Why the U.S. Racial Equity Audit is being adapted for Canadian companies

The Shareholder Association of Research and Education (SHARE) has published guidance for Canadian companies seeking to conduct racial equity audits, serving as a supplement to the Civil Rights Audit Standards that companies in the United States are currently using. 

“While the Civil Rights Audit Standards were developed in the U.S. context, their use in Canada requires careful adaptation,” SHARE wrote. 

“The legal, historical and social landscape surrounding racial equity in Canada – particularly the centrality of Indigenous Rights and reconciliation – differs in important ways.”

The guidance refers to Canada’s commitment to the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), as well as protecting Indigenous data sovereignty through the OCAP (Ownership, Control, Access and Possession) framework. 

“Going back to 2021, the discovery of unmarked graves of Indigenous children [in Kamloops] missing from residential schools, and the murder of George Floyd and growing support for the Black Lives Matter movement, really catalyzed the national dialogue on racial equity and systemic racism in Canada,” said Shannon Rohan, chief strategy officer at SHARE. 

“In response to that, investors began asking companies to demonstrate meaningful commitments to racial equity and reconciliation,” she said. 

“And that led, at the time, to a surge of companies making public commitments to prioritize diversity, equity and inclusion in particular.”

SHARE developed this supplementary guidance in partnership with the Urban Alliance on Race Relations, along with additional input from Canadian legal experts, racial justice advocates, Indigenous leaders, civil society stakeholders and auditors, Rohan said. 

How does a Racial Equity Audit work?

While the guidance is cross-sectoral and applicable to all industries, SHARE has focused on engaging the Canadian banking and financial services sectors to “identify, address and prevent systemic discrimination risks across their employment and commercial practices,” Rohan said. 

Companies are expected to engage a third-party contractor to carry out these audits, which can vary in scope. 

An audit could include internal processes, such as policies around recruitment, compensation, DEI and culture, as well as external impacts, such as supplier relations and commercial practices. 

Five of Canada’s largest banks have either already published a racial equity audit or have committed to carrying one out in the future. 

CIBC, for instance, contracted Diversio, a company specializing in workplace technologies and consulting, to carry out its audit. In addition to internal talent and culture, the audit also examined how CIBC’s own products and services can contribute to financial inclusion. 

TD contracted two law firms to evaluate its internal policies, talent and culture. 

Scotiabank, “an outlier among its peers,” remains the only bank that has not yet committed to a third-party racial equity audit. 

However, when SHARE filed a proposal to do so to Scotiabank on behalf of the Hamilton Community Foundation, 37 per cent of shareholders were in favour. 

Future of Good reached out to Scotiabank to ask about the bank’s lack of an independent third-party racial equity audit and its plans for conducting one in the future. Future of Good was directed towards a management proxy circular from an annual meeting of shareholders that took place in April 2025, as well as the bank’s Truth and Reconciliation Action Plan (T-RAP). 

According to the document, the board of directors at Scotiabank recommended that shareholders vote against SHARE’s proposal to conduct an independent racial equity audit “because of the proactive efforts the bank has taken […] to deliver against the objectives of the proposed racial equity audit.”

The bank cited several HR initiatives and internal research surveys that address racial inequity, as well as its commitment to carrying out a third-party corporate human rights assessment it disclosed in its 2023 ESG report. 

“We continue to explore whether a REA [racial equity audit] of our employment practices would be additive to our current commitments and initiatives, our T-RAP commitments, our ESR and related Employment Equity Report disclosure, and our human rights assessment,” Scotiabank wrote. 

Why the Audit must be adapted for Canadian standards

“As a result of those engagements [with banks], we also had companies seeking advice from SHARE and more broadly on how to do racial equity audits,” Rohan said. “When we reviewed some of the completed audits, it really revealed, I think, the need for more clear, consistent and credible standards.”

Along with specific guidance on meaningfully engaging with Indigenous communities and rights holders, there are several distinctions in the supplementary guidance for Canadian institutions. 

For example, it highlights specific ways that companies can appropriately compensate Indigenous groups and grassroots organizations for the time they spend supporting the audit. 

The American Civil Rights Audit Standard states that the process must be completed within a year from when an external auditor is retained, and only extended in exceptional circumstances. 

The Canadian standard, however, allows the company and auditor to “mutually establish a timeline that reflects the complexity of the audit scope and the needs of affected communities.”

“While timely reporting is important, compressed or accelerated timelines can compromise audit rigour and integrity,” SHARE wrote. 

“Rushed audits risk producing superficial findings, tokenistic engagement and diminished credibility among Indigenous Rightsholders, Groups and stakeholders, and the public.”

While SHARE can provide general guiding principles to companies looking to conduct a racial equity audit, the organization will not direct companies towards specific groups they can consult with, said Rohan.

“That is ultimately a critical part of the audit process, for them to really identify the appropriate groups that are potentially impacted by their policies and practices.”

“We recognize that the supplementary guidance does set a fairly high bar, but we do think that ultimately needs to be the North Star and the goal, and that companies will make best efforts to meet or come close to it,” she added. 

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