Beyond Courage Incorporated: Exploring ESG in Canada

By Duncan Sinclair, Chair, Deloitte Canada

On a recent episode of my podcast Courage, Inc., I spoke with Monique Leroux, Chair of the Industry Strategy Council on how Canada can become a leader in environmental, social and governance (ESG) factors.?Since our conversation, the International Panel on Climate Change (IPCC) released its Sixth Assessment Report, revealing that the last decade was hotter than any period in the last 125,000 years. Climate crisis is officially at the fore, and our country and world require bold leadership to build a sustainable and climate-resilient future.

Canada’s leadership in ESG

In a year where we have faced a global health crisis, protests over racial injustice, and extreme weather events, Environmental Social and Governance – or ESG – factors have driven public discourse like never before. ESG principles necessitate that industries and government evaluate their contributions to social and environmental goals, and while these challenges are complex, Canadian leaders have a significant and important opportunity to build a positive future.

Canada has strong potential to be an ESG leader. We have the resources, the social stability, and the appropriate governance mechanisms to assume that leadership position. Ultimately, it will be our capacity to collaborate, our willingness to make tough decisions, and our courage in the face of crisis that determine whether Canada becomes a global leader in ESG. This work cannot be accomplished by governments alone, nor solely by businesses, and it cannot be the responsibility of individual citizens. Instead, for Canada to reach its full potential, we must adopt a cross-sector approach to ESG, one that renews public-private partnerships along shared environmental and social objectives.

Where Canada’s corporate sector can play a key role is in fully integrating ESG into management strategies throughout our nation’s corporate boardrooms, and in turn, helping to move the policy conversation forward. In order to make progress, there need to be standards and reporting to demonstrate which companies are taking real action, how industries are evolving, and to measure what impact their actions are having on society.

Climate comes to the fore

In what has been called the most comprehensive recent examination of the physical science on climate change, the Intergovernmental Panel on Climate Change (IPCC) makes the unequivocal assertion that “human influence has warmed the atmosphere, ocean, and land." We have felt the impacts of climate change at home in recent months, whether this be the unprecedented heatwave and devastating wildfires in British Columbia, or the heavy rain experienced in Atlantic Canada as a result of hurricane Elsa.

For Canadians, the Sixth Assessment Report comes at a pivotal point in time ahead of a federal election. Climate will be a key election issue for politicians of all stripes, and one requiring courageous leadership to address while preserving our economy. In their report, the IPCC notes that “future climate-related risks would be reduced by the upscaling and acceleration of far-reaching, multilevel and cross-sectoral climate mitigation and by both incremental and transformational adaptation.” For us to address the most pressing challenges we face as Canadians, we must collaborate across sectors to have a genuine impact.

In addition to strengthening cross-sectoral ties, innovation will be key in the fight against climate change. In Catalyst 2030, Deloitte examines how a carbon-pricing strategy to steadily increase the price of emissions (to?$114 by 2030) could substantially lower emissions. This would not be the only step; additional measures such as the implementation of ambitious standards and incentives that accelerate the adoption of clean technologies must also be implemented to achieve positive environmental outcomes and allow Canadian industries to lead globally on sustainable innovation.

The need to take action is not solely driven by economics; we must also take urgent action out of our moral duty to one another. Those most impacted by climate change are often the poorest and most vulnerable members of society. In Canada, our Indigenous communities are particularly exposed to the worst impacts of the crisis and are facing looming dangers as the climate crisis exacerbates natural disasters. According to a recent study by the Canadian Journal of Forest Research, in looking at current and future wildland fire exposure, they found that “Northern communities, which are primarily Indigenous or associated with resource-extraction industries, are particularly exposed to wildland fires and their impacts.” In addition to protecting Indigenous communities, we must also consider Canada’s global role in protecting the large number of climate refugees who have been and will be displaced from their homes as a result of the effects of climate change.

Climate action through governance

In a May article, I argued that Boards of Directors have a duty to recognize risks and opportunities related to climate change, guide their executives to build and execute environmentally friendly strategies, and actively inform their stakeholders of the company’s climate response. Climate change, I wrote, often remains a low priority at the board level. While the IPCC’s latest report is stark in its assessment of the impact of climate change, it reinforces the point that leaders must take it upon themselves to confront unsustainable practices within their organizations now.

To ensure a resilient future for Canada in the face of the climate crisis, our institutions must embrace and implement ESG principles as we navigate the challenges ahead.