From Green Claims to Legal Claims: How Countries Are Policing Greenwashing

Introduction

While working on a sustainability reporting project in collaboration with GRI, my SIPA team noticed a pattern - ESG reports filed by Canadian companies were becoming shorter and less narrative-heavy over time.

My team wondered if this was a rare but possible case of green blushing. That theory did not survive scrutiny as we found that Canadian companies were adjusting their sustainability communications in response to tightening anti-greenwashing enforcement. In Canada, ESG reporting was no longer a reputational or signaling exercise but had become a legally risky activity.

That experience led me to research on the extent of greenwashing legislations in the world.

Over the past few years, greenwashing has quietly shifted from being a reputational issue to a legal one. What used to be handled through advertising norms, voluntary ESG disclosures, or public pressure is now being pulled into hard law: competition statutes, consumer protection rules, and securities regulation.

To better understand the trend, I analyzed regulations from different countries, starting with the strongest legal regimes and moving toward the weakest, and then asked a harder question: what problems remain unresolved even in the most advanced systems? We will look at Canada, UK, US and India as examples for this article.

For detailed information, this article from KPMG on page 4 has a map with 25 jurisdictions covered. It is however, missing key countries like India in its analysis. - https://assets.kpmg.com/content/dam/kpmgsites/xx/pdf/2025/12/greenwashing-regulatory-overview.pdf.coredownload.inline.pdf

Canada

Canada has the strongest anti-greenwashing framework out of the four countries. Under Canada’s Competition Act (it treats it as a market distortion) a public representation is illegal if it is false or misleading “in a material respect,” assessed based on the overall impression it creates, not just the literal words used.

Two rules make Canada unusually strict.

First, the burden of proof lies on the company making the claim. If a firm says its product or business has environmental benefits, it must already have evidence in hand. For product-level environmental claims, the law requires an “adequate and proper test.” For broader business or activity-level environmental claims, substantiation must be based on “internationally recognized methodology.” Regulators do not need to disprove the claim; the company must prove it.

Second, proportionality matters. Companies cannot highlight small green initiatives in a way that disguises the dominant environmental footprint of the business. A claim can be technically true and still illegal if it creates a misleading overall impression.

The result is predictable. Canadian companies have become conservative. ESG reports are shorter. Broad claims like “net-zero” or “climate positive” are used sparingly, if at all, unless they can be defended under testing and methodology standards. This is not regulatory overreach; it is how a proof-based liability regime is meant to function.

Are concerns about chilling effect legitimate feedback?

Many investors and companies have protested that the legislation has had a chilling effect - as personally observed in our GRI project. Canada has clarified terms used such as internationally recognized methodology, as well as clarified that anything governed by securities law, green claims in financial disclosures to securities legislators will not be covered. In my opinion the laws are not onerous - as lacklustre enforcement has often led to major companies, obfuscating information about the extent of their environmental effects.

United Kingdom

(Source: https://www.charlesrussellspeechlys.com/en/insights/expert-insights/dispute-resolution/2025/anti-greenwashing-in-the-uk-eu-and-the-us-the-outlook-for-2025-and-best-practice-guidance/)

In the UK, there are set of laws and regulatory frameworks designed to protect consumers from misleading claims, including environmental claims, such as (i) the UK Competition and Markets Authority (CMA)’s Green Claims Code, (ii) the new powers the CMA has under the Digital Markets, Competition and Consumers Act 2024 (DMCC); and (iii) the Financial Conduct Authority (FCA)’s anti-greenwashing rule, introduced in November 2023 as part of its Sustainability Disclosure Requirements (SDR) and investment labels regime.

The Competition and Markets Authority’s Green Claims Code lays out clear principles: environmental claims must be truthful, specific, substantiated, lifecycle-aware, and proportionate. Claims must be -

• truthful and accurate

• clear and unambiguous

• not omit or hide important information

• make fair and meaningful comparisons

• consider the full lifecycle of the product or service

• substantiated with evidence

Aside from the Green Claims Code under Competition Law, there is also advertising law, Advertising Standards Authority can rule quickly, force ads to be withdrawn, and publicly explain why claims were misleading. Even without massive fines, reputational damage acts as a real deterrent.

MOST IMPORTANTLY, In the financial sector, the UK goes further. The Financial Conduct Authority’s Sustainability Disclosure Requirements (SDR) and investment labels policy statement requires sustainability-related claims by financial firms to be fair, clear, and not misleading. This matters because it treats greenwashing as a financial conduct issue, not merely marketing misconduct.

The United States

The US lacks a comprehensive federal anti-greenwashing law, relying instead on FTC guidance and possibly upcoming state specific laws. The FTC actively enforces greenwashing rules under Section 5 of the FTC Act, which prohibits unfair or deceptive acts in commerce.

The Green Guides (last updated in 2012 - updates were expected in 2022) serve as non-binding guidance, but the FTC uses them as a benchmark in investigations and lawsuits against misleading claims like "recyclable," "carbon neutral," or "eco-friendly" without proper substantiation. Actions often result in consent orders, injunctions, and penalties—e.g., $5.5 million fines in some cases.

There are some new changes with the arrival of enforcement deadlines under California’s SB 343 (“Truth in Recycling” law) - which is state specific and congressional progress on the proposed federal Packaging and Advertising Claims for Knowledge (PACK) Act - which happened late in 2025 but is voluntary and non- binding.

(Oregon attempted to pass an anti greenwashing legislation in 2025 but it didn't happen.)

India

India's primary anti-greenwashing measure is the Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims, 2024, issued by the Central Consumer Protection Authority (CCPA) on October 15, 2024. These supplement the Consumer Protection Act, 2019, targeting deceptive ads with vague terms like "eco-friendly," "green," or "sustainable" unless backed by evidence.

Greenwashing is defined as deceptive practices like exaggeration, vagueness, omission, or false claims using words ("eco-friendly," "green," "sustainable"), symbols, imagery, or unsubstantiated environmental assertions in ads, packaging, labeling, or e-commerce. Applies to direct/indirect claims about products/services' environmental impact by manufacturers, sellers, advertisers, and endorsers.

• Claims must be specific, verifiable with scientific evidence, third-party certifications (e.g., lifecycle assessments), or accessible disclosures (QR codes/links).

• Avoid generics without qualifiers; disclose trade-offs (e.g., "low-water" but high-energy).​

• Endorsers need due diligence; comparative claims require head-to-head data. ​Developed via public consultation (draft Feb 2024) post a CCPA committee.​

  
  

Under Consumer Protection Act 2019: first violation up to ₹10 lakh fine + 2 years jail; repeats up to ₹50 lakh + 5 years; endorsers face 1-3 year bans. Advertising standards, non-binding are also there as of 2022 and discuss misleading ads guidelines.

The Act is fairly close to Canada in intent, except that the evidentiary threshold is not provided. However, it definitely has more legal teeth than USA's FTC enforcement regime - the actual test of how it is implemented remains to be seen.