Over 1000 Canadian companies are facing environmental, social and governance (ESG) reporting requirements under the new Corporate Sustainability Reporting Directive (CSRD), research published in the Wall Street Journal revealed.
CSRD mandates companies both inside and outside the European Union (EU) to report on ESG. Canadian companies will need to publish their first report in 2025 and obtain an independent review of what they report. So time is of the essence.
However, a new report by Enterprise Ireland that surveyed 332 senior Canadian decision makers in Medium to Enterprise businesses found that 74 per cent are still struggling to put ESG mandates into action. In fact, only 39 per cent report having taken “substantial steps” toward implementing ESG initiatives.
Over half of the surveyed organizations had a moderate-to-low understanding of ESG commitments and implications, while 42 per cent saw pitfalls in resource constraints – which includes the adoption of technology to capture data, and report on progress. Additionally, only one-third have a dedicated ESG role or department, and another 18 per cent do not know how it is managed.
With these challenges, companies are employing a mix of internal initiatives like employee surveys and external initiatives such as sustainability reports and third-party audits to capture data.
Over 70 per cent say they are likely to adopt new technologies in order to deliver on ESG initiatives in the future. Meanwhile, 38 per cent have developed such technology in the past 12 months, the report noted.
Forrester, in fact, predicts that the sustainability management software market will double next year due to compliance needs.
Nonetheless, only 26 per cent feel that they are capturing “very accurate” ESG data, while 34 per cent say it is not accurate, or they simply do not know.
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, PwC asserted in a recent report.
Canadian companies, accordingly, recognize the importance of ESG initiatives to corporate policy, with 67 per cent predicting that ESG would escalate as a company priority.
“We know that today’s consumers are more purpose-oriented than ever before, and that
individuals are more likely to support a brand that aligns with their values, whether that’s
in support of climate change, human rights efforts, or ethical business practices,” said David McCaffrey, country manager and senior vice president at Enterprise Ireland Canada. “Based on this, organizations understand that ESG initiatives are more than a government
requirement, but a business imperative to effectively compete in today’s landscape.”
Between 42 and 66 per cent of the surveyed companies are targeting environmental initiatives, including waste management (66 per cent) and carbon footprint reduction (63 per cent). And 55 per cent plan to reduce scope 1, scope 2, or scope 3 emissions.
However, companies are targeting social initiatives more, with employee well-being and labour practices (both 89 per cent) marked as top priorities.
A possible reason for this is that “social initiatives have often more immediate and visible impacts on local communities and employees, making the targets and results more tangible for companies,” explained McCaffrey. “We have also seen that addressing social
issues may more closely align with a company’s values and mission, making it a priority.”
Finally, between 57 per cent and 76 per cent are targeting ESG governance and reporting, including ethical business practices, and anti-corruption measures as well as stakeholder engagement.
“The bottom line: these problems are not independent of one another, and that opens the
door for Canadian companies that might be feeling the pressure under this year’s
mandates to target ESG initiatives that can solve for more than one issue,” said McCaffrey.