Twenty years ago, Corporate Knights launched its quest for a more humane form of capitalism, placing people and planet ahead of profits, with the Best 50 Corporate Citizens sitting at the head of the roundtable to make business a force for good.

A lot has changed for the better in that time and a lot hasn’t.

Thankfully, the glass ceilings in Canada’s corporate boardrooms have been breached, with non-male members now making up almost a third of directors, double their one-sixth share in 2002. Based on current trends, we are on track for 40% of directors to be non-male by 2030. In order to meet the Government of Canada’s 50% challenge to reach board gender diversity by 2030, we will need to double the pace this decade at which we add non-male directors to boards.

Racial diversity on large corporate boards has also improved: 9% of members are now non-white, double the 4% level in 2011, when we first started tracking this metric. This number still needs to double for it to more fairly reflect Canada’s total population mosaic (27% of which is racially diverse including Indigenous peoples, as of the most recent census). That means adding non-white directors at an annual clip that is three times faster this decade than we did last decade.

While one workplace fatality is too many, it is encouraging that on a national level, a third less people died on the job in 2019 than was the case in 2002, when 465 people paid the ultimate price because of a workplace accident. Reducing the number of workplace deaths (now 335 per year) to zero by 2030 means getting a lot more vigilant about safety.

Over the last two decades, corporate profits have doubled, workers have been left behind and emissions have stalled, but the Best 50 firms are leading the way with 50% more gender diversity and triple the investments aligned with the clean economy.

While high profits at a firm level can indicate economic vitality, at a national level it’s usually a sign of economic rot and oligopolistic market structures (five big banks, four big grocery stores, three big telcos, one big fertilizer company serving 36 million people). In Canada’s case, sky-
high profits have been accompanied by meagre investment and poor productivity in relation to our G7 peers. Instead of making Canada wealthier, these profits have mostly been flowing to a tiny fraction of the population that owns the majority of company shares, half of whom are foreign investors.

While taxes are the price we pay for civilization, large Canadian companies are getting a better bargain than ever, paying a quarter less taxes as a percentage of their profits than they were 20 years ago.

The average CEO of a large company is making out better than ever, too, taking home $5.6 million in total compensation, or about 106 times as much as their average employee (a ratio that has grown by more than 50% since 2002). For reference, in 1977, the late management thinker Peter F. Drucker suggested the pay ratio between CEOs and employees be a maximum of 25-to-1 (later revising that to 20-to-1, saying at the time, “I have often advised managers that a 20-to-1 salary ratio is a limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies.” Getting to 20-to-1 in Canada by 2030 would mean slimming down average CEO pay to a quarter of today’s levels and boosting average worker pay by 50% over that time period (or 5% per year).

On the one measure we have put the most emphasis, greenhouse gas (GHG) emissions, there is good news and bad news. The bad news is our national emissions have barely budged since we began our mission 20 years ago (nudging up 2% from 724 million tonnes in 2002 to 738 in 2019 – the most recent base year before the COVID pandemic). But it could be a lot worse. Had emissions grown at the same clip in the past 20 years as they did in the 1990s, Canada’s GHG emissions would be over one billion tonnes today. That is some consolation, but to achieve Canada’s 2030 goal (roughly cutting emissions in half by 2030), we will need to reduce emissions 15 times faster than we are at the moment.

To sum things up, profits have surged, people have been left behind (albeit boardrooms are a little less pale and male), and we’re stuck in neutral on the planetary issue of GHG emissions.

It has never been more possible to make a radical shift.

Those are the facts we cannot ignore.

And at the same time, it has never been more possible to make a radical shift: to harness the engine of business to put our economy in service of people and the planet. It is a tall order, but there’s no reason why we could not right this ship by the end of this decade.

The solutions are on the shelf: thanks to engineers, the price of solar, wind and storage has plunged by 90% over the past 20 years, finally making it economical to end our addiction to burning fossil fuels.

As the standard bearers for sustainable capitalism, the Best 50 Corporate Citizens in Canada have a special role to set the pace. This year’s Best 50 is leading the way with 50% more gender diversity, and almost triple the rate of investment and sixfold the proportion of revenues aligned with the clean economy, as compared to the other large Canadian companies.

The pay gap between Best 50 CEOs and their average worker is less than half that of run-of-the-mill big businesses. And their carbon productivity (which measures how much revenue a company generates per tonne of emissions) is double their peers. This approach has stood the test of time, proving that better corporate citizens can beat the market year over year. The Best Corporate Citizens’ stock market performance has outperformed its peers earning  499% gross return since it was first launched in June 2002, versus 366% for S&P/TSX Composite.

The 2022 Best 50 Corporate Citizens vs. the rest*

Meet this year’s Best 50 Corporate Citizens in Canada

Corporate Knights’ 2022 ranking of the world’s 50 Best Canadian corporate citizens is based on a rigorous assessment of nearly 7,000 public companies with revenue over US$1 billion. Who made the cut in 2022?

DOWNLOAD THE COMPLETE 2022 BEST 50 EXCEL SCORECARD »

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2022 Best 50, Summer 2022Canada’s top corporate citizen of 2022 wants to become North America’s battery June 29, 2022 Hydro-Québec tops the Best 50 list again with big plans to expand its supply of hydropower in the United States Read Article

2022 Best 50, Summer 2022These are Canada’s top international corporate citizens of 2022 June 29, 2022 These 10 companies with a subsidiary in Canada are leaders in sustainability Read Article

 

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The provincially owned utility is pursuing two of the continent’s largest decarbonization projects, that would supply hydropower to Massachusetts and New York City, displacing natural gas in those markets. In both cases, the transmission projects needed to complete the deals have run into local opposition that could derail Hydro-Québec’s export plans.

It’s also participating in talks on a project called the Atlantic Loop. The regional grid would bring hydropower to the Maritimes to displace coal-fired power and avoid the need for new natural gas plants to complement growing supplies of wind power.

If all parties can agree, new transmission lines would flow electricity from Quebec to the south and the east to provide baseload power and to back up intermittent generation of renewables. They would, in turn, allow American and Atlantic Canadian producers of renewable energy to sell to Quebec when there is a surplus of wind power.

However, even as it looks to increase electricity trade with its neighbours, Hydro-Québec faces a huge challenge in serving as the linchpin for the province’s ambitious decarbonization plans, which could result in as much as 50% more electricity demand in 2050.

The utility’s original focus was on selling hydroelectric power to Quebecers and keeping rates low for the province’s industrial and residential consumers. While that core mandate remains, Hydro-Québec chief executive Sophie Brochu says, the corporation is now determined to advance regional co-operation in decarbonization while investing more heavily in energy efficiency, wind power, and new, smarter grid technology.

The “North Star” for all electricity systems operators and utilities in North America is to deliver the low-carbon energy transition at the lowest cost possible to their customers, Brochu says.
“We have a responsibility to, obviously, serve our respective markets,” she said. “We [also] have a collective responsibility to see how we can work in common with our respective infrastructures and means of production to access this North Star.”

For the third year, Hydro-Québec ranked first among the Corporate Knights Best 50 Corporate Citizens in Canada. Its ranking was based not only on the low-carbon nature of its immense electricity business, but on water productivity, taxes paid, CEO-to-average-worker pay, executive and board gender diversity, and clean revenue.

Brochu herself is the personification of both Hydro-Québec’s progress and its deep connections with the province’s business culture. When she took over in 2020, she became Hydro-Québec’s first female CEO. The appointment interrupted the sabbatical she had planned for herself when she resigned after serving 12 years as chief executive officer at Montreal-based Énergir, the former Gaz Métro.

Keeping the home fires clean-burning

In March, Hydro-Québec released its strategic plan for 2022 to 2026. It laid out the challenges ahead and warned that pricing structures would have to change to encourage energy efficiency and conservation. In other words,  if Hydro-Québec is to succeed in its ambition of becoming the renewable “battery” for a large swath of North America’s northeast, it would have to restructure its rates, especially at peak hours, to get Quebecers to stop wasting so much power.

Between 2020 and 2029, it projected that Quebec’s own demand for clean power would increase by 20 terawatt-hours (TWh), or roughly 10% of current levels. By 2050, decarbonization efforts – including a dramatic increase in electric vehicles – would result in an increase of 100 TWh, or a 50% rise.

Brochu says they expect to meet that 2029 demand through an aggressive energy-efficiency program; the refurbishment of existing hydro facilities; and growth in wind power, including as much as 3,000 megawatts of capacity provided by a recently announced partnership between Hydro-Québec, Énergir and Borealis.

Even with that higher demand in Quebec, the utility is pursuing deals to increase exports by some 20 TWh annually to the United States under firm contracts. (By way of comparison, Nova Scotia’s power demand was 10 TWh in 2019.)

Eyeing expansion to the south

American politicians and systems planners – and a number of power sector analysts – are looking to Quebec to provide relatively low-cost, low-carbon power to help drive states’ own decarbonization plans. Hydro-Québec is moving on two separate deals: the 9.45 TWh New England Clean Energy Connect, to serve Massachusetts, and the New York City–bound Champlain Hudson Power Express, with a capacity of 10.5 TWh. The US$4.5-billion New York project was approved by state regulators in April, but further legal fights are possible.

A study from the Massachusetts Institute of Technology in 2020 concluded that increased reliance on hydropower from Quebec provides the most cost-effective route to decarbonization for northeastern states, especially when coupled with a bidirectional trade in which the Canadian province purchases surplus renewable power when generation is high but demand is low.

In the longer-term, Quebec could serve a battery function, recharging its reservoirs when there is a surplus of renewable power and flowing hydropower when intermittent renewables cannot fill demand, the author of the MIT study, Emil Dimanchev, said in an email.

Brochu says Hydro-Québec is eager to expand the combined benefits of wind and hydro. However, the current agreements with Massachusetts and New York are for a set capacity, which would flow regardless of the availability of wind power.

Proposals for Quebec to expand power exports to Ontario have long failed to materialize, in part because Hydro-Québec wants to sell firm capacity and its neighbour wants a more flexible purchase of energy to backstop renewables. The Quebec utility could face a better reception in the United States if it “reframed” the New England and New York projects “along the lines of the battery concept by bundling new transmission with large-scale renewable expansion in the U.S.,” Dimanchev says.

Opposition to U.S. expansion plans brewing

As it is, Hydro-Québec is facing tough opposition to the massive transmission projects needed to complete the American deals.

In Maine, voters rejected a US$1-billion transmission plan to bring power from Quebec in a referendum last November. Hydro-Québec’s contractor is continuing with some site preparations as the utility and its partners seek a court ruling that would allow completion.

Several groups unsuccessfully opposed the New York transmission line that would be buried under the Hudson River. They include the environmental group Riverkeeper, which submitted a brief arguing that Quebec’s hydropower is not as low-carbon as Hydro-Québec claims and that the utility is disregarding Indigenous concerns.

Damming and flooding large areas can indeed cause the release of methane and carbon dioxide as vegetation dies off. Hydro-Québec argued that the Riverkeeper analysts cherry-picked data, in part by focusing on near-term effects, while for the life of the project, its hydropower has among the lowest carbon intensity in the world.

The Riverkeeper submission included statements from a handful of Indigenous representatives, who complained that Hydro-Québec’s hydropower has damaged their traditional territory.

Brochu acknowledges that Hydro-Québec has had longstanding problems in acknowledging and addressing Indigenous concerns but says the utility is working to address its faults.

“Things need to improve, and we are improving them,” she says, while adding that there are many different perspectives within the Indigenous communities. Brochu recently participated in a ceremony marking Hydro-Québec’s commitment to bring power to the village of Kitcisakik, the last Indigenous community that was unconnected to the grid. “It is as thrilling to bring power to Kitcisakik as it is to [bring it to] Queens in New York,” she says.

Hydro-Québec is also working with a Mohawk community that wants to invest as partners in a transmission line that traverses their traditional territory on its way to New York. However, Hydro-Québec faces myriad lawsuits and other challenges from Indigenous groups stemming from its long history of damming rivers across the province and in Labrador dating as far back as the development of Churchill Falls in the 1960s and ’70s.

The Indigenous complaints have so far not derailed Hydro-Québec’s export plans.

Pierre-Olivier Pineau, an energy expert at the HEC business school in Montreal, says rejection of Quebec power would only hurt American consumers. At the same time, the loss of export sales would mean less supply pressure and lower prices at home, he says.

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At the time, the Canadian CEO and water technology expert was 63 years old and hoping to retire to academia. Benedek took a job at Scripps Research in San Diego, where he was briefly a professor. But while at Scripps, he quickly became passionate about the next problem he wanted to tackle through the private sector: climate change.

“Governments around the world are failing to protect us from catastrophe,” he says. “And things will change, as they usually do, when the catastrophe gets unbearable.” Benedek hopes that things won’t get to that point and that his current company, Anaergia, can be part of the solution in weaning the world off fossil fuels. The corporation is one of Canada’s fastest-growing sustainable companies.

In 2007, Benedek left his academic job and founded Anaergia, which converts organic food waste into biofuels, such as renewable natural gas. This technology reduces the amount of methane, a potent greenhouse gas, being emitted into the atmosphere from landfills. The company went public last summer, and in March, Anaergia announced it planned to raise $60 million by offering 4.8 million subordinate voting shares.

A current that flows through both Benedek’s old venture and his new one is his pursuit to solve environmental problems using technology. He worried that the world would face some nasty water shortages and sought to put a dent in water pollution through ultrafiltration membranes he developed with Zenon.

Governments around the world are failing to protect us from catastrophe. And things will change, as they usually do, when the catastrophe gets unbearable.

-Andrew Benedek

Benedek came to Canada from Hungary in 1956 during the Hungarian Revolution. He became a professor at McMaster University, before fleeing academia a first time to start Zenon in 1980. During that first stint as a professor, he grew restless to make an impact on big problems.

That drive led him to found the company that topped our first list of the 50 Best Corporate Citizens 20 years ago (Zenon ranked first in 2002 and 2004). Back then we wrote, “Zenon provides one of the most basic of human needs: clean H2O, while conducting itself in the most chivalrous of fashions. Is it the Ideal Corporate Citizen? For 2002, it’s King of the Castle.”

Benedek came from a long line of shoemakers in Hungary, an occupation he was expected to fall into, but he was bound for bigger things. He hopes that his company will be part of a larger constellation of corporations that will help solve humanity’s greatest challenge.

“I get up every morning with the hope that I [can] find a new way, [and] I think about … how to get there. And then I also go back in history and I find examples where, [against] impossible odds, [problems were] resolved and humanity survived,” he says.

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