Environmental, social and governance (ESG) began as a way for socially-conscious investors to screen potential investments based on the behavior of those target companies. In fact, the term was first used in the 2006 United Nation’s Principles for Responsible Investment (PRI), which introduced the requirement for ESG to be incorporated into organizations’ financial evaluations.
Fast-forward to 2023 and ESG has clearly come a long way over the last 17 years, and for good reason. As more consumers, organizations and governments focus on sustainability, the companies that serve them are expected to pay equal attention to the matter. As a result, ESG has steadily evolved into a broader concept that encompasses companies of all sizes.
In response, a growing number of small and medium-sized enterprises—spanning a vast range of industry sectors and geographies—in Canada have firmly signaled their commitment to ESG standards.
Canadian CEOs Embrace ESGs
According to KPMG, 61% of Canadian CEOs are seeing increased demand from stakeholders for more reporting and transparency around ESG issues. The survey also found that 71% of Canadian CEOs believe stakeholder scrutiny of their performance on ESG issues will only continue to accelerate, and that 91% of these executives are willing to divest a profitable part of the business that was damaging their reputation (up from 80% in 2021).
As the first to come under broad scrutiny for their ESG-related practices, larger organizations have led the charge in this area but have so far come up short. According to Net Zero Tracker’s global tally, just one-third (for a total of 702) of the world’s largest publicly-traded companies have established their own net-zero targets. The UN defines net-zero as cutting greenhouse gas emissions (GHGs) to as close to zero as possible, with any remaining emissions reabsorbed from the atmosphere, by oceans and forests.
Net Zero Tracker also says that 65% (456 out of a total of 702) of corporations have yet to meet minimum procedural reporting standards. This represents a slight improvement over 2020, when just 417 of the 702 largest companies had net-zero commitments in place.
Small Businesses Step Up their ESG Games
Customers, business partners and regulatory bodies want to see more companies taking deliberate measures to reduce their carbon footprints, limit their greenhouse gas (GHG) emissions and work toward net-zero goals.
Companies of all sizes can benefit by adopting new or improving upon existing ESG initiatives.
In fact, smaller organizations that prioritize ESG may find themselves well positioned to get in on the “ground floor” and start adopting more sustainable policies and practices.
Canadian small businesses can get started now and get a leg up on competitors that aren’t moving in this direction by:
- Finding ways to reduce their energy usage, which can make up about half of the typical company’s carbon footprint.
- Replacing inefficient incandescent light bulbs with LED bulbs that reduce electricity usage and save the company money.
- Conducting regular maintenance on your heating and air conditioning (HVAC) systems to ensure that they’re running properly and efficiently.
- Eliminating single-use plastics in the workplace and encouraging employees to use reusable water glasses and coffee mugs.
- Encouraging employees to walk or bike to work, or to form carpools.
- Sticking to the “three Rs” when it comes time to dispose of something: reduce, reuse and recycle.
Once in place, ESG measures may also help small businesses attract and retain socially conscious employees; enhance their brand value and reputation; and become more innovative, operationally efficient and risk averse in today’s competitive business environment.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.