As if Canadian businesses didn’t already have enough red tape and other government-related aggravation to deal with, the spectre of the ESG (environment, social and governance) standards as defined by the Canadian Sustainability Standards Board (CSSB) is hanging over their heads. These standards promise to burden businesses with a massive administration headache at significant cost and seriously damage Canada’s competitiveness and economic potential.
While currently voluntary, these standards may become mandatory if adopted by regulators like the Canadian Securities Administrators (CSA). At present, there is no timing known for the standards to be made mandatory, but the CSA has said it is considering it. The intent of those supporting mandatory climate disclosures is to compel businesses to produce data that can then be used by investors to support a transition to achieve net zero emissions by 2050. It is appalling that these elite globalists believe they have the right to put businesses out of business if they do not conform to these complex and unrealistic standards. These data are intended to be integrated into financial statements as an accounting standard that must be adhered to. However, they represent an enormous additional and costly red tape burden for businesses and there is much subjectivity involved in the standards.
The subjectivity and guesswork involved in determining whether or not a given business is sufficiently in conformance with ESG standards is a huge problem in and of itself. The standards are supposedly only to be applied to publicly listed companies, but this is a fallacy as there are many supply chain relationships among publicly listed companies and smaller, private firms such that those private companies will be included in these regulations. We have already heard from smaller businesses which were attempting to meet the demands of public companies they had been supplying with goods and services for years but were suddenly deemed to be unacceptable suppliers as they supposedly were not in ESG compliance. Some small suppliers have effectively been asked to open their books by larger business customers, creating problems with the disclosure of confidential competitive business information and the risk that ESG will be abused to obtain such information.
Internal contradictions within the ESG system proposals also raise questions as to the real objectives of advocates of the system. For example, a business that effectively produces nothing or very little and creates few if any jobs will have a high ESG score, but such a business is economically useless and does not increase prosperity or enhance standards of living. ESG doesn’t factor in vital considerations like geopolitical issues and energy security, serious problems that are now significantly disrupting the global economy.
The requirement of the ESG for every business to be able to document such things as where every single item or service they sell originates, the emissions it generates, emissions it is likely to generate down the road depending on who purchases it and how they use it, is highly speculative and an impossible requirement for a small business. Imagine a small grocer with four employees trying to keep track of the provenance of everything they sell, the respective carbon footprint, emissions when it gets used by someone down the value chain, whether the product came from an area with high water stress, etc.
It is wholly inappropriate that an accounting standard, which should be based on factual, verifiable information only, is being expected to encompass the subjectivity and guesswork involved in these standards. As a result, this entire system will be impossible to sensibly and economically deal with for a large business let along a small one. The costs of compliance will be massive and a further blow to Canadian competitiveness.
Another consideration is what will happen with these standards in Canada’s major trade partners. Both the U.S. and Mexico will likely not be adopting these standards at all. This represents a huge disadvantage to the already-struggling Canadian economy. The economies that look to be prepared to implement these standards are primarily in the European Union (EU). Canada should be aligning itself with its major trading partners, not the EU. The fact that Carney is promoting closer relations with the EU, with which Canada has about five per cent of its total trade, as compared with around 80 per cent with the U.S., makes no sense at all.
As with many things governments impose on the business sector, few businesses are likely aware of these new and onerous rules. That will certainly be the case for the SME sector, which at all times struggles to keep up with plethora of regulations all levels of government inflict upon them.
Like the electric vehicle (EV) mandates, which will force Canadians to buy EVs whether they want to or not, there is no indication to date that our federal government plans to back off and be more reasonable on the ESG standards before they are imposed mandatorily. The current plan to impose the totally unrealistic and oppressive ESG regime is yet another indication this is the case.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.
