Quebec businesses that have experienced fraud are deeply concerned about a new and emerging type of scam: ESG fraud, according to new research from KPMG in Canada.

Last month KPMG polled 102 Quebec business leaders whose organizations have been victimized by fraud to learn about the types of scams they had experienced. ESG fraud emerged as one of the most-common scams, with 27 per cent of respondents saying they have experienced or are experiencing ESG fraud at their organizations, slightly higher than the national average of 24 per cent.

More than nine in 10 (94 per cent) said their organizations are facing intense scrutiny from stakeholders to demonstrate tangible progress on ESG targets, and that's causing most (85 per cent) respondents concern that these pressures are increasing the risk of ESG-related fraud happening within their organizations. Nearly nine in 10 (89 per cent) said they are worried their organization could inadvertently commit ESG fraud.

"Quebec businesses are facing enormous pressure from stakeholders and regulators to demonstrate their ESG agendas, and that pressure could be tempting some individuals or teams within those organizations to embellish or exaggerate their ESG data," says Sonia Hernandez, partner and leader of KPMG in Canada's ESG practice in Quebec.

"Some might see opportunities to take advantage of regulatory frameworks that are still maturing, and organizations must be mindful of that risk and have strategies to mitigate it. If they don't, they could be facing a higher risk of ESG fraud happening within their organizations, and the consequences include financial, reputational and legal damage," she adds.

Ms. Hernandez notes that recently announced draft proposals on Canadian standards for sustainability-related financial information and climate-related disclosures by The Canadian Sustainability Standards Board (CSSB) will help provide more clarity for organizations on their ESG reporting and could help mitigate the risk of ESG misstatements.

Key highlights

  • 27 per cent of organizations victimized by fraud have experienced or are currently experiencing ESG fraud (24 per cent nationally)
    • 11 per cent have experienced or are currently experiencing internal ESG fraud involving someone within their organization (9 per cent nationally)
    • 8 per cent are experiencing or have experienced external ESG fraud involving someone outside the company, such as a supplier or vendor (8 per cent nationally)
    • 8 per cent report that they are currently dealing with both internal and external ESG fraud (7 per cent nationally)
  • 94 per cent said their organizations are facing intense scrutiny from their stakeholders to demonstrate tangible progress on ESG targets (89 per cent nationally)
  • 85 per cent are concerned about the growing risks of ESG fraud within their organizations given how important ESG is becoming (86 per cent nationally)
  • 89 per cent are concerned their organization could unwittingly commit ESG fraud (81 per cent nationally)

Mitigating ESG fraud risk

More than nine in 10 (92 per cent) respondents said ESG fraud is an emerging litigation risk – slightly higher than the national average of 89 per cent.

Myriam Duguay, a Montréal partner who leads KPMG in Canada's national Investigation Services and Fraud Risk Management practice, says heightened scrutiny around ESG has stakeholders looking closely for proof that businesses are making progress on their sustainability programs. If investors, activists or regulators find false or misleading claims in an organization's reporting of ESG efforts – known as "greenwashing" – they could face securities investigations or even class action lawsuits, she notes.

To guard against those risks, Ms. Duguay recommends organizations understand and identify the greenwashing risks that could exist within the company and build and implement robust internal controls accordingly.

"It's critical for organizations to have anti-fraud controls baked into their ESG strategies from the start. That includes having strong risk management and governance structures, having a series of check and balances within the organization to ensure ESG activities are being properly monitored and reported, conducting regular internal audits, offering continuous staff training and education, setting up whistleblower programs where stakeholders can report on ESG issues, and using technologies such as artificial intelligence for advanced detection capabilities," she says.

"Equally important as having strong anti-fraud measures at the heart of ESG programs is continually updating them as well. As ESG regulations, reporting frameworks and stakeholder expectations evolve, so too should an organization's anti-fraud controls," she adds.

Notably, four in 10 Quebec respondents expressed a high level of confidence in their ability to mitigate ESG risks, to the extent that they are not overly worried about potential ESG fraud – slightly higher than the national average of 38 per cent. Ms. Duguay says while that's a positive sign, it's still relatively low and she'd like to see that number grow.

"It's encouraging to see some Quebec businesses have already taken steps to bolster their ESG agendas with a foundation that includes compliance, risk management and reporting frameworks, but clearly there is still a lot of room for improvement," she says.

About the KPMG in Canada 2024 Fraud Survey

KPMG in Canada surveyed business owners or executive level C-suite decision makers at 102 small-and-medium-sized Quebec companies victimized by fraud between February 13-21, 2024, using Sago's premier business research panel. A majority (89 per cent) of the companies surveyed have annual gross revenue between $50 million to $299.9 million; seven per cent have between $300 million to $1 billion; and four per cent have over $1 billion. No respondents under $50 million in annual revenue were included in the survey. Over half (54 per cent) are publicly traded and 46 per cent are privately held.

About KPMG in Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see

For media inquiries:

Roula Meditskos
National Communications and Media Relations
KPMG in Canada
(416) 416-549-7982