Federally Incorporated Companies Must Now Disclose Climate Impacts

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By ESG Analyst Antonio Basso

As part of the new climate reporting legislation aimed at improving sustainable business in Canada, large federally incorporated businesses will be mandated to report their climate actions. These disclosures are aimed to improve transparency for investors, ideally helping mitigate the climate impacts of their securities. The government hopes that with this increased transparency, there will be dramatic shifts towards ‘green finance’, encouraging companies to invest in sustainable sectors. In the same press conference, they also promoted their ‘Made-in-Canada sustainable investment guidelines’, continuing to announce subsidies for organizations in carbon capture, EV development, and others.  
Each of these actions converges to a single clear message: Mandates are required to push companies to make changes toward sustainability. But is this true? Why can’t companies strive for sustainable solutions under their own volition? 

Each of these actions converges to a single clear message: Mandates are required to push companies to make changes toward sustainability. But is this true? Why can’t companies strive for sustainable solutions under their own volition? 

Should Mandates Extend Elsewhere: Whatever Happened to Pathways Alliance? 

If you watched anything on TV over this past year, you’d often find yourself watching ads for a mysterious oil conglomerate: Pathways Alliance, promising to contribute to the preservation of oil-sands wetlands. This organization is actually a consortium of Canada’s largest oil producers that collectively make up “95% of Canada’s oil sands production”. It’s immediately clear that its members are the driving force behind the negative environmental impacts of the domestic oil industry. So how can they suddenly claim to be ‘green’ without changing their current destructive business practices? This paradox is a textbook example of greenwashing: “Conveying a false impression or misleading information about how a company’s products are environmentally sound”. Pathways alliance was eventually forced to remove their advertising as part of mandatory anti-greenwashing legislation. 

Is Pathways Alliance the norm?

Misleading statements about a business’ sustainability are not isolated, they are a direct response to broader consumer pushes for sustainability. Research has shown that “companies systematically disclose an incomplete financial picture of how their decisions and activities affect the environment”. As an aside, that same paper also claims that governments should “compliment voluntary reporting with mandatory requirements”. Clearly, the current rules allow too much leeway over what companies must include in their financial statements. This not only deceives stakeholders but sidesteps any meaningful change in the development of sustainable practices. If companies can get away with simply not reporting the problematic aspects of their policies, why would they attempt to change them? 

Some businesses do provide detailed reports on their own volition– even seeking third-party verification of their statements. For example, Canada Post uploads impact reports to a non-profit organization called the Carbon Disclosure Project (CDP) annually. Reporting with third parties is arguably the only non-regulatory approach towards holding companies accountable for their environmental impacts as they verify the claims they make when reporting. However, the accolades companies receive are largely not in the form of financial benefit and only encourage companies that are already sustainable to report. Besides, why would a fossil fuel giant file a complete sustainability report? So, while these organizations do bring about significant change in business practices, more is needed to ensure a transformation in Canada’s business landscape.

Leading the future of sustainability

While the government’s current plans only force federally incorporated business into updated sustainability reporting, extending these requirements to other publicly traded companies in Canada can further help improve transparency for the public and investors alike. Equally as important, these shifts would dramatically combat greenwashing and force businesses to actually change. Extending mandatory climate disclosure laws could set a precedent for stricter environmental accountability across all sectors of the economy. By doing so, Canada can position itself as a global leader in sustainable finance and corporate transparency, paving the way for meaningful climate action. 

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