2024 Canadian ESG Reporting Insights

The sustainability reporting pressures on Canadian companies are becoming even more demanding and complex. Rising stakeholder expectations have led to prescriptive regulations replacing voluntary guidelines. What’s more, many organizations that operate in multiple jurisdictions are now finding themselves subject to numerous environmental, social and governance (ESG) reporting frameworks.

Here in Canada, corporate sustainability reporting is becoming more sophisticated. But companies’ ESG reports are still falling short of what’s required to meet these new regulatory requirements, including the evolving climate change risk disclosure expectations of stakeholders.

To better understand the readiness of Canadian companies, we undertook an extensive analysis of the public disclosures of more than 250 of Canada’s largest businesses, based on market capitalization and revenue. Our exclusive benchmarking exercise explores how companies incorporate strategy, materiality, metrics, targets and other factors into their ESG reporting.

The gaps we identified go beyond compliance risks. Businesses that can’t answer questions from customers and investors about how they manage their material ESG risks and opportunities in a satisfactory manner—and are unable to produce trusted data to support their narrative—may lose market share and access to financing.

It can inform internal decisions and give companies a strategic advantage by helping them improve their operational performance and increase their long-term enterprise value.

Many Canadian companies must soon file ESG disclosures under multiple ESG standards. These include the Corporate Sustainability Reporting Directive (CSRD) in Europe, which requires businesses to publish their first report in their 2025 fiscal year, and California’s climate disclosure rules, which mandate reporting beginning in 2026 on 2025 information. Additionally, the Canadian Sustainability Standards Board (CSSB) is reviewing the International Sustainability Standards Board (ISSB) global baseline for use in Canada,¹ while the Canadian Securities Administrators (CSA) is considering whether—and over what time frame—these standards should be mandated.

These standards align with the four pillars of the Task Force on Climate-related Financial Disclosures (TCFD)—governance, strategy, risk management, and metrics and targets. But 38% of the companies in our analysis don’t mention TCFD or only include a limited narrative around its four pillars.

A similar number of companies (31%) don’t include a discussion of their material issues.

Investors in particular want to understand a company’s unique material topics, which will vary across industries (and even between companies within the same industry). Regulators and standard-setters have taken notice: ISSB, CSRD and other ESG reporting frameworks all require companies to consider materiality in various ways.

Elsewhere in our analysis, we found other gaps that Canadian companies must close to meet new ESG reporting standards. For example, the ISSB requires companies to disclose quantitative information on how sustainability-related risks and opportunities affect their current and future financial position and performance. Yet in our analysis, 81% of companies don’t financially quantify climate-related risks in their reporting.

New requirements for climate-related disclosures stem from rising stakeholder expectations. Our research shows investors care about companies’ exposure to climate risks. But many say they want more quantitative climate information companies.

Our analysis uncovered encouraging signs. More than three-quarters (78%) of companies disclose information about emissions from their own operations (scope one and scope two emissions). But only 47% also disclose the emissions from their supply chain (scope three emissions)—an ISSB requirement.

We saw similar trends when we looked at the use of climate-scenario analyses, which is also required under ISSB and helps organizations consider a broader range of assumptions, uncertainties and potential future states. Nearly half of companies (49%) undertake this analysis in at least qualitative terms. But only 19% completed a quantitative analysis—a critical step to tell your stakeholders about the financial implications of climate change on your business.

Stakeholders recognize that most companies depend on nature and want information on how they protect the water, land and biodiversity of the regions in which they operate. New reporting standards emerged in September 2023 with the release of the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations for nature-related risk management and disclosures. But this remains a nascent area of ESG reporting for many Canadian organizations: just 6% of companies in our analysis mentioned TNFD in their disclosures. And only 7% disclosed the business impact of their nature-related dependencies, risks, opportunities and impacts.

Producing trusted ESG reporting that meets stakeholders’ climate expectations and new regulatory standards involves assessing your material topics. It also requires pinpointing the related risks and opportunities, and producing metrics and targets that show how you manage those risks and opportunities.

Below, we highlight several findings from our analysis to benchmark Canadian companies’ reporting against specific characteristics of trusted, investor-grade ESG reporting.