By Caroline Chamberland, M. Sc. MBA
A turning point for corporate governance and responsibility
In May 2024, Bill S-285 was introduced, marking a major step forward in the regulation of corporations in Canada. This legislation aims to fully integrate environmental and societal considerations into the mission of businesses. This transformation challenges both large corporations and small and medium-sized enterprises, prompting them to rethink their role in society and their impact on the environment.
A renewed framework for corporations
The bill proposes a fundamental change to the Canada Business Corporations Act (CBCA)It requires that companies' purpose statements include explicit commitments:
- Contribute to the community and the environment in a manner commensurate with their size and the nature of their activities;
- Reduce, and ultimately eliminate, harm to the community and the environment.
This approach reflects a shared responsibility between companies and their stakeholders. It translates into legal terms the environmental, social, and governance (ESG) objectives, thereby bringing Canadian companies into line with international trends, particularly European regulations.
Implications for officers and directors
Directors are entrusted with increased diligence to comply with these new requirements. Their responsibility extends beyond traditional financial considerations to include the environmental and societal impact of the company's activities. For example:
- A manager who is aware of a project that could destroy an aquatic environment could be held personally liable if no preventive or corrective measures are put in place.
- The publication of a annual report on societal and environmental impacts becomes mandatory. Although the format of this report is still undetermined, it will have to present the measures taken to minimize harm.
What does this mean for businesses?
For large companies
For large companies
Take Canadian oil companies, for example: they will not only have to reduce their 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 not be acceptable.
For small businesses
SMEs are not exempt. A company with four employees must comply with these principles on its own scale, whether by reducing waste or promoting ethical local practices.
How can you prepare for it?
Analyze ESG risks and opportunities
Start by assessing your activities: what are your impacts on the environment and society? Do you have strategies to maximize benefits and minimize risks? This could include:
- Setting targets for reducing CO₂ emissions;
- The adoption of practices that promote local development;
- The integration of ESG criteria into decision-making processes.
Prepare an impact report
Even if the official format remains to be defined, it is wise to start documenting your efforts. A clear and transparent report can strengthen your credibility with shareholders and business partners.
Raise awareness among your teams
Involving your employees and managers in this process is essential. Offer training on environmental standards or sustainable development so that they understand the issues and actively participate in their implementation.
The challenges ahead
Although this reform is promising, it raises several questions:
- Implementation : How will companies be supported in complying with these new requirements? Are incentives or penalties planned?
- Standardization of norms : What standards will be used for ESG reporting?
Conclusion: a shift towards responsible governance
Bill S-285 marks a major step forward in corporate accountability. Although it has not yet been enacted by the federal government, Canadian companies should view it as an opportunity to innovate and build trust with their stakeholders.
Furthermore, this legislation aligns with several international ESG regulatory frameworks, including European laws. Although it may take a few more years to be implemented in Canada, your clients or markets may require you to comply sooner than expected.
Recommended action : Start your transformation today. For more information or to participate in our ESG standards training courses, visit our section. Formations and select the Environment and Sustainable Development category.
Suggested reading:
How to effectively integrate climate change into ISO management systems