertising. Credence characteristics. I don't know if you've heard this term before. It's how economists talk about the special characteristics that cannot be directly verified by individual consumers. So it's a bit like when you go to the doctor, and you get these new prescription drugs or prescribe this great medical treatment, and apparently it's going to solve your issues, but maybe you're not going to see any effects. You don't know Is it working or not? Is it the right treatment for me? And maybe you're not going to see any different difference, but you can also not know what would have happened in the absence of the treatments. You don't have any counterfactual. And you have to believe that doctor, so you have to believe that this person is a professional to the same with lawyers and our clients need to rely on, on whatever piece of advice we give them? Well, it's the same with environmental claims, it's very difficult to know whether a claim is true or not. So how can you know if a firm has really reduced its greenhouse gas emissions in the past year, it's difficult, are you really gonna go on site at the plant for a whole year to measure what's coming out of the of the power plant, it's almost impossible, so we really have to rely on them. And it's would be very costly for consumers to verify all the information that's being provided to them. So without the expertise of a third party, or some kind of regulatory enforcement authority, consumers don't know whether a claim is true or not. And that's something that's not true for all marketing claims. Environmental claims have initial an additional degree of complexity in terms of how technical they are. So that's the first difference. A second difference is also that greenwashing creates distortions in consumers investors behavior, and these distortions can increase the production and the consumption of polluting goods and generating environmental externalities. So another term that I'm taking from my master of economics here. So environmental externalities, essentially, it's social costs that are not internalized by the originators of these costs. This is very specific to greenwashing. Because typically, whenever a consumer makes the wrong purchasing decision, well, it will only impact that specific consumer, it's not going to have a huge impact on society as a whole. But greenwashing can also lead to more pollution in the aggregate. So it's impacting environment as a whole. And that impacts everyone. So if the social cost of these externalities, its environmental externalities are not passed on to consumers, for instance, like to environmental taxes or carbon pricing, then there's this new effect that greenwashing has impacts social welfare through this additional channel, which is that aggravation of pollution, if you want.
12:16
Interesting, thank you. What are the different laws and standards that apply to green washing in Canada?
12:25
There's a lot, and there's really a lot and I feel like I hear about a new statute that prevents false or misleading statements almost every week. So there's a lot it seems like it's a really bad thing and Canadian law making false or misleading statements. But specific to greenwashing, you've got a few federal consumer protection laws, of course, the Competition Act, because many, many of our listeners know about this one. Also the Consumer Packaging and Labeling Act, the Textile Labeling Act, and also the Trademarks Act as some generic provisions. And what these provisions say is that you should not be making false or misleading statements. What's particularly interesting about the Competition Act, and we're going to be I think, probably discussing this one in more depth is that it's applying to representations to promote products, but also any type of business interests whatsoever. So that can be very broad, it doesn't really require a consumer transaction. If you're promoting a project or a business activity, or you're an industry association, and you're trying to promote a particular industry, then the Competition Act, the prescriptive marketing provisions can apply to your your claims. So that's the first big bucket federal consumer protection laws, especially the Competition Act. Then there's the provincial equivalent. So you've got almost in every province, I think, in every province, actually, some provincial consumer protection laws. In Quebec, we have the Consumer Protection Act in BC, there's a Business Practices and Consumer Protection Act. And they say very similar things across your jurisdictions, but also compare to the federal laws. And it's the same general provisions about not making false or misleading representations. And these provisions, they also provide for various administrative panel and civil remedies. So that's the second bucket third bucket, and there's also some federal and provincial environmental laws. Now, they don't provide specifically for green washing. But what's interesting about these laws is that they provide for several disclosure and reporting obligations for firms. And that's in these laws that you're going to find the mandatory reporting of greenhouse gas emissions by major emitters, for instance, under the federal carbon pricing regime. So again, these laws they don't tell firms that they should not be making greenwashing. But they may provide some guidelines about how you could make environmental clean In this property, for instance, how should you account for your GHG emissions? Or what is a proper carbon credit, so you can look at these laws and try to get some insights in there. And finally, the fourth bucket of laws that are relevant for greenwashing is the provincial securities laws. So these laws, they apply to a specific type of firms specific type of claims. It's the claims made by public issuers. So public entities are active in the capital markets and issuing trading their securities. And these reporting issuers have to disclose a wide range of information to investors, that includes the usual audited financial statements, information about corporate governance, but also disclosure of material risks. And that includes the material risks arising for climate change. So firms have to disclose that information already, under the current framework, they can also voluntarily disclose more than what's material risks. But when they do that this information cannot be false or misleading. If you're voluntarily stating something, it has to be true. So sometimes, firms that's why maybe firms are, tend to be more on the green hushing side instead of the green claims side. And there's going to be more obligations coming soon, there's several legislative or regulatory reform projects in the works, driven by the work that was done by the task force on climate related financial disclosures, or the TFCD. So that's like an international task force. And they were the first to really advocate for a better better disclosure of climate related information by investors. And in Canada. Now, the work is being led by the CSA to Canadian Securities Administrators, which regroups all the provincial securities agencies, and they've issued a new policy proposal that should be live in the upcoming months. And we're still waiting for what's going to happen in other jurisdictions, to see when just to make sure that Canada's regime is not too different from the others. But they're proposing a new instrument that would require reporting issuers to disclose their GHG emissions scope, one two, potentially three, and also specific information about climate related risks and opportunities. So it goes without saying that a misleading statement that goes against these disclosure requirements would potentially result in remedies under securities laws. But again, what's different about these laws, and also, that's why we're not going to look at them for too long, I think in this call is that they only apply to claims by reporting issuers, and it's in the context of financial markets. Whereas the Competition Act is really this broad piece of legislation that just regulates corporate speech in general, as long as it's made to the public. So that's essentially what we had in terms of laws. There's also some soft law mechanisms, private certifications, private education processes, through the ECD. For instance, there's also Ad Standards Canada, which is this is like, it's essentially the advertising industry's self regulatory body. But for our purposes, I think the Competition Act is really the elephant in the room, but I guess we're gonna, we're gonna discover what that elephant does.
18:27
A lot going on, it must be difficult from a compliance perspective, just to keep up on all the evolving, it's
18:34
a nightmare, honestly, and the acronyms, I think what's worse is the acronyms. There's so many acronyms, so it's horrible. I worked for some time at the UNEP FI, which is the branch of the UN that's working on sustainable finance. And I think just the first month was learning all the acronyms that was a big challenge.
18:56
And do some of them. Are they consistent or harmonious to some degree? Or just do businesses find themselves in a situation where one statute or regulation says go left and the other says go right, on the same point?
19:11
I think some require more extensive disclosure than others. And some have more stringent reporting requirements. But they all more or less go in the same direction. I would just say some maybe asked more and some ask less. But that's an issue. That's certainly an issue, because then if some ask less, then maybe you're not going to do that much on the hidden part of one, one standard. So that yeah, there's a problem with this potential for an inconsistency.
19:39
Well, let's turn to the elephant in the room as you have to. How does the Competition Act apply to greenwashing?
19:47
Yeah, so under the Act, it's pretty clear that greenwashing or at least some forms of greenwashing are illegal. So the Act it's this piece of legislation that is very broad it's it applies to mergers, cartels, abuse of dominance. The listeners that have listened to the previous episodes are probably now experts and in Canada's competition, competition law. So the act is enforced by the Bureau, this federal independent law enforcement agency. And what it says is that you cannot make for permission, promotional purposes, representations to the to the public, that are either false or misleading in a material respect. And that's very, very broad. That's very generic, but it does apply to environmental claims. And the Act also requires that performance claims be based on adequate and proper tests. So a breach of these provisions because there's a civil and administrative and criminal provision. But a breach of these provisions can lead to criminal administrative civil remedies. That includes criminal fines, administrative monetary penalties, and also class actions. So that's the current regime. And it's a very, it's very broad terms, very broad provisions. And the Act does not define what could qualify as false or misleading under the act. So it's, it's up to the readers interpretation. I guess that's why we, we lawyers are there to help to help clients understand what these these words can mean. But the Bureau has relied on the acts deceptive marketing provisions to initiate a few matters involving allegedly false or misleading environmental claims. For example, in the late 2000s, the bureau agreed to a few consent agreements, it wasn't the sector of Spa retailers. And apparently, allegedly, I should say these party elders had made false or misleading energy efficiency representations. So that's some cases that the bureau took. And then there was a very famous diesel gate. So the bureau participated to that there were two consent agreements entered into by the Bureau, with vehicle distributors in connection to these false or misleading claims regarding environmental performance. And more recently, and that's really like the recent landmark case, the bureau entered into constant agreement with Curie Canada, three candidates selling single use coffee pods, and the Bureau was alleging that Keurig had made false or misleading claims about the risk cyclability of the single use coffee coffee box. So according to the Bureau, the problem here was that Keurig had given the general impression that consumers could recycle the pods by simply removing the lid, emptying the comm the contents of the coffee, essentially, in the bin, and then throwing them in the recycling bin. But the problem with that case is that some local recycling programs did not accept the pods. So even if the technology existed for municipalities to recycle the pods, some municipalities did not have that technology. And that raised concerns for the Bureau over the validity of the recycling claims. So the bureau entered into a consent agreement and under the terms of that agreement, surely had to pay a 3 million administrative monetary penalty, and also make 800,000 charity charitable donation to an environmental organization, as well as publishing corrective notices and leading its future marketing claims. So that's really the big, big case. That has occurred over the past over the past years. But interestingly, in the last year, the Bureau has been launching also a series of investigations relating to climate related claims. And these investigations followed complaints by groups of citizens, environmental nonprofits, that were filing complaints, asking the bureau to investigate particular firms. So one of them because then once the bureau receives a complaint, and they can decide whether they're going to investigate things further, and eventually file a claim, formal, formal legal action before the Competition Tribunal. And one of these cases was a case involving the Canadian bank, RBC, which is currently subject to that investigation, and the complaint related to RBCs pledge to reach net zero emissions by 2050. So the environmental groups here question whether that pledge was serious, because allegedly, RBC had started to finance new, new project new fossil fuel projects. And so the groups asked the bureau to investigate whether enough had been done under the pledge so that the pledge was was a serious commitment. So that's the first case it's still under investigation. So we'll see where that leads and There's another investigation that was launched by the Bureau last fall. That one, it's an investigation into the Canadian Gas Association, which is an industry lobby group. And this one is relating to a marketing campaign led by the lobby group that claimed that natural gas was clean and affordable. So again, similar case, as the previous one, environmental groups became aware of these claims, and were questioning whether these claims were accurate. So asked the bureau, essentially to investigate to ask the firm to disclose how we got here. It was not a firm it was a an industry association, but fail to disclose how they came to the conclusion that natural gas was clean and affordable. So investigations are still ongoing, we remains to be seen whether the bureau will take formal legal action or not. But it still shows that this is a hot issue in terms of enforcement, and that the Bureau, the Bureau is responding to these investigation requests by NGOs, nonprofits.
25:59
Very interesting, as you say. The provisions in the Competition Act Relating to misleading advertising are very general, has the bureau provided any guidance to help businesses apply in real life situations what they can and cannot say in the context of environmental claims?
26:19
I wouldn't, I wish I really wish they did. Unfortunately, there is no extensive guidance for firms right now. And that's a bit surprising, because a lot of agencies around the world I've been publishing guidelines, but the Bureau has not issued detailed enforcement guidelines on environmental marketing. In the past years, there used to be a best practice guide that had been published in 2008, together with the Canadian Standards Association, and that, that that guide was that guide who was really excellent, it was exhaustive, comprehensive, provided a lot of information, references to technical standards that firms could rely on. It was just a guide. Right. So it was not the the Act, but it was still some, you know, very concrete information that firms could use. Unfortunately, that guide was archived in November 2021. And right now, the only thing we have is the Bureau's website. There's a web page that provides generic advice on the substantiation of green marketing claims. So for instance, the Bureau is recommending that firms avoid using vague terms like eco friendly or safe for the environment. And and it's a fair point, we don't really know what these what these terms mean, like, what does it mean to be safe for the environment? I don't know is anything to say for for the environment these days? So that's, that's the type of generic guidance that they've given. And so there's some information on that webpage. But it's not the type of extensive guidance that I think firms would be looking for.
27:53
And what about what you talked earlier about green hushing? Do you think that the repeal of the Bureau's guide will have the effect of contributing to more green hushing?
28:04
What I think I think that could certainly happen. When we published, you mentioned that there was a report by the security last last fall, and we met with a lot of stakeholders when we were preparing this report and something that almost everyone told us, and is that there's an issue right now, we don't know what we can and can't say. And that can be a strategy from the Bureau, right? Like if the, if the line is blurred, and you're gonna be even more cautious, you're gonna miss it? Well, you know, I'm not gonna make any marketing claims, because I don't know what I can see or not. But I think, in the end, like consumers lose, and firms lose as well. Because then if you don't know what you can say, and you're not maybe not going to differentiate your products, and you're not going to provide these new carbon neutral goods that everybody's asking for. So I think if we want to have a well functioning marketplace, we need predictability. We need enforcement certainty. We know we need to know what's what's happening behind these closed doors, to know anything, lawyers would be happy to have more information to provide to their clients, as well as so everybody would win, with more, more certain and more certain environment. Right now.
29:13
Great, thanks. The bureau held a green summit last fall. Tell us a little bit about that. And the key takeaways from it.
29:22
Very, very interesting, very interesting event. I was not there in person, but I was listening. I was listening actually from Croatia. I was on vacation at that time, but I couldn't not miss the Bureau's green summit. I guess I'm some kind of geek, in terms of competition law. But so on September 20, last year, the bureau organized this green summit. It was a conference where the viewer wanted to know more about what's happening in this in this field. So they were not there to provide answers. They were more asking for questions and solutions. And it was about the interaction between environmental policy and competition law. There was a very interesting debate during that summit, about whether competition law should be used actually to pursue an environmentalist agenda. And this is a debate that's been around for many years. Like, I think a lot of people want to use competition law to achieve other things than just maintaining the efficiency of the markets. But I think when it comes to greenwashing, there's a nuance because having a well functioning markets where firms are not afraid to tell the truth and where the liars can be distinguished from the firm's that are true leaders. I think that's exactly within the purpose of the competition policy, having a marketplace that's working and and that's effective. So I don't think that fighting greenwashing is outside of the Bureau's mandate, and is outside of the purpose of the Competition Act, I think that's very well connected. And taking just a broader perspective on this topic, I think without, without the environment, there's no economy and then there's just there's just no market to preserve. But coming back to this green summit, there were some still some introductory remarks by the Commissioner of competition, who during during his speech, said that the bureau could address greenwashing greenwashing was on the rise, and that the bureau could address it by doing its day job. However, the Commissioner took a stance in this debate. He warned that this may not involve expanding the goals of competition law, or changing changing the legal tests that are currently being applied. So the Commissioner’s approach seems to be more about using the agency's existing powers to prevent greenwashing. But not to provide you new guidelines or even to ask for more for for more stringent regulatory framework. When the commissioner asked for some reforms for other provisions of the Act, so it seems like greenwashing for them it's not the current framework is sufficient. I disagree with that view. Respectfully. But I guess we'll have an opportunity to talk more about what would be the perfect competition act in my mind.
32:13
Sounds sounds good. You're mentioned of your vacation in Croatia, suggests me that this is maybe a good time to switch gears, because we like to include in our episodes, a segment that we call overtime.
32:31
And overtime is where we take ourselves out of regulation play and explore some additional lesser known dimensions to our guests, including their personal interests and pursuits. So in compliance with NHL shootout format, in our Overtime segment, we take three shots, getting to know our guests a little better. So here goes Julien, you've had the opportunity to live in the Netherlands. These tell us a little bit about your time there.
32:57
Well, so I was there for my Master of Economics. Had a wonderful time. Have you been to the Netherlands?
33:03
No, I unfortunately, it's on my list, but I have not made it.
33:08
So I would say don't go in the winter because the weather is horrible. It's always raining. That was that was a difficult part of the year there. But Rotterdam is a very beautiful city. It's very different from the rest of the country. It was completely destroyed during the Second World World War. So they had to rebuild everything. And they use that as an opportunity to make really funky architecture. So you go there and you see these incredible buildings that you haven't seen ever before in your life. So Rotterdam is it's a different, it's just something in itself. But there was also something very exciting about the Netherlands. And I'm sure you've heard about it, it's the biking. They're just cycling all the time. I was never in a car, I was not taking the bus, or the train. I was just on my bike every day. And you see families doing it, like you've always got these fathers or mothers and they've got two kids on the bike. And you don't really understand how they keep their balance, but they still do it. And and that was truly amazing. Like I would go on the weekends. Just because it's not only in the cities. It's also between the cities in the countryside. So I would just go bike the countryside and visiting nearby cities. I went to the Hague, by bike I went to, you know, the the Gouda cheese. I actually it's a city it's called Gouda. And there used to be a big cheese market there. And that's why we speak about Gouda cheese. So I will just bike randomly, half an hour and I will be there and how the so really amazing. And another fun fact about the Netherlands, we always think about these windmills when we think about the Netherlands. And the reason why there's still so many windmills in the Netherlands. It's not because they were eating a lot of bread. Though let me let me assure you they do. But the main reason is that 70% of the land is under the sea level. So to remove the water, they had to build these dams. So that's why we have Rotterdam, Amsterdam, dams everywhere. And they would just drain the water outside of the land using the windmills. So that's why you have so many windmills in the Netherlands, but truly amazing country. So don't go in the winter, but bring your bike.
35:22
And when you bike, did you, I'm an avid biker myself. So I followed a lot of what's going on in Amsterdam and some of the other European countries. But did you get an E bike? Or was this did you do it all yourself?
35:34
So what's great there, it's flat. It's the flattest country on Earth. So you don't, it's pretty easy. The rain is annoying, but other than that, it's pretty easy to bike there. So because that's a big pro they have compared to Canada, and they don't have ice in the winter. Though I hear there's some cities in Finland that are very good with year-long biking.
35:57
And I think they actually plow their bike lanes with a higher priority than their roads.
36:04
That's what we need, I think.
36:06
So moving on to question two, what's your favorite recent book or TV series that's unrelated to environmental matters?
36:15
You asked me a tough one. Because I'm really interested by environmental politics. I read a very interesting book. And I think it's gonna be interesting for people who are interested by competition, just as a principle, and it's called, I read it in French, I had to look for the translation, but it exists in English. It's called Mutual Aid: The Other Law of the Jungle by Pablo Servigne, and Gauthier Chapelle. And these, these two people are biologists, and they were interested in, in the nature, if like, is nature naturally has a natural tendency to be aligned with competition or with cooperation or collaboration. And they looked at plants, animals, like primitive communities, and just trying to understand, naturally, are we wired to be collaborating or to be competing with each other, and they were trying to debunk the myth that yeah, the law of the jungle is that we're all fighting against each other, we're all competing. But they found a lot of evidence about cases where different living beings are collaborating with each other cooperating. Very, very interesting book, very unexpected angle on competition, but I would really recommend it to anyone interested in these these topics. Yeah.
37:39
Sounds fascinating. I will go out and get that. Last question. Any interesting tech gadgets that you wouldn't want to be without?
37:49
Uh, well, I'm not super, super tech savvy. So this was also a, it's also a hard question for me. But there's one app that I use every day on my phone, and that's Duolingo. I don't know if you have it. It's to learn foreign languages. So I'm, I'm currently today at my 130th day of learning German. So every day I do my little lesson. It's really fun. I recommend it to everyone to learn German or any language, actually, it's a really fun app.
38:20
Sounds. Sounds good. So get getting back to environmental matters. Let's just talk about some climate related claims. What are net zero pledges and climate neutrality claims?
38:34
There's been there's been a lot of these net zero pledges. I think in the past in the past year, Canada has made its own pledge to go the historical roots of these claims, why are we always talking about Net Zero 2050? It's all derived from the Paris Agreement. In Paris, countries agreed that they would take the measures to try to limit global warming to 1.5 degrees to but aiming for 1.5, potentially two degrees. And the IPCC, which is this internal intergovernmental group of researchers published some research showing that to reach that, that goal, we would have to maintain our emissions to zero by 2050. So that's why we're always talking about Net Zero 2050. And, as I said, Canada is committed to reach to reach that many provinces many cities in Canada have committed that made their own net zero pledges, and many firms as well. And that's really interesting, because now you've got all these firms, and it's seven firms among the Forbes 2000 list. So really 700 among the two or 2000 biggest firms of the world have made these pledges. So it seems like everybody's trying to contribute to put some make some efforts. And that's what net zero means to take the formal definition from the IPCC Intergovernmental Panel on Climate Change and define net zero emissions as this state where emissions of greenhouse gases to the atmospheres to the atmosphere are balanced by anthropogenic removals. So every tonne of CO2 that is issued that is released in the atmosphere has to be offset to capture brought back in the ground in any type of form, to make sure that there's no positive issuance of release of emissions, sometimes we hear also the word carbon neutrality instead of net zero, it's more or less the same thing. Most people use it as a synonym carbon neutral versus net zero. Some people have argued that carbon neutrality would only be for CO2 only for carbon and would not apply to other greenhouse gases like methane. But the general agreement is that it's the same thing. And even if you say that a good is carbon neutral, you're also including the other greenhouse gases. So I would suggest that anyone using carbon neutral would should also include the other gases when they're doing some emissions accounting. And I gave you the definition. And we, we spoke about the rationale of these claims. And it makes some really simple, you know, zero claims, okay, yeah, I'm going to be nonzero, I'm going to offset my emissions by 2050. Problem solved. But actually, there are way more complex that we would think. And I'm going to ask you a few questions, and you're going to see how complex these claims can be. So the first one, let's say you want to make a netzero pledge? Well, should you include the emissions? Let's say you're running a big firm, you have your power plant, and you have you know, any product you can choose. I don't know your product, but you want to be the producer for for tonight's episode.
Let's say cars.
Okay, so you're a car manufacturer, and you have your supply chain and your plant and you want you want to make that net zero pledge? And should you include emissions from your whole supply chain? Or only the emissions arising from your plant? That's a fair question. Should I include the tires and the glass? Like everything that's in the car? Should that is probably generating some emissions to produce? Right?
42:20
So Is that doable? I mean, you'd have to rely on third parties, because it's a big supply chain.
42:25
That's what that's what that's, that's, that's a big topic right now. So some people are saying, yes, you should be including all the emissions from your supply chain. And whenever you're making claim, it should be encompassing every supplier, the energy you're using to produce. So we usually there's a term technical term, they call them scope, one, scope two and scope three emissions. And some people say it's really old, old scopes, others say no, it's only what's happening within your plan that you're doing yourself. But it's a question. And some people could argue that whenever they're making a claim, they're legitimately just including scope one. And in the consumer. If we don't get more information qualifiers, there's no way we we can tell was second question. Let's say you want to buy carbon offsets. So you want to offset you want to buy these voluntary carbon credits to achieve net zero? What how can you make sure that these carbon offsets, they're going to be permanently removing greenhouse gases from the atmosphere? You don't need to answer like these are, nobody has an answer for these questions. So I don't want to put you in a tough spot. But it's also a very good question like, if, for instance, I buy credits from a reforest reforestation project are these trees, they might, there might be a forest fire tomorrow. And all these nice captured greenhouse gases are going to be released again in the atmosphere. And there's been a few cases like there was some fires in California last year. And all the forests that burned down were associated with voluntary carbon credits. And there's ways to purchase insurance and then to purchase other credits afterwards. But it's still a big issue, especially if you're trying to do it at a big scale at a large scale. Another question, if you, let's, let's remember, you are this car manufacturer, and you want to sell carbon neutral cars, let's say your cars are carbon neutral, so you're upset. You bought all the right credits, they're permanent. And you've included all the emissions from your supply chain. Now, there's a car but should the carbon neutral claim the carbon neutrality claim also include the greenhouse gas emissions arising from the disposal of the car at the end of its life? So that's another question.
44:45
Very, very complex area, a lot of very questions to grapple with. Yeah,
44:49
so like, because a firm could say, well, it's not none of my business. I sold the car now. It's, it's the problem of the consumer dealing with it. These are your greenhouse gas emissions. No, not mine. and another, just just to finish this exercise, let's enjoy you being this car manufacturer for a few seconds, let's say you pledge to become net zero in 2050. So not today, just in the future, many years, there's a lot of time, there's a lot of room to make changes. In the meantime, what efforts do you need to do in the meantime, to reduce your emissions? So can you just, you know, sit on your chair and wait for time to pass? And then in 2049, on the 31st of December, then you start to take action? That's another question. So our aspirational claims are truly binding, what type of efforts you need to do, and that's the case of the RBC complaint. So RBC is committing to achieving something in 2050. And some people could say, well, this doesn't is not binding in the meantime. And also it's an aspirational claim. So I want to do it, but doesn't mean I will necessarily do it. So these are just to show how complex these claims are. And and, and then if you refer them and you want to make these netzero pledges and you want to do good, you want to be a good corporate citizens, it's a very difficult world to evolve in, clearly a lot to think about and manage and grapple with.
46:15
How does the current legal framework apply to these types of claims?
46:18
So again, we have this general deceptive marketing regime. So as any marketing claim, false or misleading, netzero pledges or climate neutrality, carbon neutrality claims are subject to the same deceptive marketing rules. But as we've just experienced, it can be difficult to know how you could you should qualify your claims or substantiate these claims. And and firms have limited in my opinion firms have limited visibility on the Bureau's position on what constitutes a valid kind of claim and what does not. So the Bureau has not published detailed guidelines position statements on how these claims should be formulated substantiated. We mentioned that there's a lot of GHD GHD accounting and target setting frameworks, private certification schemes that exist out there. Most Canadian firms use them. Many, many are members of different initiatives to get their products certified. But that's all taking place outside of the legislative regime outside of of the Bureau's territory, and I think it's time for the regulator to step in. But that's just my personal view. Of course,
47:32
I'd like to now get your views on any tensions or contradictions between the policy objectives and or actions of various stakeholders, and whether they may contribute to green hushing and by extension serve as a disincentive for manufacturers to make more environmentally friendly or less environmentally harmful products. For example, at a conceptual or aspirational level, governments at all levels, consumers, and pretty much everyone is in favor of greener products. And from a science and innovation perspective, manufacturers are now able to make a range of products that are compostable, recyclable or biodegradable, seemingly in response to this demand. However, waste collection is done by municipalities and therefore highly decentralized, with their own rules as to what they accept in their various programs. And what they accept and compost or recycling as opposed to garbage may not reflect what manufacturers are capable of making. What are your views on this? To what extent do you consider it to be a problem? And if it is a problem? Do you see any realistic solutions?
48:34
I think this is certainly a problem. It's an very important coordination problem. And it can certainly slow down the development of greener, greener products. I was reading a study by an Environment Canada (ECC). And the study said that in Canada, as of 2018, only 14% of plastic packaging was recycled 14%. That's that's not a lot. And that percentage drops to 8%. If you include all sources of plastics going beyond beyond just this packaging, and that's not talking about all the other waste materials that exist that are out there, and that could be recycled. So I think like no, yes, certainly firms cannot realistic realistically, tailor their marketing campaigns to every local jurisdiction where they operate. And if they cannot capture the real premium that consumers are willing to pay, they're completely prevented from making recyclable claims altogether, then why would they make these costly investments in environmental quality? Because you know, it's a choice. It's a business decision. At the end of the day, will I develop a new material will I invest in a new production production facility that will allow me to make recyclable claims, but if firms cannot communicate about about these claims, that that's a major issue. The good news is that it seems like the federal government is aware of the problem. Because ECCC has been working on national recyclability standards for plastic items. So there are new rules that have not been rolled out yet there was a public consultation last fall, it's only for plastic products and plastic packaging, packaging, but still. And according to the rules that were being discussed during the public consultation, a plastic product would be only what could be only labeled as recyclable, if it would be accepted in public recycling systems accessible to at least 80% of the population in one or more of five regions across Canada. So here, we're providing some guidelines about what you actually need to meet in order to make recyclability claims, again, just for plastics. But it's still I think it's a great first step in the right direction. And this consultation was also about labeling plastic items as compostable. So some, some plastic items could be labeled as such, if they've been certified by a third party, or meeting a specific standard. So more details are to come on what the final rules will be. But maybe after moving for plastic, there's going to be new rules for other types of waste. So I think that's an interesting development. We'll see. But you're certainly right. There's I think there's a big issue there. And we were talking about well-functioning marketplaces. I think this is certainly one big issue.
51:31
Very interesting. Just Just a clarification on the 80%. Is the proposal that if you exceeded the 80% threshold in one of the five regions, you could make a blanket statement for the whole country? Or would you have to have, you know, specific to that region only and not make the claims in the other four regions?
51:51
That's a very good question. I'm not sure what the answer to that question. But I think that I'm not sure it was not 100% clear from the materials I
52:00
saw. So let me get back to you on this one.
But just a sign of the complexity of implementation 100%. What about developments in other countries? Have there been regulatory developments and other jurisdictions that are aimed at curbing greenwashing that we might want to take note of and observe?
52:23
There's been there's, ya know, there's there's certainly been a lot happening around the world. There's no every jurisdiction has its own approach. Some jurisdictions have publish guidelines guidance on how current legal frameworks apply to environmental claims. So not changing the rules, but providing more information on how the rule could be construed. And that's the case in the UK, in Australia, the US has also updated their green guides and provide more information on voluntary carbon markets. I think that's a very interesting development. Other jurisdictions, instead of just going for enforcement guidelines, they've completely updated their environmental marketing laws or consumer protection laws. There's three types of regulatory frameworks that have been examined. First, you've got some mandatory disclosure rules. So essentially rules that say that all firms that are subject to the rule must disclose certain information. So it's not only when you want voluntarily to make a claim that you must disclose the information. It's, as soon as you affirm that is subject to the regulation. So that's the case in the EU. In the EU, you've got recently, the corporate sustainability reporting directive, EU CSRD. And that Directive requires public public entities but also firms with a certain number of employees or it's only for big firms, these firms must report mandatory information to the public. And the main advantage of that type of instrument is that firms not only report report on the good sides of their businesses, but also maybe the less positive aspects of their businesses. So there's a list of information that you need to provide. And you don't pick and choose, you need to provide that information, whether it's good or bad for your business. I think that's interesting. However, the downside of that type of rule is that it can be very burdensome. The good news for the EU firms is that it's only for the big firms that presumably have more capacity that can take on this type of burden. But maybe it's not well suited for smaller firms SMEs that don't have the resources to, to, to make these types of claims. Another type of regime that's interesting is the type of regime where firms are, are forced to publicly disclose how they came to a particular conclusion. So in Canada, the regime we have is that yes, you need to preemptively substantiate your claims if you're making a performance claim, but you don't have to disclose publicly the results of your tests. And there's some rules in California that require require you to proactively disclose how you substantiate your claims. So that's also an interesting model that exists out there. So that was the first category of rules. Another big category of rules is certification schemes. So under a certification scheme, you need to be allowed to get up to to be allowed to make a particular claim, you need to be certified first. So that's the case of, again, the EU with the Unfair Commercial Practices Directive, and the Consumer Rights Directive. What these directives say is that, as you're prevented from making certain generic environmental claims, unless there's a certification, and you'll get certified, so that's another type of regime. The French have something similar as well, in the French environment, environment code, what they say is that, as soon as you want to make certain climate related claims, you need to disclose some specific information to consumers, you need to have a QR code on the product, the consumer can scan with his phone, the packaging of the product, and then get the information, the prescribed information about GHG emissions, carbon credits, and whatsoever. So that's another another model. And the good news is that there's like systematic verification of the claims. The problem with that is that there can be higher compliance costs, because, somebody has to pay for all these certification certifications, somebody has to verify somebody has to pay for the person who's gonna be auditing all the marketing claims. And the third model is advertising bans to banning advertising of certain products. That's what the Dutch city of Harlem, we know Harlem, in New York, but actually Harlem was a Dutch city before being a neighborhood in New York, actually in New York was New Amsterdam, before being being New York it was a Dutch colony. But I digress. So the Dutch city of our land ban decided to ban meat ads. So they considered that meat was a product that could raise issues for climate change. And they decided that it would by ban all the meat ads, of course, in Canada that could raise freedom of speech issues. It can be easy to enforce an advertising man compared to other types of regime. But there's also downsides to having an advertising man because if we take the example of meat, there might be one producer that has better environmental practices than the other. And let's say you have one producer that's relying on clean energy and another is relying on coal, then maybe you want to buy your steak from the producer that's relying on clean energy. So if you don't have access to information and ads that that allow you to choose your producer, then is are we really achieving anything? Maybe not. So I'm less a fan of advertising bans, but it's certainly a model that's out there. And that can serve its purpose. Keeping in mind that it can that it can be some there can be some constitutional constraints, about advertising them because of freedom of speech issues, issues, but we've done it for some products, like for tobacco products, or for advertising to children, there's been some advertising bans in Canada, so it's certainly something that's possible, but probably within a very restricted scope.
58:26
Thanks. Let's talk about the role of private standards, target setting initiatives and eco labels, can we can we expect the Bureau to rely on recognized industry standards, when determining whether a claim has been properly substantiated?
58:40
They can look at it and they can, can consider the fact that you've been complying with a particular standard standard. But being certified or being compliant with the standard is not a guarantee that the Bureau will, will give you a blank check, and there's no problem you're certified. And then we won't be looking into your claims. And in fact, there's currently a Bureau investigation in to a sustainable forestry certification scheme. So not only are they looking at claims, but also at the certification schemes themselves. So it's not a guarantee, however, the Bureau can use that as evidence of a good market practice. Some certification schemes are top quality, very serious with good verification auditing processes. But it's certainly not enough to avoid all the old responsibility.
59:32
Is the Bureau do you think inherently suspicious about some of these standards to the extent that they, you know, maybe created by industry members?
59:45
Well, we have so I think I think they may be suspicious. I think the bureau was rightfully suspicious, in general, but I think that's it. That's good enforcement approach. You know, there was recently that the flushable wipes case where they were I was not able to land on a particular standard. I think there were some news report where it said that the Bureau was looking for an industry standard and could not decide what it actually meant for a wipes to be flushable. So, you know, I think, yes, they're going to be skeptical. But yeah, these standards, they really need to be taken with a grain of salt.
1:00:21
Moving to the reformation of the Competition Act, potentially to tackle greenwashing does the ongoing consultation about the future of Canada's competition policy address greenwashing?
1:00:34
It does not, and I was very disappointed about that. It does not. There were some consultations in other jurisdictions to reform competition law that have considered environmental market marketing. That's the case of the UK recently. But ongoing consultation does not consider expressly sustainability or environmental marketing. However, it's an open ended consultation. So I think the government is going to be taking any any recommendations from the public that is relevant. So I don't think that it doesn't mean that there's never going to be any changes about that in the future.
1:01:13
Right now, I'm mindful of the time and we don't want to take up too much of your time. But maybe one last question that we can address fairly briefly. Under the current regime, essentially someone a consumer or initial screen for someone who makes a complaint, the bureau conducts an investigation and either decides to take enforcement action or not. And then enter into a consent, or if that doesn't work, perhaps litigate. What are your views on this? Is the current regime working or optimal? Or do you think it needs to be improved?
1:01:52
You're right, there's been many investigations. And in a few cases that I've been that that led to consent agreements. So one could think that the current regime is working. However, I think there's some serious limitations in the current regime. The main one is the fact that the regime is heavily reliant on consumer complaints. So right now, the Bureau is not proactively systematically monitoring climate related claims by firms. So they're relying on consumer complaints and consumers are not well equipped to judge whether a claim should lead to a complaint. No, I, again, I see your product at the supermarket, it's written carbon neutral on the label, will I make a complaint to the Competition Bureau? Well, to do that, I need to be suspicious about something. But if I have zero information about what this claim is about what it actually means, but also, how did they substantiate the claim that maybe it's just going to be difficult for me to make the right complaint to the Bureau, and then are they going to take the matter and can be a very slow process, they receive a lot of complaints. And to my knowledge, the bureau doesn't have any experts, any teams of experts on these topics. However, we saw that it's a very complicated topic, you know, climate related claims are complicated. And having experts that are dedicated to that that are actively monitoring the marketplace, I think that's what we need and the way the current regime is operating. And that's not taking place. And that can be explained by the fact that the bureau doesn't see sustainability, as within its core mandate. I think it's not in the purpose clause. So we could think about maybe adding sustainability in the purpose clause. But I think what really should be front and center is to facilitate, facilitate the identification of misleading and false claims by consumers. And for that you need proper disclosure by firms. Right now, yes, you need to substantiate your claims, but you're not forced to publicly disclose how you came to these claims. And having more standardized disclosure of information, like like we're gonna have for securities laws, having firms that as soon as you want to make a climate related claim, or here's the information you need to disclose, and this information needs to be public, it needs to be easily available on the packaging of the product. I think these are all rules that are very easy to implement, very easy to verify. And I think that's the direction we need to take. So there's the current regime is working, but it's it has very big limitations. In my opinion, having enforcement guidelines would also be a very low hanging fruit, having the bureau publish new enforcement guidelines. That would be an option. Certainly these guidelines need to address voluntary carbon markets. But having regulations that address voluntary carbon markets would be even better, because then it's clear it's in the Act. There's there's predictability there certainty, and it's not up to the list of priorities of the Bureau in a given year. It's there and it's serious. So I think other jurisdictions have moved There's a lot of examples out there that the bureau could build on or, or the government could build on to reform the act. And, and just just to finish on that, and there's a lot of momentum right now, on these issues. There was a UN report that by Catherine McKenna, former Minister of Environment, but also former competition lawyer, I think she was working for one of the national firms. And, and what she said in her report is that governments need to step in and they need to regulate net zero claims by firms and in the Security Secretary General of the UN said the same thing. We need to put an end to greenwashing. And it's important that policymakers take the lead on that. So the UN is saying it. And there's also the net zero advisory body of the federal government that has recently been saying that all federal agencies, all government or government, governmental departments, agencies should be using all the leverage they have to achieve Canada's climate goals. And the Bureau has a lot of leverage, they can regulate these claims. Well, they can not regulate, but they can enforce the current Act, but the government can also use the Competition Act to better regulate these things. So there's a lot of momentum, I think it's moving in the securities law world. It's just time that other other jurisdictions have paved the way it's just time to Canada make the right choices.
1:06:29
Well, Julien, this has been most interesting. There's so many more issues that we'd love to discuss and more deeply. And we could go on for hours, I think we've taken up enough of your time. So I'd like to thank you for sharing your knowledge and your insights with the Counterfactual podcast. We'll look forward to following your ongoing research and publications. And hopefully seeing you again here soon on on a Counterfactual. Thank you.
1:06:58
Thank you very much. And it was a great pleasure in and if anyone is interested in more details about our recommendations. Just go on the CQDE website. Our report is there. It's a long report, but it's, it's very detailed. You'll find a lot of information about that topic in that.
1:07:15
Thank you.
Thank you very much. Bye bye.
1:07:18
Thank you for listening, counterfactual is produced and distributed by the Competition Law and Foreign Investment Review section of the Canadian Bar Association. The opinions expressed by the participants in this podcast are their own and do not necessarily represent those of their employer or other organizations. If you enjoyed this podcast or would like to join the Canadian Bar Association, please visit www.cba.org/sections/competition-law