At a panel titled Sustainability Disclosure in Canada: Overcoming the Headwinds, hosted by the Canadian Sustainability Standards Board (CSSB), speakers discussed the challenges and opportunities for Canadian businesses as international trading partners increasingly look for environmental, social and governance (ESG) transparency.

Eight out of Canada’s 10 biggest trading partners either have or will soon have mandatory disclosure rules — including those in the Indo-Pacific region, an emerging market for Canada’s agri-food sector, said Canadian Sustainability Standards Board chair Wendy Berman.

She called Canadian Sustainability Standards the “ticket to play” in a global market which may also be moving toward sustainability disclosure practices.

Canadian standards in the global market

Companies do not need to be perfect, only rigorous, Berman said.

“If you communicate that rigour, and you put sunlight around the main assumptions, which our standards tell you to, then that is what you’re communicating to the market.”

Berman said the standards board is helping Canadian companies address the market’s needs by looking at global reporting baselines and adding changes to reflect the uniqueness of the Canadian market.

“What we also have is a Canadian version of proportionality mechanisms,” she said. “What we’re saying to the market is ‘It’s okay, build capacity on these items and continue to do that so that you’re ready to enter the global market’.”

Ontario Securities Commission CEO Grant Vingoe said Canada will need to follow a global baseline if it wishes to continue on the path of market diversification. He said he hears many investors express frustration at a lack of a consistent global framework, forcing them to rely on private sources.

Disclosure fatigue

Canada is in a “pivotal moment for sustainability in Canada,” one “full of complexity and uncertainty and also real possibility,” said Elizabeth Dove, executive director of the UN Global Compact Network Canada.

“Over the last few years, Canadian companies have stepped up,” Dove said. “They’ve adopted climate action strategies. They’ve incorporated ESG into governance and risk. They’ve built systems to measure, disclose and manage sustainability performance. But let’s be honest, it hasn’t been easy.”

There has been fatigue around disclosure, and some businesses are now asking if the measures are necessary — particularly if they seem to hamper the company’s ambitions.

“We cannot allow ambition to be the casualty of uncertainty,” Dove said.

“Climate change is not waiting for regulatory clarity.”

Adoption of ESG will likely increase as the means of measuring climate risks improve, said Peter Routledge, superintendent of the Office of the Superintendent of Financial Institutions.

“Guess what? As you measure the risk more effectively, boards of directors and senior management teams will make really smart decisions about how to invest to counteract that risk,” Routledge said.

“That’s the beauty of market capitalism at work.”

“It is not a regulatory burden for the sake of increasing costs to in pursuit of some abstract virtue,” Routledge said. “That’s the last thing we’re interested in. What we’re interested in is creating management and risk measurement discipline to elevate and improve and sustain shareholder value.”

The post Sustainability disclosure ‘ticket to play’ in emerging global market appeared first on Alberta Farmer Express.

ESG pillars are environmental, social and governance. They are a testy threesome, and it has been tough going without clear direction within country, let alone on a global scale. Increasingly, frustrated industries and companies are either ditching or adjusting their ESG goals.

The exodus from ESG promises is reflected in the abandonment or shift in policy with such companies as Coca Cola, Unilever, Volvo, Shell, Air New Zealand, Kimberly Clark, Bank of America, Microsoft and others who are adjusting the sails in such an expensive and underdefined regulatory space. Financial institutions are walking away from the Net Zero Alliance and only 16 per cent of global companies might reach their 2050 net zero targets and no one, anywhere, has a clear mandate on what compliance would look like.

Nuffield Scholar and ESG expert Catherine Marriott traveled the world looking at ESGs in agriculture and found a profound inconsistency between countries where there were gaps in definitions, methodology, measuring and leadership. Canadian experts agree that there are a number of indices and standards that need harmonizing, and that farms and businesses are not getting the signals they need to manage risk. And those putting the pressure on do not have the aptitude to achieve the goals.

Marriott argues that it is time to slow down and think this through for agriculture: “We’ve got to pause and design ESG changes with the systems in mind. Farmers operate in a complex ecology so you can’t segregate one part, such as GHG emissions, without considering the impact and the unintended consequences that are detrimental to the farm.”

The reality is that farmers care about the three pillars but in many cases cannot afford to fully implement change. The ESG agenda is driven by the EU and California and adopted by those regions with wealth who have an expectation that all of agriculture should comply – even when the farmers within their own borders cannot afford to do so.

Food and Drink Europe estimates the global cost of implementing ESG’s in agriculture is €50 billion Euro and that the cost of doing nothing is the same. The short-term cost is borne by farmers and industry and the long-term price of doing nothing is carried by governments and community. There is an advantage to society to stay focused on the end game. The unanswered question is: just where is the starting line?

We know that sustainable practices are very regional, and each area of the country will do what is best for their environment and their community. We can decrease our sovereign risk by growing and then processing our own food. With Canada’s potential in this space, we could be writing the book as collaborators in the ESG space.

Unfortunately, those influencing or in policy often do not appreciate the value of food production and processing within our borders and even those that should, such as the Canadian Alliance for Net Zero Agri-food, are focused on Scope 3, suppliers, which translates into farmers who will bear the cost of ESG regulations. (There are no women or farmers on the executive or advisory committees in this alliance.)

Back on the farm, Marriott encourages producers to understand their market. She advises farmers to know what is important to their investors and financial institutions but most important is to appreciate what matters to their own business, family and community. Between stakeholders there is certain to be some commonality and that is the starting point. On the farm, begin at the point of practicality.

Marriott’s research found that farmers are doing what they are able with the resources at hand. But like carbon credits, it is the wild west in terms of establishing value, and there are strong societal expectations that may not always be realistic.

She says: “We sit here with a wet throat, full gut and money in our wallet thinking that people should be doing better. The inconvenient truth is that we’ve got supply chains that need to be filled, people in factories that need to work and supermarket shelves that need filling.”

It is time to stop and think this through. We are on track to tackle the data disparity through the Centre for Agri-Food Benchmarking which also wisely considers economics as a fourth pillar. This will pave the way to set targets and achieve goals that are practical, measurable and cost-effective in Canada. It could result in a point of product differentiation, although there is no system in place to value, reward or market differentiated product. And that is a key point.

In addition, the reporting standards are still driven by the International Financial Reporting Standards Foundation with a board comprised primarily of global financial institutions. We must question if governments, global banks and mega food retailers should drive our local, regional and national agricultural ESG agenda in the absence of a functioning system and standardization at a time when participation is wavering.

Without a system in place, the unintended consequence that Marriott refers to could be the exodus of independent farms in food production.

The post Understanding ESG in Canadian Agriculture appeared first on Alberta Farmer Express.

Panels covered ESG and the changing Canadian ag landscape from national and global perspectives.

The first panel focused on ESG standards in a global context.

IFRS Foundation Montreal office Director Isabelle Mégré, said that in many international markets, like the United States and European Union, sustainability disclosure could soon become standard.

To illustrate how this could affect Canada, she gave the example of a California bill set to take effect in 2026 which would see large companies required to disclose climate-related financial risks, including value chain emissions.

“Canada was worth nine billion in 2023,” she said of Californian export money. “We are actually California’s top agriculture and agri-food export market”

Centre for Agri-Food Benchmarking Founder David McInnes asked the speakers how ESG standards can be created to apply to the disparate sectors of Canadian agriculture.

“The standards are not a one-size fits all as we might think,” Mégré said. “It actually requires a lot of judgment and reflection from new companies that are using it.”

“It might feel like a one-size-fits-all, because there’s one set of standards. But really, when you dig into it, it’s about reflecting on what is affecting your company’s perspectives, your company’s business models.”

“We’re trying to find this common place where it can fit for everybody,” she said.

Canadian sustainability Standards Board Interim Chair Bruce Marchand stressed the importance of having organizations like his remain independent in this process.

“In some countries, the regulator sets the standard and the regulation at the same time,” he said, “and in other countries, the regulator and the standards are separate, but they’re both an arm of government.”

“I want to stress that our board is independent, so it’s not a government and it’s not a government board like our sister boards.”

Mégré closed the discussion by warning that ESG regulation can be very politically polarizing. She said that this has created a fear of backlash among investors wanting to discuss ESG.

The second panel took on upcoming policy such as the Jan. 1, 2025, implementation of the S1 and S2 of the ESG Sustainability Disclosure Standards as well as Bill C-59, which aims to increase greenwashing accountability.

Deloitte Senior Manager of Infrastructure and Capital Projects Michelle Leslie expressed concern over how producers and businesses will have a burden of proof put on them for their sustainability efforts in accordance with Bill C-59. “There’s no standard as to what that burden of proof is,” she said.

Leslie thought definitions of sustainability have not been sufficiently broadened beyond just environmental factors. “If you achieve emissions reductions but it’s at the cost of bankrupting communities, if it’s at the cost of making people poor in the process, then I would say you have failed.”

Pulse Canada VP of Corporate Affairs Greg Northey said ESG goals are not as important to Canadian producers and consumers as other economic development goals.

“From an agricultural sector perspective, we’re still very much focused on how do we become the best, most competitive producer in these global markets,” he said. “And a lot of the time, sustainability, ESG, is not as much an issue.”

United Farmers of Alberta Sustainability Director Selene Munro said there should be more attention paid to cost and scope when creating ESG standards.

“There is a cost to implementing or building or consolidating these standards. Not all programs are built out. There is no understanding of scope.”

“A lot of those organizations will not meet the requirements for reporting because they’re not publicly traded,” said Munro. “The companies that are publicly traded are going to need or require that data from individuals within the supply chain, and that will go down to producers.”

The panelists also highlighted the importance of data collection for influencing public policy.

Before lunch, breakout groups of attendees discussed questions about disclosure standards and a National Index. Following the break, panelists from the breakout groups debriefed on the Importance of consolidation and issues with limited awareness of the standards.

They also spoke to the importance of translating tenets of the International Sustainability Standards Board (ISSB) to be relevant to ag-specific data tracking.

Finally, Centre for Agri-Food Benchmarking Tarra Drevet closed the conference with some words about ESG, sustainability and data collection, stressing the importance of quality information and communication of data.

Drevet communicated an overall note of hope in her closing remarks: “I think we can be optimistic about what’s coming up next.”

The post Second day of CAPI conference tackles ESG appeared first on Alberta Farmer Express.