This view, once ubiquitous, is being increasingly challenged by central bankers, investors worried about long-term risk exposure, a restless general public and governments straining under the pressures of growing inequality. And by corporations themselves.

Even in the heart of Wall Street, the world’s largest investment firm (with US$6.3 trillion under management) recently sent a letter addressed to the CEOs of each corporation it invests in, encouraging them to make smarter business decisions.

“Society is demanding that companies, both public and private, serve a social purpose,” BlackRock CEO Larry Fink wrote. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate.”

This includes everything from skyrocketing CEO pay to water scarcity to the careful reconsideration of corporate supply chains. Concerns raised by activists and civil society about modern-day slavery have led to regulations such as California’s 2010 Transparency in Supply Chains Act, pushing firms to begin launching corporate-led initiatives of their own (see here for more).

But it’s not only the largest companies in the world that have an impact on society – it’s small and medium-sized enterprises (SMEs) as well. Beyond employing the vast majority of Canadians in the private sector, they’re also responsible for almost one-third of the country’s GDP. SMEs will be front and centre if Canada is going to successfully transition to a more prosperous, low-carbon society, but the challenges faced by the sector are unique.

Corporate Knights is now in our fifth year of measuring the country’s medium-sized enterprises through our Future 40 Responsible Corporate Leaders in Canada ranking, and decided to narrow the scope of eligible companies to ensure a level playing field. Private or publicly listed companies headquartered in Canada with revenue of under $1 billion will now be considered, down from $2 billion last year.

Companies impacted by this change will be eligible for the 2018 Best 50 Corporate Citizens in Canada ranking, scheduled to be released on June 8.

This year’s top company in the Future 40 ranking is the Saskatchewan Research Council, a provincial treasury board crown corporation that conducts applied research, development, demonstration and technology commercialization (see profile here).

It is followed closely by the Canadian Broadcasting Corporation, a demonstrated leader in board and management diversity. London Hydro came in third, followed by First Capital Realty and Investissement Québec.

Corporations headquartered in five of Canada’s provinces made the list this year, largely hailing from the population centres of Ontario, Québec, Alberta and British Columbia.

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Then, earlier this decade, the provincial Crown corporation realized it had overlooked one key stakeholder in its mission to improve environmental performance – itself.

“It was a laugh/cry moment a few years ago when we realized we should be applying some of these tools to ourselves,” says Laurier Schramm, president and CEO of the SRC, one of Canada’s leading applied research, development, demonstration and technology commercialization organizations. “We decided that we couldn’t be all that we could be if we weren’t conducting our own business in a responsible manner and if our communities and partners didn’t perceive us to be doing that.”

Today, the company is diligent about improving, tracking and reporting its own environmental performance. It works continuously on reducing its energy use across its operations and has been stepping up recycling of everything from cardboard and computers to the hazardous waste used in some of its research projects.

“Our desire has not just been to comply with environmental rules and regulations … but to do better,” says Schramm, whose organization earned the top spot on this year’s Corporate Knights Future 40 Corporate Leaders list. It’s the fifth time the SRC has made the list and the first time it has landed in first place, due in part to a change in methodology (see here for more).

Being a better corporate citizen isn’t just the right thing to do, but also helps to attract workers who care about the environment and want to know their employer is doing its part, he says.

SRC received high marks on the Future 40 list for its low employee-turnover rate, which Schramm says has been in the 8-10 per cent range for about a decade and “a massive blessing.”

Schramm doesn’t think the SRC provides any special perks when compared to other companies but follows best practices from other organizations on how to attract, retain and develop talent, including building a culture of trust and inclusiveness on the job. Employees also believe in the work, which helps keep them there.

“Believing or buying into the company’s mission is one reason people tell us they are still here,” says Schramm. “They like what we are doing and the feeling of seeing the work produce positive impacts, whether it’s economic, social or environmental. It helps us all, I think, myself included, feel like we are doing something worthwhile with our work. Most of us have worked at other companies before coming here and know it’s not always like that.”

SRC currently employs about 360 workers at its offices across Saskatchewan, including its head office in Saskatoon and locations in Regina, Prince Albert and seasonal location in Uranium City in northern Saskatchewan.

Most of its work happens in the province and, while it receives some government funding, most of its revenue comes from contracts with about 1,500 clients across Canada and in 20 countries around the world.

About half of its workforce is women, which has been the norm for decades. The company has also been working to diversify its board and executive team. One of its six board members is female (as of late February). Schramm says the number is low right now due to some recent retirements and the organization usually has about nine to 11 board members. “It’s normal for about one-third of the board to be made up of women and we’re still on that journey of trying to extend that further,” he says.

Of the eight-member senior executive team, there are two women and one aboriginal member. “It’s still a work in progress,” Schramm says of the makeup of the board and executive team. “I wouldn’t say we are satisfied with where we are yet but are happy we are continuing to make progress.”

SRC received a perfect score in the Future 40 ranking for its zero lost-time injury rate –which it has had for past three years. That’s considered an achievement given some of the hazardous materials it handles in its science and engineering labs. The SRC also operates the Slowpoke-2 nuclear research reactor.

“I have a little bit of a reputation for being obsessed with [safety],” Schramm says. While the company has always been focused on health and safety, he has made it a top priority, including changing the culture to ensure employees know they never have to be involved in an unsafe work environment, even if it means giving up projects.

It also helps to maintain a culture of trust. “People are used to it, taking care of each other,” Schramm says. “For some, that’s also an important reason to stay.”

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“While many countries will be undergoing a similar structural transformation, adapting to a lower-carbon economy will likely mean more profound structural changes for Canada than for many other countries,” Lane said. The country continues to be a major producer of fossil fuels, he explained, while our manufacturing sectors produce energy-intensive products like automobiles. “And Canadians use more energy per capita than residents of many countries, given the size of our country as well as our climate, living standards and lifestyles.”

But Lane also explained that inaction isn’t a viable option, with the negative effects of climate change set to rise to between $21 billion and $43 billion by the 2050s. “While the coming shift does present some unique challenges, Canada has shown an ability to adapt,” he said.

Much of this resiliency in the economy will need to come from small and medium-sized businesses, firms that do not have access to the same resources and capital as Canada’s largest companies. Four years ago Corporate Knights began the Future 40 ranking in an attempt to track which companies are successfully pivoting to this new low-carbon reality.

The firms on this year’s Future 40 are a cross-section of corporate Canada’s strengths, with fully a quarter coming from the mining sector. The world is counting on metals and materials coming out of this sector to meet the growing demand for renewable energy to help combat climate change, but will need to become much more resource-efficient and attuned to concerns about social licence if it is to survive and prosper.

Other sectors represented include medium-sized oil and gas players, which will be contending with carbon taxation in the years ahead. Several top universities also find themselves on the list, determined to lead by example as they equip the country’s future leaders with the knowledge and skills to succeed in a changing world.

Utilities also figure prominently, led by top-ranked Toronto Hydro Corporation. The city-owned utility has had success reducing its carbon footprint in recent years, including a 24 per cent decrease between 2014 and 2015. While some of this was due to the final phaseout of coal power in the province, other steps like decreased emissions from its vehicle fleet and facility retrofits also played a factor. The company has also made progress through a pilot waste reduction project that has increased waste diversion 19 per cent in the past two years.

Toronto Hydro rolled out a climate change adaptation road map in 2015, and has begun replacing infrastructure to increase resiliency with products like stainless steel submersible transformers. Along with teaming up with the city to install solar PV projects on municipally owned buildings, the utility has also moved forward on two promising energy storage projects – the HydroStor underwater compressed air energy storage system and an intelligent energy storage unit being developed by Electrovaya and a group of other partners.

Next on the list is the University of British Columbia, followed by Manitoba Telecom Services (which finished 6th on last year’s list). The top five is rounded out by Algonquin Power & Utilities, as well as the 2016 top company Horizon Utilities, which recently completed a merger with several other utilities in the region to become Alectra Utilities.

Although almost half of the Future 40 is headquartered in Ontario, companies hailing from six provinces are represented on the list. With a turnover rate of 27.5 per cent, a number of new companies surged into the ranking this year including Kruger Products, McGill University and Entertainment One.

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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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