Pandemic prompts Canadian SMBs to integrate ESG: KPMG in Canada

Nearly four in five SMBs have increased their commitment to make an impact on environmental and social issues while large corporate CEOs feeling pressure from stakeholders

TORONTO, Oct. 20, 2021 /CNW/ - Ahead of next month's COP26 climate summit in Glasgow, the leaders of Canada's small- and medium-sized businesses (SMBs) are already starting to integrate environmental, social and governance (ESG) practices into their organizations, finds recent KPMG in Canada research. Nearly four in five (78 per cent) have increased their commitment to make a difference on environmental and social issues in the past 19 months.

"ESG has become a business reality for all companies no matter the size," says Roopa Davé, Partner, Sustainability Services, KPMG in Canada. "The pandemic has raised the public's awareness about societal inequities while the growing frequency of devastating natural disasters heightens concerns about the impact on businesses and communities. Business leaders are increasingly feeling the pressure from their stakeholders to be more transparent and accountable on ESG and sustainability. Many now recognize ESG isn't just a tick box exercise; it's become core to the way we do business."

"ESG has become a business reality for all companies no matter the size," says Roopa Davé, Partner, Sustainability Services, KPMG in Canada.

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As many as two-thirds of SMBs say they have set social and environmental targets in their business plans and tied management compensation to achieving them, the poll findings reveal.

Key poll findings:

• 78 per cent of Canadian SMBs say the pandemic and social inequities increased their company's commitment to make a difference on social and environmental issues.
• 92 per cent of Quebec SMBs said it increased their resolve
• This commitment jumps notably higher among business owners or decision makers in the 25-to-34-year-old demographic, with 88 per cent agreeing
• Commitment increased along with revenue – 82 per cent of companies with annual gross revenue of $100 million or more increased their efforts compared to 74 per cent for companies with revenue between $10 million and $19.9 million
• 70 per cent say their customers expect them to take the lead on societal challenges, such as racial and gender inequality or climate change
• 82 per cent of Quebec SMBs and 86 per cent in Atlantic Canada agree
• More publicly traded companies agree than privately held ones, 78 per cent vs. 67 per cent
• 63 per cent believe major global challenges – such as income inequality and climate change – are a threat to their company's long-term growth and value
• Two-thirds (66 per cent) have set social and environmental targets in their business plans and management pay is tied to achieving them
• This jumps to 74 per cent in Quebec and 75 per cent in Atlantic Canada
• 74 per cent of business owners or decision makers aged 25-34 and 71 per cent aged 35-44 have set ESG targets and tied management compensation to them
• Fewer privately held companies than publicly traded ones have done so – 63 per cent vs. 75 per cent, respectively
• 87 per cent agreed their company is an important part of the communities they operate in and it is important they invest in their long-term economic, social, and environmental health
• 92 per cent in Quebec and 96 per cent in Atlantic Canada
• 88 per cent believe that companies which give back to their communities have a competitive edge in recruiting/engaging employees
• 98 per cent in Quebec and 96 per cent in Atlantic Canada
• 87 per cent of leaders at privately held companies and 92 per cent of publicly traded companies agree

ESG also prominent in Canadian CEO Outlook

Just as SMB leaders are recognizing the need to integrate ESG into their businesses, 75 per cent of their counterparts at some of Canada's largest and most-influential companies in the recent annual KPMG Global CEO Outlook say they also face increased demands from stakeholders – investors, regulators and customers – for more reporting on ESG issues. In fact, that percentage is the highest among global peers surveyed in 11 major countries, including China, Germany, the U.K. and the U.S. France is just behind, at 73 per cent.

Unlike SMB leaders, only 20 per cent of their peers at large companies say their pay should be based on performance against ESG goals and targets as well as traditional financial-performance measures (16 per cent globally).

Nearly four in five (79 per cent) Canadian CEOs at these large, mostly publicly traded companies believe corporate purpose will have an impact on driving financial performance, a number that, while significant, lags their global peers (89 per cent).

"This underscores an opportunity for Canadian leaders to examine and optimize strategies in order to identify and seize opportunities to drive performance while addressing key societal issues for the broader good," says Ms. Davé.

Nearly three quarters (73 per cent) say income inequality and climate change are a threat to their company's long-term growth and value. And, a quarter (25 per cent) are concerned that failing to meet climate change expectations will result in the public markets not investing in their business.

Read more insights about ESG from KPMG's Business Outlook Poll and Canadian CEO Outlook: Delivering on ESG commitments - KPMG Canada (home.kpmg) 

To explore more Canadian insights from the KPMG 2021 CEO Outlook: KPMG 2021 CEO Outlook – Canadian Insights - KPMG Canada (home.kpmg)

About the KPMG Business Outlook Poll

KPMG polled 505 Canadian small- and medium-sized business owners and decision-makers between August 6 and August 15. The online survey of business owners and decision-makers were all drawn from Delvinia's premier online research panel, Asking Canadians, through the Methodify platform. Of the 505 survey respondents, 35 per cent are family-owned businesses and 74 per cent are privately held, while 31 per cent have revenues over $100 million annually and 24 per cent have annual revenues between $50-100 million.

About KPMG CEO Outlook

Now in its seventh year, the KPMG CEO Outlook provides an in-depth three-year outlook from thousands of global executives on enterprise and economic growth. See the 2021 Canadian Insights from some of Canada's most influential CEOs of large companies and organizations.

About KPMG in Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs nearly 8,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see home.kpmg/ca.

SOURCE KPMG LLP

For media inquiries: Caroline Van Hasselt, Corporate Communications, KPMG in Canada, [phone], [email protected]