Telling a credible ESG story
We recently analyzed the ESG reporting of Canada’s top 250 public companies. We found reporting around KPIs, metrics and targets is improving, particularly on climate-related topics. But we also saw opportunities for many organizations to tell a more effective and credible story of their ESG performance.
The following elements make your disclosures more comparable and help curtail any perceptions of management cherry-picking metrics that reflect positively on their organization:
Setting targets. These should be specific, quantifiable and cover both short- and medium-term timeframes. Currently, only 22% of Canada’s top companies disclose targets for more than three-quarters of their KPIs.
Showing progress by disclosing historical data. Among the Canadian companies in our analysis, 50% include a historical data point for the majority of their KPIs. But only 34% share two or more historical data points.
Aligning reporting with global standards. Many climate-related reporting standards are aligned to the pillars of the Task Force on Climate-Related Financial Disclosures (TCFD). But 59% of companies in our analysis don’t mention the TCFD or its principles in their disclosures, leaving them potentially unready for mandatory reporting requirements.
New disclosure rules will force many companies to include additional metrics in their reporting. This will result in companies telling a more complete story of their ESG performance. Some metrics may paint an unflattering picture. As you prepare for these regulations, it’s worth thinking about how these potentially unfavourable metrics could affect your stakeholders’ decision-making—as well as how you can develop and communicate a plan to track, monitor and improve your performance.