Canadian regulators warn of rise in corporate greenwashing

CSA advises issuers wanting to avoid being accused of ‘conveying a false impression’ of sustainability credentials

The umbrella body for Canada’s financial regulators has observed another uptick in greenwashing by companies. 

The Canadian Securities Administrators (CSA) published a note this week outlining the current state-of-play for general corporate disclosures by regulated entities in Canada. 

Among the areas it highlighted as top concerns was greenwashing, described as “conveying a false impression” about the sustainability credentials of products and activities. 

“We have observed an increase in issuers making potentially misleading, unsubstantiated or otherwise incomplete claims about business operations or the sustainability of a product or service being offered,” CSA said. 

It is the second time it has noted a rise in greenwashing, having made the same comments in its last review, back in 2022.

This time, it pointed to companies that say they have a net-zero target without providing details, or with “no credible plan to achieve such a target”; and those claiming a product or service is ESG “friendly” or “compliant” without further context or explanation. 

CSA offered a number of pointers to companies wanting to avoid being seen by regulators as greenwashing. 

“ESG disclosure should be specific and supported by facts and corporate activities,” it warned, adding that “issuers should ensure that all ESG disclosures, whether voluntary or required, are factual and balanced”. 

CSA said it expects companies to have “a reasonable basis” for making forward-looking statements, including climate targets and plans, and to explain the assumptions underpinning them and the key risks to their success.

They should also “exercise caution” when citing their ESG ratings as proof of anything, CSA cautioned. 

“In our view, it is not sufficient, for example, to say an issuer obtained a ‘high score’ on ‘a national corporate governance survey’ without disclosing the actual score, the parameters on which the survey was based, the name of the third-party conducting the survey, and the date of the survey.”

The comments mirror CSA’s 2022 review of corporate reporting, in which it highlighted a press release from an anonymous Canada-listed company that claimed it would be carbon-neutral by 2023 without explaining how it would achieve the target. 

The same company also claimed to have a “high rating” on a national corporate governance survey without disclosing details, the 2022 review said.