The Food and Grocery Council says Greenpeace should apologise, after tests on Cottonsoft toilet paper showed the products were made of plantation pulp.
Earlier this year the lobby group accused Cottonsoft of contributing to the destruction of Indonesian rainforests and said its paper was made of rainforest fibres.
However, independent testing for Cottonsoft has found the products contain hardwood species such as acacia and eucalyptus, and softwood material, including spruce and Douglas fir.
Food and Grocery Council chief executive Katherine Rich says the argument put 130 New Zealand jobs at risk.
Ms Rich said Greenpeace is well-known for making bold statements to grab headlines and donations.
