On February 24, 2025, Fasken published its third annual ESG Disclosure Study, offering insights into the environmental, social, and governance (“ESG”) strategies of 81 publicly listed companies (the “Surveyed Companies”) on the Toronto Stock Exchange 60 Index (“TSX60”) and the Climate Engagement Canada Focus List (“CEC41”). The Study is an important resource for employers regarding emerging ESG trends and best practices.
Among the three pillars of ESG, the social pillar – or the “S” pillar – holds particular relevance for workplace management and human resources professionals, as it relates to organizations’ social and human capital. While increasingly important, the “S” pillar of ESG is often overlooked compared to the “E” and the “G.” In order to understand the reporting trends amongst employers, Fasken’s Study did a deep dive into key “S” issues, including executive compensation, wage gap reporting, employee engagement and wellbeing, and forced and child labour.[1] In this bulletin, we set out our key insights in each of these areas. For additional insights into all three ESG pillars, please visit the 2025 ESG Disclosure Study, available here.
Role of ESG in Executive Compensation
Fasken’s Study found that ESG metrics remain highly relevant in the determination of executive compensation. Year-over-year, more companies appear to use standalone environmental and other ESG metrics to determine executive compensation. Notably:
- ESG metrics are prevalent in executive compensation plans: A substantial number of Surveyed Companies (73% of TSX60 and 85% of CEC41) incorporate ESG metrics into their executive compensation plans, reflecting the increasing importance of ESG considerations in corporate governance.
- ESG metrics are more often reflected in short-term incentive plans: The Surveyed Companies predominately use ESG metrics in short-term incentive plans, with 91% of TSX60 and 94% of CEC41 companies incorporating ESG factors into short-term compensation. Long-term incentive plans are less frequently tied to ESG metrics.
- Companies use corporate scorecards to evaluate ESG metrics: The majority of the Surveyed Companies utilize corporate scorecards to measure and communicate ESG performance, ensuring that these metrics are integral to their pay-for-performance for awarding executive incentive compensation.
- Increasing prevalence of clawback policies within Surveyed Companies: A significant majority of Surveyed Companies (95% of TSX60 and 93% of CEC41) have implemented clawback policies that allow for the recovery of executive compensation in the event of financial restatements or misconduct, ensuring accountability and alignment with long-term ESG goals.
Wage Gap Reporting as an ESG Initiative
Fasken’s Study identified a growing recognition of the importance of wage gap reporting as part of broader ESG initiatives, despite the absence of mandatory requirements for most corporations. While Canadian legal requirements for wage gap disclosure continue to evolve, a notable number of the Surveyed Companies report on certain wage gaps within their workplaces.
Approximately one-third of the Surveyed Companies report on wage gap ratios, with a higher prevalence among TSX60 companies (33%) compared to CEC41 companies (12%). These disclosures predominantly focus on gender-based wage gaps: 100% of the reporting companies reported on gender wage gaps and 62% reported on wage gaps applicable to racialized individuals in the workplace. Detailed wage gap reporting most often measured wage-gaps in respect of base salary or total compensation, reflecting an emerging trend towards transparency in pay practices Notably, the Financial Services sector shows the highest rate of wage gap reporting, with 75% of companies in the sector disclosing such data.
Figure 1: For the Surveyed Companies, percentage of companies that disclose wage gap ratios:
Attention to Employee Engagement and Wellbeing
Fasken’s Study found that, out of all Surveyed Companies that report on the “S” pillar (beyond DEI in their continuous disclosure), 95% of such companies identified employees as key stakeholders in their continuous disclosure documents. The result is consistent with the findings from Fasken’s 2023 and 2024 studies, indicating employees’ well-being and engagement continue to be important aspects for companies to manage social risks.
Managing Forced and Child Labour Risks
Under the federal Fighting Against Forced Labour and Child Labour in Supply Chains Act (“FCLA”), specific entities (generally, larger businesses) and government institutions are required to file an annual report (“FCLA Report”) with the Minister of Public Safety by May 31 each year. The report must identify, among other things, areas of risks for forced labour or child labour in companies’ supply chains, and steps taken to assess and reduce the risks of forced labour.
Fasken’s Study found that over 90% of companies that issued the FCLA Reports discussed, in their reports, the steps taken to prevent and reduce the risks of child and forced labour in supply chain, policies or due diligence processes in relation to forced and child labour, and steps taken to assess and manage the risk of forced and child labour. However, less than 70% of such companies discussed the trainings provided to their employees on forced and child labour, although the percentage has increased as compared to 2024.
Figure 2: Percentage of Surveyed Companies reporting on their internal risk assessment and management related to forced and/or child labour in their supply chains:
Final Thoughts
Historically, many of the “S” pillar issues have been approached by employers as internal considerations. However, Fasken’s Study highlights the growing importance of social issues within employers’ external-facing ESG frameworks in order to meet evolving stakeholder expectations. For more comprehensive information and data-driven insights regarding the recent trends with all of the ESG pillars, please visit Fasken’s complete Study, available here.
