Only one-third of Canadian companies report on biodiversity loss

With universal reporting standards and tightening regulations on the horizon, companies will need to increase the quality and scope of their environmental, social, and governance (ESG) reporting, a KPMG Canada report says.

The vast majority (91%) of Canada’s top 200 companies by revenue currently report on ESG performance, with nearly three-quarters (72%) reporting against their carbon reduction targets. However, only a third (35%) report on biodiversity loss – including their potential contribution to its acceleration and related risk to the company, reputational or otherwise.

“With nearly two-thirds of Canadian companies not yet disclosing how their operations impact nature, biodiversity and natural capital preservation is the rapidly emerging next frontier for climate disclosures,” said Katie Dunphy, partner in the ESG practice at KPMG Canada. “Most organizations report their progress against specific targets, but companies must now expand their lens to incorporate their full impact on nature and society to effectively manage growing physical, financial, and reputational risks.”

KPMG expects the launch of the global Taskforce on Nature-related Financial Disclosures (TNFD) and the EU’s Corporate Sustainability Reporting Directive (CSRD) frameworks to drive up reporting in the future.

Moving on to the “social” part of ESG, only half (50%) of Canada’s top 200 firms disclose their approach to managing human rights issues and just 39% report on their Indigenous reconciliation efforts.

“Our analysis shows companies that are further along in their ESG reporting journey are more likely to disclose on these metrics, but all Canadian businesses have a responsibility to protect against biodiversity loss, advance Indigenous reconciliation, and respect human rights,” said Dunphy. “While reporting is voluntary, that won't last long. It's essential organizations quickly take stock of rights holder, stakeholder and regulatory expectations and transparently report against these metrics – or risk falling behind.”

Despite increasing stakeholder pressure around ESG, only 36% of the top 200 obtain third-party assurance to ensure disclosures are accurate and align with best practices.

Quality of reporting and metrics is a key part of the global sustainability effort because the pull to greenwash or fudge numbers might be tempting – especially when ESG efforts could significantly impact corporate profit margins or conflict entirely with a company’s business model.

“Assurance over non-financial ESG information helps organizations build trust in the accuracy and reliability of their disclosures, adding another layer of credibility as stakeholder scrutiny of reporting practices continues to climb,” said Farah Bundeali, a partner in audit and assurance at KPMG Canada.

KPMG says the establishment of the International Sustainability Standards Board (ISSB) by the International Financial Reporting Standards (IFRS) Foundation means a common reporting language on ESG is coming. Beyond climate-related disclosures, similar reporting frameworks are being developed to address the wider universe of ESG metrics.

“While it’s a complex process to arrive at universal ESG standards, companies shouldn’t wait to get started,” Dunphy said. “Organizations that choose to report across a broader spectrum of ESG topics will be in a better position to attract capital and remain competitive in the long run.”