Like it or not, Net Zero requirements and ESG (Environment, Social & Governance) reporting are coming.
And while the two initiatives are going to add extra layers of complexity to how companies big, small, and in-between do business, the news of their impending arrival isn’t all bad.
Yes, companies in Manitoba are going to need to understand how to manage the risks and opportunities associated with ESG.
But that’s not necessarily a bad thing.
“Yes, there’s been a lot of conversation around emissions, supply chain requests and upcoming regulatory requirements,” says Alison Joutsi, Vice-President, ESG & Sustainability for BDO Canada. “In the not-too-distant future, Canadian companies are going to need to demonstrate how they’re managing various ESG risks and opportunities to stay competitive.”
Make no mistake about it: ESG reporting is going to become a major issue, as agriculture is a significant contributor (along with forestry) to greenhouse gas (GHG) emissions in Canada.
Those emissions are categorized into three scopes: direct emissions from farm-owned sources like livestock and combustion (Scope 1); indirect emissions from purchased electricity and heating/cooling (Scope 2); and indirect emissions from activities outside the farm, including transportation and supply chain impacts (Scope 3).
“Public and private companies banking with main banks will eventually have to report their emissions to banks to secure and maintain loans,” explains Joutsi. “OFSI regulated financial institutions will need to disclose its Scope 1 and 2 emissions starting in 2024, while Scope 3 emission reporting will start in 2025, depending on whether you are a D-SIB, large bank, or an SMSB .”
She says all companies in Manitoba should start engaging with their key stakeholders to understand what ESG issues are material to their key business partners.
“It’s critical to understand the reporting criteria, so it’s important that (food processing) companies start doing things like talking to suppliers now. They will need to go down the value chain to make sure they’re aware of everything they need to do to meet sustainable procurement criteria.”
That said, there is time to get started.
“Larger organizations will be the first ones impacted,” Joutsi notes. “Smaller organizations won’t be impacted immediately, so they will have time to get things in order. They will have time to start gradually incorporating ESG practices into the way they do business.”
As daunting as incorporating ESG practices into a business is – especially for smaller companies with limited budgets and staffing – there are many benefits that can come out of it.
“There will be a lot of opportunities and value creation opportunities that come with it,” she says. “For example, there is potential capital available from government programs, including Investment Tax Credits and Scientific Research and Experimental Development tax incentive programs that will help organizations finance various initiatives. That capital can be a big help to organizations committed to ESG.”
Joutsi adds there are other benefits associated with embracing ESG.
“Organizations can save costs on water and waste, diversify revenue streams, and even create new revenue streams. They can also adopt advanced technologies to become more efficient.”
That being the case, Joutsi encourages organizations to conduct a materiality assessment to identify and prioritize the most critical ESG issues they may be facing.
“The key here is collaboration – that’s what’s important for organizations to determine ESG issues successfully,” she says. “There must be a high level of collaboration throughout the (agriculture and food processing) industries, with organizations working with banks, to successfully incorporate ESG criteria into the way they do business.”
In the long run, there won’t be any downside to embracing ESG.
“Sustainable projects may be funded, so if you’re on board, there is the potential to get funding,” says Joutsi. “That will lead to benefits like the ability to better differentiate your product and improve your image with consumers. It’s just a way of doing good business while ensuring your business is sustainable into the future.”
Food & Beverage Manitoba will be holding a special webinar with Alison on November 9, 2024, 12-12:30 pm. Join us for this open-to-the-public online session to learn more about ESG and what it means for your business. REGISTER HERE.