This also has its drawbacks, as it takes the focus off not-so-large companies. A business wasting electricity due to a poorly insulated office leads to negative consequences no matter the size – increased costs, wasted energy and an expansion of its carbon footprint.

Corporate Knights continues to focus on the big corporate fish through our annual Best 50 Corporate Citizens in Canada, which targets companies with revenues of $2 billion or more and at least 2,000 employees. But starting in 2014, we also began to rank Canadian companies that fall under that threshold in a separate ranking known as the Future 40.

Over these past three years, we’ve observed a dramatic increase in transparency and disclosure practices at many leading medium-sized Canadian enterprises. This trend is particularly pronounced when it comes to resource productivity indicators.

This year, 90 per cent of companies on the Future 40 disclosed their energy consumption compared to 78 per cent in 2014. An impressive 90 per cent reported their carbon emissions versus 82 per cent in 2014.

The improvement is even more recognizable when it comes to the water and waste indicators. Corporations reporting water consumption jumped to 75 per cent, compared to 48 per cent two years prior; and 70 per cent reported how much waste they generated versus 43 per cent in 2014.

What many medium-sized companies are beginning to realize is that sustainability is not an expensive luxury only available to the largest companies, but an integral part of staying competitive in today’s marketplace.

This view is best exemplified by Horizon Utilities, the top company in this year’s Future 40 ranking (see here for profile). “Many people have asked me over the years why we spend more money on sustainability measures,” says Neil Freeman, VP, business development and corporate relations at Horizon. “And my response is that we spend less than you. Measurement gives us increased mileage on what we do spend.”

Perhaps more notably, disclosure has remained strong in both the energy and mining sectors despite the challenges brought on by the current period of low commodity prices. “It’s very encouraging to see companies in sectors facing strong fiscal headwinds deciding to maintain the scope of their sustainability reporting,” says Michael Yow, director of research at Corporate Knights.

Following Horizon in the ranking is the Greater Toronto Airports Authority, followed closely by Export Development Canada. Both companies have won the Future 40 ranking in previous years.

With a turnover rate of 22.5 per cent, a number of new companies also joined the list in 2016. These include the utilities London Hydro and EPCOR Utilities, as well as Edmonton International Airport and paper company Tembec.

There are several indicators in which smaller Canadian companies in the Future 40 outperform their larger peers on the Best 50 ranking, including maintaining a lower CEO to average worker pay ratio.

Elsewhere, however, smaller companies are struggling to keep up. Future 40 companies are failing to invest in the same percentages of research and development as their larger industry rivals.

Non-profit organizations like Mitacs are working to bridge this void by helping to build partnerships between academia and industry to spur further innovation, particularly among smaller enterprises (see here).

Once Ontario and Alberta implement their plans, 80 per cent of the country’s population will find itself under some form of carbon pricing. In addition, the federal government is signalling its interest in a national minimum on carbon pricing as a first of many steps towards reaching its aggressive post-Paris conference carbon reduction goals.

This presents both a threat and an opportunity for Canada’s business community. These Future 40 companies are among the best positioned to take advantage of it.

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An old power corridor was running through the Twelve Mile Creek watershed in the Niagara Peninsula, an environmentally sensitive area peppered with walking and cycling trails. Even though it would never be built today, the power lines were there and needed to stay in place for reliability reasons. Horizon was facing heavy criticism every time the foliage was cut back to protect the lines as it reduced the natural beauty of the area.

Instead of ignoring local concerns, Horizon decided to partner with the City of St. Catharines, the Niagara Peninsula Conservation Authority and Ontario Power Generation on a pilot project to replace the existing fauna with 5,000 native wild flowers, grasses and shrubs. This allowed for improved biodiversity in the area while also cutting the cost of maintenance going forward.

“So it was responsible stewardship of a difficult problem that made sense both for the community and from a cost perspective,” says Neil Freeman, VP, business development and corporate relations at Horizon.

Horizon is best known for its competitive electricity rates and strong customer service, earning top marks in the 2015 UtilityPULSE Electrical Utility Customer Satisfaction Survey. The municipally owned utility provides electricity for roughly 242,000 commercial and residential customers covering the cities of Hamilton and St. Catharines in Southern Ontario.

But it has also begun to gain recognition for the steady integration of sustainable development principles into its work over the past decade.

The first step involved measurement and transparency. In 2008, Horizon became the first utility in Ontario to begin following the Global Reporting Initiative sustainability disclosure practices, while also revamping its annual report to give equal attention to social, environmental and economic considerations.

“It was at this point that we started asking how sustainable development practices could enhance how we serve customers,” explains Freeman.

Horizon became one of the few utilities in the country to institute an infill development strategy, working to encourage further densification of Hamilton and St. Catharines.

This was achieved by first moving to minimize business startup costs at brownfield properties targeted for redevelopment by reducing connection fees. Horizon then created a database of the existing sites and the electricity assets that were already there so prospective buyers could maximize old equipment like transformers left over on the properties and cut costs even further.

“This is great news for the region and a shining example of smart growth development,” exclaimed then-provincial transportation minister Glen Murray at the time. The project went on to earn a Brownie Award from the Canadian Urban Institute.

The company also turned its attention to maximizing energy conservation efforts among its customers. In 2011, Horizon applied to the Ontario Power Authority’s Conservation Fund to develop an energy-density mapping tool so it could specifically target conservation marketing efforts to each building’s specifications.

“We then incented our conservation team with performance-driven metrics on both demand and energy conservation for our management people,” says Freeman. “Get us the conservation and earn us an incentive cheque from the province at the same time because it makes us a stronger business and lowers costs for the customers.”

Because of this and other conservation efforts, Horizon was the only utility in Ontario with more than 60,000 customers to hit both its energy production and conservation targets as required under Ontario’s long-term energy plan.

Horizon is in the midst of a public debate over a potential merger with three other major utilities, which would create the second-largest electricity distributor in Ontario. With disclosure practices not as strong at the three other companies, it remains to be seen if Horizon will be able to maintain its position as a sustainability champion in the years ahead.

Freeman agrees that the other utilities have a way to go on disclosure, but points out that they have been showing initiative in other areas like renewable energy. For example, PowerStream is the largest solar developer of any municipally owned utility in Ontario.

“What I can tell you is that the merger integration philosophy is of highest common denominator and not the lowest,” says Freeman.

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The methodology for the 2016 Future 40 Responsible Corporate Leaders in Canada ranking is based on 12 key performance indicators (KPIs) covering resource, employee and financial management. All information is derived from publicly-disclosed data. All eligible entities are contacted for data verification prior to project completion.

KPIs:

1. Energy productivity: Revenue per gigajoule of energy consumption.

2. Carbon productivity: Revenue per metric tonne of direct/indirect GHG emissions (scope 1 & 2 only).

3. Water productivity: Revenue per cubic metre of water withdrawal.

4. Waste productivity: Revenue per metric tonne of non-recycled waste produced.

5. Percentage tax paid: Taxes paid in cash as a percentage of EBITDA/operating income trailing over the past 5 years.

6. Leadership diversity: Percentage of women on board of directors and in executive management.

7. Clean capitalism pay link: At least one senior executive’s compensation tied to clean capitalism-themed performance targets.

8. CEO-to-average worker pay link: How much more CEO gets paid (expressed as a multiple) compared to average worker.

9. Safety performance: Lost time injury rate and number of fatalities/number of employees.

10. Innovation capacity: R&D expenditure as a percentage of revenue, trailing over the past three years.

11. Employee turnover: Number of departures/average number of employees.

12. Pension fund status: Unfunded liabilities divided by total assets, or expenses towards defined contribution plans divided by total assets.

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