Liane Langstaff
Partner
Environmental Lawyer & Co-Leader, ESG Advisory Services
Article
5
On December 18, 2024, the Canadian Sustainability Standards Board (“CSSB”) announced the release of its first Canadian Sustainability Disclosure Standards (“CSDS”). The new Canadian standards, effective January 1, 2025, align with international benchmarks while considering the unique Canadian context.
Although currently voluntary, the Canadian standards provide useful guidance for disclosing sustainability-related financial information and climate-related risks and opportunities. The standards could become mandatory if adopted by regulators or governments in the future.
Notably, the Canadian Securities Administrators (“CSA”) are reviewing the standards and will conduct consultations. If incorporated into a CSA rule, the standards would become obligatory for Canadian public companies.
Established in June 2022, the CSSB assesses the applicability of international sustainability disclosure standards to the Canadian context and promotes their adoption. The standards respond to increasing demands from investors, regulators, and other stakeholders for consistent and comparable sustainability disclosures.
Canada is under pressure to improve transparency in environmental and climate-related issues, and these standards aim to bridge the gap between sustainability initiatives and financial reporting, ensuring that businesses provide decision-useful information to the market.
In June 2023, the International Sustainability Standards Board (“ISSB”) released IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. These standards aim to enhance investor trust by communicating sustainability-related risks and opportunities.
The CSSB standards build on the ISSB framework, with modifications outlined in the “Proposed Criteria for Modification Framework” released in March 2024. The Exposure Drafts for CSDS 1 and CSDS 2 underwent a 90-day review in early 2024, leading to their December 2024 release.
Adopting the CSSB standards supports Canada’s commitment to global sustainability goals, aligning closely with both the ISSB and the Task Force on Climate-related Financial Disclosures (“TCFD”). For businesses, this means that adherence to CSSB standards will also satisfy global investor expectations, thereby enhancing their competitiveness on the international stage.
CSDS 1 outlines principles for sustainability disclosures. Its primary goal is to provide a cohesive framework that enables organizations to communicate how sustainability-related risks and opportunities affect their financial position, performance, and prospects. Key aspects include:
CSDS 2 provides specific guidance for climate-related disclosures, aligning closely with the TCFD recommendations. It addresses the following four key pillars:
The Canadian CSDS 1 and CSDS 2 standards align with IFRS S1 and IFRS S2 but with the following modifications to address Canadian public interest needs:
The introduction of CSDS 1 and CSDS 2 marks a shift in Canadian sustainability reporting. For businesses, these standards present opportunities, challenges and strategic considerations, including the following:
The CSDS 1 and CSDS 2 standards, as well as the supporting Bases for Conclusions document, are provided in the CPA Canada Handbook – Sustainability, which is currently available for free for a limited period of time on the Chartered Professional Accountants Canada website.
The CSSB’s standards represent a significant advancement in sustainability reporting for Canadian businesses. The CSSB will continue to seek feedback and provide resources to facilitate the adoption of CSDSs and to ensure that Indigenous rights and interests are meaningfully integrated into their work. CSSB will also be hosting consultation on its 2025-2028 Strategic Plan in April 2025.
For more information about the CSSB standards and other ESG, climate and environmental law inquiries, please contact the authors or a member of Gowling ESG and Environmental Law Groups.
[1] Scope 1 emissions are direct GHG emissions from sources controlled by an organization. Scope 2 emissions are indirect GHG emissions associated with the purchase of energy. Scope 3 emissions are indirect GHG emissions from activities along an organization’s value chain (both upstream and downstream).
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