More Canadian companies are publishing diversity and sustainability reports than at any point since 2022, but competing political and investor pressures are pushing some firms to strengthen their environmental, social and governance policies, while others scale them back.

A new analysis by Montreal-based advisory firm Millani shows 76 per cent of the 211 S&P/TSX composite firms surveyed issued sustainability reports for their latest fiscal year, up from 73 per cent a year earlier. 

Despite the increase in volume, however, firms aren’t necessarily publishing more useful information. In some cases, sustainability reports have become less detailed, with some companies scaling back environmental, social and governance (ESG) policies.

On climate, for example, most companies (72 per cent) left their emissions-reduction targets unchanged, but among those that revised them, 16 per cent weakened their targets compared to 12 per cent that strengthened them. Several firms that filed ESG reports in past years, including 11 firms in extractive sectors such as mining and oil and gas, didn’t report any sustainability content for their latest fiscal cycles.

Millani CEO Milla Craig said many companies that scaled back reporting cited an amendment to Canada’s Competition Act, known as Bill C-59, as the reason. The legislation includes changes meant to clamp down on greenwashing. Companies and investors have argued the new rules, which were passed in June 2024, cast a chill on environment target-setting. Craig said even if firms have detailed environmental plans, they’re less likely to disclose them out of fear of legal scrutiny. 

Companies also appear divided on whether to curb or strengthen diversity commitments. The report suggests that, despite political and legal pushback, particularly from the U.S., Canadian firms are “moderating” their plans rather than “retreating.”

The share of S&P/TSX composite firms surveyed that reported diversity among their management teams fell from 46 per cent to 38 per cent, and diversity reporting for overall workforces fell from 27 per cent to 25 per cent of issuers. Another 11 per cent of firms changed their diversity targets to be less stringent, while 10 per cent strengthened them. More companies reported board-level diversity, however, which Craig said reflects pressure from investors.

The contrasting approach to ESG reflects the competing forces shaping corporate behaviour, said Craig. On one side, institutional investors are pushing for better transition plans, more granular climate data and clearer explanations of how companies will compete in a decarbonizing economy, she said. On the other side, changing political and regulatory music in Canada and the U.S. is prompting some companies to limit how much they say. 

Craig said there’s an imperative for Canadian firms to improve their ESG targets and reporting habits, particularly as Canada angles to be less economically dependent on the U.S. as a result of President Donald Trump’s trade war. Outside of North America—including in Europe, China and India—sustainability standards are becoming more stringent. To compete in those markets, said Craig, Canada will have to comply with their rules.