PwC Canada Study Finds Canadian Biggest Companies Lagging on ESG Reporting

Published on: 31 January 2022 12:00 PM
by KnowESG

A Brief Summary

PwC Canada has announced the findings of its first 'Canadian ESG reporting insights study,' which looked at the state of ESG reporting in Canada and analysed the problems firms face with their sustainability disclosure policies. Many organisations are underperforming in the development of their ESG reporting and strategy, according to the survey, despite increasing demand from stakeholders such as investors and regulators to disclose sustainability.

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PwC's Building Public Trust Insights framework was used to assess elements such as strategy, materiality, metrics, assurance, and other key components of ESG reporting across 150 of Canada's largest public companies based on a combination of revenues and market capitalization, utilising publicly available information.

While most firms have formed sustainability policies and are attempting to raise awareness of ESG risks, quantification, target setting, and reporting are all behind, according to the research. Only around half (51 per cent) of corporations disclose short-, medium-, or long-term timetables for their ESG initiatives, and only 41% incorporate sustainability-related information in their annual report beyond a specific corporate social responsibility section.

The analysis reveals a lack of ESG reporting maturity at a time when organisations are under increasing pressure to give complete and relevant disclosures on their sustainability risk, impact, and progress. According to a recent PwC investor poll, 79 per cent of investors believe that a company's management of ESG risks is a key element in their investment decisions, and 83 per cent desire ESG reporting that offers thorough information on the company's progress toward ESG objectives. Following the release of mandate letters delivered by Canadian Prime Minister Justin Trudeau in December asking cabinet ministers to proceed toward implementing required climate-related financial disclosures, regulatory obligations are expected to compel firms to report on ESG as well.

Materiality and assurance were two main areas of concern for the condition of the firms' ESG reporting processes. While stakeholders expect firms to identify and report ESG risks and opportunities that are important to their core strategy, only 37% of organisations offer a clear explanation of how they identify substantial sustainability concerns, according to PwC. Furthermore, while 73 per cent of investors stated they would want independent assurance of ESG measures, just one out of every five firms was found to have some sort of assurance of their ESG data.

The discrepancy in reporting looked to be particularly pronounced in the area of climate risk, which is one of the most closely monitored by investors and regulators. While the Task Force on Climate-related Financial Disclosures (TCFD) is mentioned in more than 60% of company filings, just around one out of every four corporations discloses specifics on each of the 11 TCFD recommendations. Furthermore, just 8% of organisations provide quantitative information about analysing possible climate-related hazards, while only 18% report on how climate risk is properly incorporated into their entire risk management strategy.