October 26, 2023

Why should Canadian companies disclose climate-related financial information if not required of them?

Mandatory disclosure of climate-related financial and environmental information is gaining momentum around the world, including in Canada. Yet for many privately held Canadian companies, it’s not yet required. So why bother? 

While reporting may feel like a burden, it is important to consider the broader benefits. Disclosure can allow companies to enhance and protect their reputation, attract capital, uncover risks and opportunities, track and benchmark progress, and contribute to Canada’s net-zero goals. Starting the process now also helps companies get ahead of regulation that is coming in fast.

Demonstrate action, boost reputation, and attract investment

Reporting creates improved transparency, enabling businesses to demonstrate their commitment to sustainability while building trust with customers, investors, and other stakeholders.

According to a recent study, 98% of Canadian institutional investors identified climate change as a top ESG focus area. Investors are increasingly seeking consistent climate-related information and aiming to allocate their resources towards sustainable and resilient companies.

Uncover risks and opportunities

Disclosure can help companies identify emerging environmental risks and opportunities that may otherwise be overlooked. The process of reporting can help companies be better prepared.

Extreme weather events this year – from rampaging wildfires, damaging storms, floods, and heat domes – have impacted nearly 60% of Canadian small- and medium-sized businesses, finds new research by KPMG in Canada. To address the new reality, companies need to have strategies and business-interruption plans in place.

Contribute to Canada’s net-zero goals

The disclosure process helps companies set ambitious goals and measure progress towards them, on a company level – and against their industry peers.

Disclosure is also essential to track progress on a wider scale. Beyond individual companies, it is helpful to know if whole markets are delivering emissions cuts in line with national and global goals. The overarching aim of climate-related disclosure is to help facilitate the transition to a low-carbon economy.

Get ahead of regulation

New rules are likely to make climate-related disclosure mandatory in Canada. This is already underway in the US, UK, Europe, Australia, and New Zealand.

Early adoption can position businesses as leaders, differentiating themselves from competitors and potentially capturing new opportunities. Now is the time for companies to preemptively improve their climate-related disclosures and sharpen their climate messaging.

Where to begin?

There are tangible business benefits to be gained from climate-related financial disclosure. To navigate current and upcoming reporting requirements, Canadian business can start taking proactive steps today by: