Chemical substances compliance under CEPA: Managing a growing regulatory risk

Chemical substances regulation is emerging as a significant legal and operational risk for businesses operating in Canada.

As regulatory requirements under the Canadian Environmental Protection Act, 1999 (CEPA) continue to evolve, companies are facing increasing scrutiny over the substances they manufacture, import, distribute, and sell. New restrictions, reporting obligations, and enforcement initiatives are expanding the scope of compliance obligations across a broad range of industries.

For many organizations, chemical substances management has historically been viewed as a technical or product stewardship issue. Increasingly, however, it has become a front-line legal, regulatory, and reputational concern.

Recent developments illustrate several important realities:

• CEPA obligations extend far beyond substance bans and prohibitions.
• Documentation and recordkeeping are becoming critical compliance tools.
• Supply chain transparency is essential to understanding regulatory exposure.
• Businesses must actively monitor regulatory developments to keep pace with change.

For manufacturers, importers, distributors, retailers and other businesses operating in Canada, understanding this evolving regulatory framework is becoming increasingly important as regulators continue to expand their focus on chemical substances management.

Below, we outline four key themes shaping the current chemical substances compliance landscape and the practical lessons they carry for organizations operating in Canada.

Four themes defining chemical substances compliance

CEPA compliance is broader than substance bans

Companies should assess chemical substances compliance broadly. It is not enough to determine whether they manufacture, import, or use substances that are prohibited, restricted, or subject to reporting requirements; they should also consider whether they import, use, or sell products that contain those substances.

Because the regime is complex and spread across multiple technical regulations and CEPA provisions, companies often need a focused legal and technical review to identify the obligations that apply to their activities and products.

Key compliance areas

• Substance-specific restrictions: Companies should assess whether their substances or products are subject to prohibitions or restrictions, including in relation to asbestos, volatile organic compounds (VOCs), mercury, PCBs, and PFAS.
• Reporting obligations: They should determine whether mandatory reporting requirements apply, including under initiatives such as the Federal Plastics Registry.
• Significant New Activity Notices: They should also consider whether a Significant New Activity notice applies, as this regime covers hundreds of substances and may require a filing before certain activities can begin.

Enforcement risk: Non-compliance can lead to significant penalties. For example, a company may face enforcement exposure if it imports a product that exceeds applicable VOC limits or fails to file a required report before selling a product containing certain substances. Recent enforcement in the cosmetics industry illustrates this risk, including a $750,000 fine for failing to submit a required report before marketing a product containing a PFAS substance.

Key takeaway: Companies should assess chemical substances compliance holistically. Evaluating only the substances they manufacture or intentionally use may leave important regulatory obligations overlooked.

Documentation is becoming a key part of compliance

In practice, demonstrating compliance is often just as important as achieving compliance. Companies should be able to explain how they assessed their obligations and why they concluded that a product, substance, or activity is compliant.

This generally requires maintaining clear and reliable documentation, including:

• supplier information;
• safety data sheets;
• volume data; and
• use information.

Key takeaway: Clear, reliable documentation can help support compliance assessments and reduce risk during audits, inspections, or enforcement investigations.

Supply chain visibility is essential

Manufacturers, importers and distributors often depend on supplier data to understand the substances present in their products. Collecting and centralizing this information is an important step to mitigate chemical substances non-compliance risks.

Businesses should consider whether they have sufficient visibility into product composition, supplier certifications, and changes in sourcing or manufacturing processes that could affect regulatory obligations.

Key takeaway: Effective compliance often depends on obtaining reliable information from suppliers and maintaining visibility throughout the supply chain.

Regulatory monitoring helps anticipate issues before they become enforcement risks

Chemical substances obligations are evolving more quickly than ever. Companies should have a robust process in place to monitor legal developments and assess, internally or with the support of third-party experts, how those changes may affect their operations.

New restrictions, reporting requirements, and other regulatory initiatives continue to emerge, creating new compliance obligations across a range of sectors. Companies that actively monitor these developments are better positioned to identify potential issues early and adapt their compliance programs before those issues become enforcement risks.

Key takeaway: Compliance programs should not be static. Ongoing regulatory monitoring is increasingly necessary to manage legal risk in a rapidly evolving regulatory environment.

What this means for your organization

Taken together, these developments highlight a common reality: chemical substances compliance is becoming increasingly complex and important.

Businesses should:

• Assess compliance broadly by examining both regulated substances and the products that may contain them.
• Maintain robust documentation to support compliance assessments and respond to regulatory inquiries.
• Improve supply chain visibility to better understand product composition and potential regulatory obligations.
• Implement effective regulatory monitoring processes to identify new obligations and emerging risks.
• Seek legal and technical guidance where appropriate when navigating complex or evolving requirements.

As CEPA obligations continue to evolve, organizations that invest in proactive compliance systems today will be better positioned to manage future risks and respond effectively to regulatory change.

Special thanks to Alexander Detre of Ecomundo for his valuable contribution with the webinar.

This post is part of a two-part series based on a McCarthy Tétrault Environmental Law Update webinar. It is provided for general information only and does not constitute legal advice. Missed part 1? Read Environmental Prosecutions in Canada: Key Enforcement Trends. 

For guidance on environmental compliance or enforcement matters specific to your organization, please contact a member of our team.