Canadian companies know their stakeholders expect environmental, social and governance (ESG) considerations to be integrated across their organization. But meeting those expectations requires more than simply saying the right things about your sustainability initiatives.
Investors, customers, employees and regulators are demanding ESG reports that are measurable, verifiable and complete.
Organizations without this proof of meaningful action that supports their commitments risk being accused of greenwashing.
These stakeholder expectations will soon rise even more. Regulators, including the Canadian Securities Administrators, U.S. Securities and Exchange Commission and European Commission, are developing or have already introduced mandatory ESG reporting requirements. But regulators aren’t the only driver. Other stakeholders are also asking companies to provide this information. It’s a significant shift—and one for which many Canadian companies are unprepared.
Against this backdrop, we’ve applied our PwC-developed framework for assessing ESG reporting maturity to the public disclosures of Canada’s top 250 publicly traded companies, as measured by revenue and market capitalization. For the second consecutive year, we’ve used our framework to examine the strategy, materiality, targets, metrics and key performance indicators (KPIs), assurance and other elements of ESG reporting in Canada.
We see Canadian organizations talking about ESG more seriously. But actual progress is failing to keep pace with rising stakeholder expectations in many cases.
of companies don’t disclose a Task Force on Climate-related Financial Disclosures (TCFD) report, leaving them potentially unprepared for mandatory reporting requirements underpinned by the TCFD framework.
of businesses don’t integrate their reporting by combining financial reporting with ESG disclosures and risk management. Investors are looking to understand how a company is identifying its material ESG risks and opportunities, the resulting commitments and progress on achieving them, including the linkage to the financial implications of those activities. This coherent story is the difference between a compliance-based approach to ESG and one that demonstrates true value creation.
of businesses only talk about their positive performance, missing opportunities to build trust with stakeholders through balanced and verifiable ESG reporting.
of Canadian companies are not obtaining reasonable or limited external assurance of their ESG reports—a powerful step that adds credibility to disclosures.
But there’s good news for organizations working to close these and other gaps in their ESG reporting, as well as for the stakeholders who rely on their disclosures:
The move to mandatory reporting is pushing organizations toward specific globally recognized standards and away from a confusing patchwork of external and internal frameworks.
Even more encouraging, many organizations that previously announced a net-zero commitment have since followed up with a plan for achieving their ambition and are providing historical data to demonstrate progress.
They’re applying their background in financial reporting, risk management and data collection processes and controls to setting, measuring and reporting on ESG targets. They’re also bringing their experience verifying metrics and ensuring compliance with changing regulatory requirements. ESG reporting topics can be complex and unfamiliar to some finance professionals. But integrating ESG teams with finance teams to continue upskilling and gain a broader perspective of the risks and opportunities facing their organization benefits the entire business.
Canadian companies need to accelerate their efforts to seize these opportunities. It takes time to correctly instill the right governance structures, data-collection systems and internal controls—all of which need to be in place before ESG reporting becomes mandatory. Meeting these upcoming requirements, as well as the rising expectations of clients, suppliers, employees and other stakeholders, requires companies to act now.
Our analysis takes a closer look at several ESG themes commonly prioritized by stakeholders.
Canadian companies are operating in an environment in which their long-term success depends on certain non-financial factors that increasingly have a financial impact. Stakeholders want to know how these factors affect your business. They also want to have confidence that your disclosures are consistent, credible and comparable.
But high-quality ESG reporting is about more than communicating with stakeholders.
Identifying your organization’s ESG risks and opportunities, as well as strategies to manage them, is critical to sustaining your company’s ability to deliver outcomes that fulfill its purposes and secure its financial success. It takes what we call a community of solvers: experts both within and outside your organization working together to create high-quality ESG disclosures. Making meaningful sustainability commitments, setting relevant targets and tracking your progress with metrics, data-collection tools and validation processes help build trust with stakeholders—a key source of sustained value creation.