PricewaterhouseCoopers (PwC) Canada has unveiled its second Canadian ESG reporting study that assessed the ESG maturity of Canada’s top 250 publicly traded companies, as measured by revenue and market capitalization. The PwC-developed framework was used to examine the strategy, materiality, targets, metrics and key performance indicators (KPIs), assurance and other elements of ESG reporting in Canada.

Significantly, ESG and financial reporting are still treated as separate processes by many Canadian companies and companies are lagging on many aspects of their ESG evolution.

“We are seeing an improvement compared to last year, however, actual progress is failing to keep pace with rising stakeholder expectations. Canadian companies are missing important opportunities to add credibility to their sustainability disclosures,” said Sarah Marsh, a partner of the National ESG Report and assurance leader at PwC Canada. “It’s crucial to have a clear plan of action, as the demand for transparency among stakeholders remains an imperative, and investors and supply chains continue to push for ESG initiatives.”

Climate and biodiversity

Nature and biodiversity have become a crucial aspect to the operational resilience of many industries. Gaps exist in how Canadian companies are integrating their climate-related risk management process into their overall risk management process. This is important because it helps companies understand the specific risks that impact their bottom line. For example, only 48 per cent of Canadian companies report their process for identifying, assessing and managing climate risks. Additionally, among the companies studied, only 36 per cent disclose their expectations of future restrictions on the availability of their natural capital and their strategy for managing this scarcity.

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Diversity and inclusion

The analysis this year shows that Canadian companies’ diversity reporting is focused on gender and LGBTQ2+ inclusion, with limited disclosures for Indigenous peoples, individuals with disabilities and visible minorities. The Truth and Reconciliation Commission of Canada’s final report contained 94 calls to action, but many Canadian companies have yet to adopt a reconciliation framework. Fewer than one in five (19 per cent) of the companies in the analysis discloses a reconciliation action plan. That’s roughly the same proportion as last year.

Banking, financial services and real estate

The finance function is increasingly playing a key role in organizations’ ESG reporting. PwC’S analysis revealed that in the Banking and Financial Services industry only 28 per cent included ESG skills in their board skills matrix. 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.

“Stakeholders want more transparency of comparable and reliable information. Investors are looking to understand how a company is identifying its material ESG risks and opportunities, including the linkage to the financial implications of those activities,” says Caroline Gadbois, director of ESG reporting and assurance at PwC Canada. “Organizations need support in the implementation of processes, internal controls, and systems to collect all ESG data to evaluate performance and measure the impact of sustainable finance. This coherent story is the difference between a compliance-based approach to ESG and one that demonstrates true value creation.”

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The report explores where Canadian companies currently stand, and gives the opportunity to benchmark companies’ ESG reporting and look for industry-specific opportunities. Canadian leaders must act now to remain relevant in a competitive business environment.

To learn more about the 2023 Canadian ESG reporting insights study, click here.

Featured image credit: Arturo Casteneira/Unsplash.

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