Survey Shows 78% of Canadian CEOs Making ESG a Priority Due to Regulations

November 21, 2024 TruthUSA

A significant number of Canadian business leaders are placing a high emphasis on environmental, social, and governance (ESG) principles, with the main driving force being regulatory obligations, as per a recent survey.

The survey revealed that while 29 percent of Canadian CEOs considered ESG their primary operational focus—twice the global average—78 percent identified regulatory and reporting obligations as the primary motivator for prioritizing ESG.

The survey, conducted by KPMG, involved 1,325 CEOs interviewed between July 25 and Aug. 29.

Furthermore, 75 percent of respondents expressed that it would take a minimum of three years to realize substantial returns on ESG investments, with 63 percent struggling to fully integrate ESG into their businesses for value creation purposes.

Regarding barriers to ESG implementation, 79 percent mentioned frequently changing regulations, 74 percent highlighted ESG data collection and aggregation, 61 percent pointed out difficulty in building a business case, 57 percent cited a lack of budget, and 55 percent mentioned insufficient ESG technology or buy-in from senior leadership within their companies.

ESG, an investment principle focusing on environmental, social, and corporate governance issues, encompasses environmental matters such as climate change and energy efficiency, social aspects like customer satisfaction and diversity, and governance factors like board composition and corporate culture.

ESG adoption has seen an increase in recent times, with a 2023 Business Development Bank of Canada (BDC) study observing that 82 percent of major buying organizations mandated their suppliers to disclose information on at least one ESG category.

Doron Telem, a partner and national ESG Leader at KPMG in Canada, emphasized that Canadian CEOs are under significant pressure to address issues like climate change, decarbonization, and ethical supply chains as indicated by the survey findings.

“The intricacies of sustainability in operations, logistics, finances, and legalities require the entire C-suite to work collaboratively in embedding ESG throughout the organization,” he mentioned in a statement regarding the survey results.

Telem also stated that while regulatory demands are pushing the focus on ESG, many companies acknowledge that “resilience and risk management are paramount.” Management teams are evaluating ESG factors and refining their ROI calculations to incorporate more data on risk impacts, cutting-edge technologies, and financing options.

In the U.S., Republican states and federal politicians have opposed ESG compliance, arguing that it compromises energy security and goes against national interests.

Pension funds focusing on ESG have faced legal challenges from contributors, like American Airlines pilots, who claim that their retirement investments are being used for political purposes rather than for their benefit.

Kentucky’s Democratic Gov. Andy Beshear has aligned with Republicans in opposing ESG. By enacting a law mandating public pensions in his state to consider financial risks and returns over ESG, Beshear stated last year that there has been a shift towards using Americans’ savings to promote ideological causes through the ESG movement.

Democratic U.S. President Joe Biden vetoed a Republican proposal last year that aimed to prevent pension fund managers from prioritizing ESG.

Most states and politicians governed by Democrats argue that prioritizing ESG in investments is essential. A letter by Democratic attorneys general addressed to congressional leaders in 2022 states, “Considering ESG factors alongside all other material factors does not ‘sacrifice’ pensioner retirements for political motives; it acknowledges that environmental, social, and governance issues are essential factors impacting returns.”

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