Climate Disclosure: A Vehicle for Value in Canada

As Canadian businesses and government entities sharpen their focus on sustainability, decisions pertaining to their future Environmental, Social, and Governance (ESG) commitments and pledges along with initiatives to improve ESG metrics and drive the green transition have become more intertwined with their overall governance and strategic planning. 

However, many entities are hampered by the lack of consensus around uniform sustainability reporting requirements. As a result, business and government leaders have been left to make long-term ESG pledges without sufficient tangible evidence to back them up. 

Earlier this year, the Canadian government began to address these “greenwashing” concerns within Bill C-59, which contained an amendment to the Competition Act. As of June 2024, corporations are now required to prove that their public sustainability targets are substantiated. Failure to demonstrate progress towards such goals may lead to financial penalties. 

Unfortunately, the new legislation created significant uncertainty, given the lack of a widely accepted methodology to demonstrate progress toward meeting ESG objectives. Due to fears of backlash and litigation, many companies resorted to taking down their voluntary disclosures. Clearly, this was not the desired outcome and led to a regression in the quantity and quality of ESG reporting in Canada. 

That situation has led to Canada’s proposed new climate disclosure regulations and taxonomies, which aim to remedy this concern, while also serving as a driver for sustainable capital to flow into the Canadian economy.