Rather than wait for the 2024 regulations to hit, our recent study reveals five ways Canadian businesses can begin reporting on sustainability impacts and show progress toward their goals.

In Canada, reporting on environmental, sustainability and governance (ESG) has so far been done on a voluntary basis, by businesses eager to burnish their brand as a sustainable one. As a result, the processes for both tracking and mitigating environmental impacts are, on the whole, less rigorous in Canada than in regions more progressive on sustainability regulations.

However, regulations are coming. By 2024, the federal government will begin to require eligible banks, insurance companies and financial institutions to provide ESG disclosures on their climate-related risks. Although the guidelines are focused on financial services organizations, these firms play a prominent role in shaping the entire economy through their lending and investment. Because the “financed emissions” attributable to this lending and investment will need to be included in the new disclosures, financial institutions will need to collect sustainability data from their clients, which will require those businesses to formalize their own climate-related disclosures.

In this way, the regulations will produce a domino effect, in which Canadian businesses will need to understand and report on not just the sustainability impact of their own internal operations but also in their wider value chain.

That’s why—rather than wait for these regulations to hit—businesses should learn from their counterparts in other regions and begin understanding what it takes to not just report on sustainability impacts but also show progress toward their goals. In partnership with Oxford Economics, we surveyed 3,000 executives, including 262 in Canada, and found that the biggest challenge will be ramping up intensity around data-driven initiatives. This includes identifying what data to collect, automating its collection, working with clients and partners to provide accurate data, and determining the best options for mitigation.

We’ve developed five recommendations to help Canadian businesses overcome their data challenges and outperform their markets by embedding sustainability at their core.

#1 Boost sustainability investments to realize full business value

Source: Cognizant Research
Figure 1

Businesses across Canada are gearing up to increase investment in their sustainability initiatives. Average annual budget growth is expected to increase from 5.6% between 2018 and 2020 to 11.9% between 2025 and 2030.

#2 Elevate your internally focused sustainability initiatives for even greater return

Source: Cognizant Research
Figure 2

The top two initiatives Canadian businesses are pursuing to advance their sustainability transformation are energy-oriented and enabled by technology: using digital tools to make operations more efficient (77%) and generating energy through sustainable means such as solar panels (62%). Looking ahead to 2025, many have plans to make premises and processes more sustainable and less wasteful, and will ramp up their use of digital analytics to identify sustainability improvements in their operations.

#3 Expand your sphere of influence, upstream and downstream, to achieve greater business benefits and impact

Source: Cognizant Research
Figure 3

Six in 10 Canadian businesses are greatly focusing their sustainability strategy on their internal operations compared with no more than half focusing on supply chain (50%) and products and services (46%). This emphasis on internal operations is completely justifiable as it stems from the confidence and control businesses can exert in this area.

Conversely, it’s more difficult to effect change in areas traditionally out of their own control, such as the complexities of modern supply chains or the afterlife of a product once in the customer’s hands. Businesses can gain greater rewards, however, by combining new levels of supplier engagement with the use of digital technologies to extend their reach and gain visibility and influence across the entire value chain.

#4 Explore new ways to apply and deploy mature and emerging technology

Source: Cognizant Research
Figure 4

Cloud, IoT and artificial intelligence are the most commonly implemented technologies to support sustainability efforts, but some less deployed technologies may be equally as impactful. Although only 42% of businesses in Canada have applied intelligent automation, for example, more than seven in 10 of those that have say it’s effective.

#5 Evolve power structures to allow for necessary shifts in culture and accountability

Source: Cognizant Research
Figure 5

While it’s primarily CEOs in Canada who allocate the sustainability budget (58%) and approve the sustainability strategy (74%), very few (less than 10%) are accountable or have their performance measured against the strategy’s success. Instead, it’s the chief sustainability officer (CSO) and other senior managers who are responsible for outcomes regardless of their absence at the strategy table.

To embed sustainability into the company’s culture, businesses must clarify roles and responsibilities, and clearly connect these to an incentives system to successfully encourage all employees to participate in sustainability endeavors.

Learn how your business (or you) can become sustainable to the core in our report, “Deep Green: How data, technology and collaboration will drive the next phase of sustainability in business.”

For even more on this topic, visit our Sustainability & Resilience webpage.

This article was written by Ambrose Chiu, Director, Sustainability Practice, Cognizant.