Canadian companies continue their slow and long journey towards adopting environmental, social and governance (ESG) criteria. Their disclosure remains deficient, especially for indicators related to climate change.
In the 2023 version of its Canadian Perspectives on ESG Reporting, the professional services firm PwC evaluated the reports published by the 250 largest companies listed on the stock exchange according to their turnover and their market capitalization. He notes that, if their commitment to these criteria is intended to be a little more serious this time, it is still far below the expectations of the stakeholders.
Despite increasing market and regulatory pressures, only a handful are answering the call. In the summary, it is observed that 77% of companies do not incorporate the principles of the Task Force on Climate Change Financial Disclosures (TCFD) into their reports, “suggesting that they are not prepared for meet the information obligations based on these principles”. In fact, 38% of companies have yet to embed their information on ESG issues and risk management in their financial reports. Moreover, 59% speak only of their positive results.
And while nearly three-quarters of global investors say it’s important for ESG indicators to be independently certified, the same percentage of Canadian companies don’t pay attention and don’t use external certification.
By refining the reading to include indicators related to climate change among the ESG criteria, “although many of them disclose their emissions, Canadian companies seem to be just beginning to grasp the effects of climate change on their activities”. PwC cites the fact that only 48% of companies publish their process for identifying, assessing and managing climate risks. Fewer still (22%) include an analysis of climate change scenarios in their information, despite the fact that this is also a recommendation from the TCFD, continues the accounting firm.
If we broaden the spectrum, but focus on indicators with less than 50% support, we see that few (30%) publish a net zero emissions target or even a target for each of the indicators. (22%). Or to establish specific objectives (26%) and clear deadlines for achieving them (27%). Just 44% describe progress in achieving goals.
Climatic opacity
By way of comparison, in its report published in January, PwC Canada notably observed that only 41% of the 150 largest Canadian companies then assessed filed an ESG report on the place occupied by sustainable development in their strategy. From this analysis carried out in September 2021, it also emerged that 62% of the companies surveyed say they recognize ESG factors, but only 30% have established deadlines for achieving their objectives. Inertia was also intended to be more marked in the face of global warming. Only 35% have a formal commitment to carbon neutrality, but just 17% of them have set a deadline, we wrote.
“Overall, the ESG information disclosed by large companies in the country does not meet the requirements of capital markets and stakeholders. This makes them vulnerable to rumors of greenwashing,” PwC said at the time.
Although many disclose their emissions, Canadian companies seem to be just beginning to understand the effects of climate change on their activities.
And we are only talking about listed companies here. So what should we think of the situation among private companies? Without forgetting that investors and shareholders are not the only stakeholders. Employees, lenders, customers, suppliers and even regulators also base their decisions on ESG information and thereby aspire to transparency, responsibility and even accountability.
But it is true that all of this takes place in a regulatory environment where disclosure remains voluntary and where harmonization is lacking.
We can, at most, recall here that the TCFD, set up by the Financial Stability Board led by Michael Bloomberg and Mark Carney, has made 11 recommendations to companies on how to communicate to investors important information related to climate, grouped into four components (governance, strategy, risk management, indicators and targets). Many actors and stakeholders in the ESG universe believe that they form the basis of financial information on climate change.