Alastair Cranston, who was capped 19 times for his country, has been told by the Commissioner for Ethical Standards in Public Life in Scotland he has breached its code of conduct.
The 64-year-old now awaits his punishment, which could involve a suspension for up to a year from his role as member for Hawick and Denholm ward on Scottish Borders Council.
Mr Cranston had been accused of constantly promoting his rural recycling and renewable energy business in various council debates and admitted he had been taken aside by a senior council official and warned on several occasions.
The complaint about the SNP councillor promoting "anaerobic digestion" at meetings is understood to have come from a fellow councillor and he received notification of the findings from the Edinburgh-based standards commissioner on July 16.
Mr Cranston said: "I would be reluctant to use the word guilty, I have contravened the guidelines of what is acceptable in public life.
"I have been very naive and I suppose you could even say ignorant, but that is no defence. This investigation has lasted several months now and I will just have to wait and see what happens.
"I do not want to comment on possible sanctions."
He added: "I genuinely do not think I have done anything wrong. I never thought this was an issue. I will have to weigh up the future and deal with any punishment.
"There has been no financial gain whatsoever. If I have to, I can, and will, prove that."
Last week a press release from the offices of Scottish Borders Housing Association, of which Mr Cranston is a board member, announced it was supporting a feasibility study into a green energy plant at Burnfoot, Hawick.
In his Scottish Borders Council register of interests, Mr Cranston is listed as a director of Economic Recycling Services, which is involved in community and business waste recycling, including the provision of "local anaerobic digestion biogas facilities", and also has an agency contract with AgriKomp, which specialises in "energy generation from Biogas".
A graduate of Edinburgh University, he played rugby for Hawick before representing Scotland between 1976 and 1981.
From 2002 to 2005 he was chief executive of the Borders Reivers professional rugby team.
After they were disbanded, the businessman became involved in the development of rural recycling and renewable energy initiatives related to the linking of communities and agriculture.
He was elected as an SNP councillor to the Hawick and Denholm ward on Scottish Borders Council in 2012 after switching political allegiances from the Conservatives.