Amendment to the Canada Business Corporations Act

4 February 2025

By Caroline Chamberland, M. Sc, MBA

A Turning Point for Corporate Governance and Responsibilities

In May 2024, Bill S-285 was introduced, marking a significant step forward in the regulation of business corporations in Canada. This legislation aims to integrate environmental and social considerations into the core purpose of companies. This shift challenges both large corporations and SMEs to rethink their role in society and their impact on the environment.

A Renewed Framework for Business Corporations

The bill proposes a fundamental amendment to the Canada Business Corporations Act (CBCA). It requires corporations to explicitly commit to:

Providing benefits to the community and the environment that are proportional to their size and the nature of their activities;
Reducing, and ultimately eliminating, harm caused to the community and the environment.

This approach reflects a shared responsibility between businesses and their stakeholders. It legally translates environmental, social, and governance (ESG) objectives, aligning Canadian companies with international trends, particularly European regulations.

Implications for Directors and Executives

Directors are entrusted with greater diligence in complying with these new requirements. Their responsibilities now extend beyond traditional financial considerations to include the ecological and social impact of corporate activities. For example:

An executive aware of a project that could destroy an aquatic habitat could be held personally liable if no preventive or corrective measures are implemented.
The publication of an annual report on social and environmental impacts becomes mandatory. While the format of this report is yet to be determined, it must outline the measures taken to mitigate harm.

What Does This Mean for Businesses?

For Large Corporations

Consider the example of Canadian oil companies: they will not only have to reduce their pollutant emissions but also demonstrate their contribution to the community—whether through job creation, community donations, or environmental protection initiatives. This also suggests that uncontrolled pollution would be unacceptable.

For Small Businesses

SMEs are not exempt. A company with four employees must also comply with these principles at its scale, whether by reducing waste or promoting local ethical practices.

How to Prepare?

Assess ESG Risks and Opportunities

Start by evaluating your operations: What are your impacts on the environment and society? Do you have strategies to maximize benefits and minimize risks? This could include:

Setting goals to reduce CO2 emissions;
Adopting practices that support local development;
Integrating ESG criteria into decision-making processes.

Prepare an Impact Report

Although the official format is yet to be defined, it is wise to start documenting your efforts. A clear and transparent report can enhance your credibility with shareholders and business partners.

Educate Your Teams

Engaging employees and executives in this process is essential. Offer training on environmental standards or sustainable development to help them understand the issues and actively contribute to their implementation.

Challenges Ahead

While this reform is promising, it raises several questions:

Implementation: How will businesses be supported in meeting these new requirements? Will incentives or penalties be introduced?
Standardization of Norms: What standards will be adopted for ESG reports?

Conclusion: A Shift Towards Responsible Governance

Bill S-285 represents a significant step towards greater corporate accountability. Although it has not yet been enacted by the federal government, Canadian businesses should see it as an opportunity to innovate and strengthen trust with their stakeholders.

Moreover, this legislation aligns with various international ESG frameworks, including European regulations. While its implementation in Canada may still be a few years away, your clients or markets could require you to comply sooner than expected.

Recommended Action: Begin your transformation today. For more information or to participate in our training sessions on ESG standards, visit our Training section and select the Environment and Sustainable Development category.