Canadian companies are not prepared for new ESG disclosure requirements: PwC study

Very few Canadian organizations are ready for new environmental, social and governance disclosure requirements, according to a new study by PwC Canada.

Many Canadian companies are unaware that the Corporate Sustainability Reporting Directive applies to them – and of their obligations under it, according to the findings of the report. Companies that are not prepared to meet the new regulatory requirements will find themselves at risk for not just financial penalties but also reputational damage.

While more than three-quarters (78 percent) of companies disclose their scope one and scope two emissions, less than half (47 percent) disclose their scope three emissions—which is an International Sustainability Standards Board requirement, the report reveals.

The study also found that four out of five Canadian companies (81 percent) don't financially quantify climate-related risks in their reporting.

Moreover, 73 percent of companies fail to fully disclose how they have analyzed and incorporated ESG issues into their long-term strategy, while 62 percent of companies don't obtain assurance over any of their ESG metrics.

“Companies are going to have to take a more strategic approach to sustainability disclosures—from developing a comprehensive ESG reporting strategy to making sure that they have clear and robust processes and controls, to monitor their activities,” said Meghan Harris-Ngae, national ESG strategy and advisory leader at PwC Canada. “This will help create trusted, investor-grade reporting that helps generate sustained long-term value.”

With the release of the Taskforce on Nature-related Financial Disclosures, new reporting standards have emerged regarding nature-related risk management and disclosures, yet this remains a nascent area of ESG reporting for many Canadian organizations. Only six percent of the companies in PwC’s study mentioned TNFD in their disclosures, and only seven percent disclosed the business impact of their nature-related dependencies, risks, opportunities, and impacts.

“The need to act on nature and biodiversity is moving up the business agenda,” said Scott Morrison, partner, ESG reporting and assurance at PwC Canada. “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.”

PwC Canada's ESG Reporting Insights study explores the quality of ESG reporting of more than 250 of Canada's largest businesses, based on a combination of revenues and market capitalization.