ESG and the Canadian Energy Sector: Transition, Not Elimination

Canada’s energy sector sits at the center of two realities that often collide.

First, it anchors the economy. In 2024, Canada’s energy sector accounted for about 9.8% of nominal GDP, directly employed 316,200 people, and supported hundreds of thousands more jobs indirectly. Energy exports reached $208.2 billion and went to 132 countries, with the U.S. taking the largest share.

Second, the sector faces rising expectations to cut emissions, strengthen governance, and prove social value. That pressure does not come from one place. It comes from regulators, investors, customers, communities, and employees.

So the most practical framing for ESG in Canadian energy is not “eliminate.” It is “transition,” with discipline. ESG helps firms manage risk, protect continuity, and earn the right to operate while the energy system changes.

Why the energy sector matters to Canada

People sometimes discuss energy as if it is a single industry. In Canada, it is a network: oil and gas, pipelines, power utilities, hydro, nuclear, renewables, LNG, services, and supply chains.

The numbers show the scale. Statistics Canada reported that in 2024, Canada exported 80.5% of crude oil production and 38.3% of natural gas production, with most exports heading to the United States. That export footprint creates jobs and revenue, and it also raises the bar for transparency because global buyers want comparability and credible climate plans.

That is the point many sustainability leaders now make internally: “We can’t decarbonize in a spreadsheet.” We need a transition that keeps energy affordable and reliable while emissions fall.

ESG as a transition and risk management framework

In energy, ESG works best when leaders treat it as a management system, not a marketing layer.

That means three things in practice:

1) ESG links strategy to enterprise risk

Climate risk now lives in finance, not only in EHS. Canada’s prudential regulator OSFI has made climate governance and risk management a clear expectation for federally regulated financial institutions. Even if you do not work in a bank or insurer, this matters because lenders and insurers push those expectations down value chains.

When energy companies translate ESG into board oversight, scenario analysis, operational controls, and transition planning, they reduce financing friction. They also reduce surprises.

2) ESG supports credible disclosure, not volume

Canada is aligning toward consistent sustainability disclosure. The Canadian Sustainability Disclosure Standards CSDS 1 and CSDS 2 were published in December 2024, building from the ISSB baseline and aiming to improve comparability for investors.

In other words, the direction of travel is clear: fewer glossy claims, more decision grade data.

3) ESG keeps the lights on while emissions fall

Energy leaders have to balance climate objectives with operational continuity. Reliability is not optional in Canada’s climate, and neither is safety. A strong ESG program does not ignore this tension. It manages it.

A useful internal question is:
“Which transition actions reduce emissions and also improve operational resilience?”
Methane abatement, leak detection, electrification of operations where feasible, and stronger maintenance regimes often score high on both.

Regulatory and stakeholder expectations are getting sharper

Even when policy timelines shift, expectations keep rising.

For example, Canada has continued tightening the focus on methane, a high impact lever for oil and gas emissions. The Government of Canada announced final regulations to reduce methane emissions from major sources, reinforcing that methane performance will remain a compliance and credibility issue.

At the same time, disclosure expectations are converging. CSDS 1 and 2 push companies toward structured, investor oriented reporting.

Then there is the stakeholder layer. In Canadian energy, stakeholders include Indigenous Nations, municipalities, landowners, local employees, and communities along infrastructure corridors. ESG becomes real when engagement is specific, ongoing, and measurable.

Case examples: ESG ratings improvement and stakeholder trust

If you want to improve ESG ratings, you need more than performance. You need proof: targets, governance, and outcomes that external raters and investors can follow.

Here are practical examples of what that can look like in Canada’s energy system.

Indigenous partnerships that change the risk profile

Equity partnerships can move engagement from “consultation” to shared value creation.

TC Energy announced what it described as Canada’s largest Indigenous equity ownership agreement related to its natural gas pipeline network. Deals like this can strengthen stakeholder trust, reduce long term project risk, and show raters that social license has structure behind it.

Enbridge’s sustainability reporting also highlights how Indigenous engagement and inclusion is organized as a management approach, including internal programs and partnerships. The ESG lesson here is simple: stakeholder engagement improves when it has governance, budgets, and accountability.

Transparent reporting choices, even when it is uncomfortable

Suncor’s sustainability reporting notes a “dual challenge,” meeting energy needs while reducing emissions, and it also signals how legal and regulatory uncertainty can affect what firms publish.

Whether you agree with a company’s approach or not, the broader point matters for ESG ratings. Raters look for consistency, controls, and assurance pathways. If disclosures change, explain why, and show how governance still functions.

Methane as a fast credibility lever

Methane performance often delivers quick wins because it ties directly to operations. Strong methane programs can lift environmental scores, but they also reduce product risk with buyers who track upstream emissions.

With Canada finalizing stronger methane regulations, companies that invest early in detection, measurement, and verification will likely find it easier to defend performance and reduce compliance risk.

What sustainability professionals should take from this

If you work in the Canadian energy sector, or you support it as a consultant, ESG should help you answer three questions clearly:

1. What are the material risks, and who owns them

2. What is the transition plan that protects reliability and jobs

3. How do we prove progress with comparable disclosure and credible engagement

When you can answer those questions, you move ESG from debate to execution.

Build the skills behind transition ESG

If you want to lead these conversations with confidence, you need current tools: ESG governance, stakeholder engagement strategy, materiality, disclosure readiness, and practical implementation steps.

That is exactly what we cover in the Canada Sustainability ESG Course Cohort 2. Register and review the program details here.