Covid-19 pandemic has driven Canadian SMBs to accelerate ESG initiatives

Nearly four in five (78%) small- and medium-sized businesses (SMBs) have increased their commitment to impact environmental and social issues in the past 19 months, according to research from KPMG.  The survey polled 505 Canadian SMBs between August 6th and August 15th.

“The pandemic has raised the public's awareness about societal inequities while the growing frequency of devastating natural disasters heightens concerns about the impact on businesses and communities,” said Roopa Davé, partner, sustainability services, KPMG Canada. “Business leaders are increasingly feeling the pressure from their stakeholders to be more transparent and accountable on ESG and sustainability. Many now recognize ESG isn't just a tick box exercise; it's become core to the way we do business."

According to the KPMG survey, 70% of SMBs say their customers expect them to take the lead on societal challenges such as racial and gender inequality and climate change. Nearly two-thirds (63%) of SMBs admitted that global challenges such as income inequality and climate change threaten their company's long-term growth and value.

Many SMBs are building in incentives to reach their ESG targets. Two-thirds (66%) say they have set social and environmental targets in their business plans, and that management pay is tied to achieving those targets. 

Advancing corporate ESG agendas also could be a difference-maker in attracting and retaining talent within a notably tight labour market. Eighty-eight percent of respondents believe companies that give back to their communities have a competitive edge recruiting and engaging employees.

Across the survey results, public companies were likelier to take the lead on ESG issues than private companies. Regionally, Quebec and Atlantic Canada businesses were ahead of Canada's other regions in their enthusiasm and support for ESG integration.

Large companies are also facing pressure to accelerate ESG agendas. Seventy-five percent of large companies in Canada polled in KPMG's Global CEO Outlook survey say they have faced increased demands from stakeholders - including investors, regulators, and customers - for more reporting on ESG issues. Nearly three-quarters (73%) say income inequality and climate change threaten their long-term growth and value, while a quarter say they are concerned that failing to meet expectations around climate sustainability will reduce investment from public markets in their businesses.

However, contra to SMB leaders, only 20% of leaders at large Canadian companies say their pay should be tied to performance against ESG goals and targets.