81%

of Canadian CEOs are using their corporate purpose to help drive action in addressing the needs of stakeholders.

The pandemic and other recent events have heightened awareness of companies' responses to environmental, social and governance (ESG) issues. Customers, employees, investors and other stakeholders are increasingly expecting companies to make more socially and environmentally responsible decisions.

Our latest CEO Outlook found that 75% of Canadian CEOs surveyed are seeing significant demand from stakeholders to address ESG issues. The bulk of this pressure is coming from institutional investors (59%) and regulators (29%), although customers (7%) and employees and new hires (5%) are looking for leaders to step up as well. Clearly, the push for change has moved from the grassroots to the halls of finance and government.

Leading with purpose

Leaders are paying attention and want to address these issues and are looking to leverage their corporate purpose when making decisions.

​Canadian CEOs are the most likely of their global counterparts to use their corporate purpose to help drive action in addressing the needs of their stakeholders. As can be seen in the chart below, these CEOs see this purpose having the most impact on building customer relationships, building brand reputation, shaping capital allocation, partnerships, alliances, and M&A strategy.

Where Canadian CEOs believe corporate purpose will have the greatest impact

The chart also shows that 79 percent of Canadian CEOs believe corporate purpose will have an impact on driving financial performance—a number that, while significant, lags their global peers (89%). This underscores an opportunity for Canadian leaders to examine and optimize strategies in order to ensure they are meeting both financial and stakeholder needs, including addressing key societal issues for the broader good.

Good ESG is good business

While the link between purpose and financial results may not yet be as strong for Canadian CEOs, a majority still indicate that major global challenges—such as income inequality and climate change—are a threat to their company's long-term growth and value, thereby necessitating action.

As such, CEOs are prepared to put their money to work in addressing these challenges, with more than half expecting to spend upwards of five percent of revenue on programs to become more sustainable. This commitment is a significant step in driving real change and value for organizations and stakeholders, alike. But this investment needs to be made thoughtfully and strategically. Companies must clearly understand their ESG objectives, define their ESG strategy and how they are going to execute it.

  

73%

say income inequality and climate change are a threat to their company's long-term growth and value

Roopa Dave

"When looking at how to articulate an ESG strategy, step one is engaging with your broader stakeholders, including investors, regulators, customers and employees to understand what they think is important. Understanding what's happening in the ESG universe outside your business and how that integrates with existing strategies can help you identify where to focus for maximum impact."

— Roopa Davé, Partner, Sustainability and Impact Services

Social issues take center stage

While climate change has remained a dominant concern for leaders, the pandemic and other recent societal events has resulted in a shift in stakeholders focus and scrutiny when it comes to the social aspect of ESG. Canadian CEOs expect stakeholder scrutiny of their performance on social issues will continue to accelerate and that increasingly they will be held personally responsible for driving progress in the diversity, inclusion and equity of their organization.

To satisfy stakeholders and win the war for talent, companies will need to embrace inclusion and diversity across the organization — ensuring that they don't just attract diverse talent, but that they retain, cultivate and promote an equitable workplace culture

Rob Davis

"Workplaces that are truly inclusive ensure that different points of view get heard and that everyone gets a chance to impact decision making. This will be even more important as companies adopt hybrid work models."

— Rob Davis, Chief Inclusion & Diversity Officer, Chair of the Board of Directors, Partner, KPMG in Canada

The G in ESG

With increased pressure from stakeholders, organizations and their leaders will be held increasingly accountable for the commitments they make and the results achieved when it comes to ESG and sustainability goals. However, 41% of CEOs say they are still struggling to articulate a compelling ESG strategy. Twenty-seven percent are struggling to meet the reporting needs of stakeholders and investors and another 21% don't feel they have built the rigour needed for ESG reporting.

Canada 75%

of Canadian CEOs see increasing demand from stakeholders for ESG reporting and transparency

Global 58%
Heather Baker

"Having a comprehensive ESG strategy is crucial to being able to articulate a compelling ESG story to stakeholders. And capturing reliable impact metrics is important when bringing your story to life."

— Heather Baker, Canadian Managing Partner, Quality and Risk Management and Social Impact Leader, KPMG in Canada

Key actions:

  1. Companies need to have a clear understanding of their ESG strategy and the impact it has on decision making in order to address growing pressure from governments, regulators, consumers and employees.
  2. Companies need to create a culture of inclusion and diversity across the organization to attract and retain new employees and satisfy investor and government expectations.
  3. Companies need to develop rigour and process around setting, measuring and reporting on progress against ESG commitments.

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