In December 2024, the Canadian Sustainability Standards Board (CSSB) released two important publications outlining sustainability disclosure standards in financial reports for large, federally incorporated private companies: CSDS 1 (for sustainability-related disclosures) and CSDS 2 (for climate-related disclosures).
The CSSB bases its work on the International Sustainability Standards Board (ISSB), which created the IFRS S1 and the IFRS S2 standards.
| CSDS 1 | CSDS 2 |
| Sustainability-related risks and opportunities | Climate-related risks and opportunities |
| Disclosure about how the corporation interacts with the social, economic, and environmental spheres | Disclosure about carbon emissions, risks tied to environmental issues, analysis of potential policy scenarios and other climate items |
| GovernanceStrategyRisk managementMetrics and targets | Governance Strategy Risk management Climate-related metrics and targets |
The establishment of nationwide standards is crucial to ensure consistency, comparability and transparency between companies when it comes to reporting sustainability metrics. For instance, accounting standards are widely used by companies to disclose their financials to external stakeholders.
In return, investors can make informed decisions based on publicly available data. Investors have long called for mandatory and standardized disclosures of sustainability information, and this represents positive progress for sustainable investing.
In October 2024, the federal government publicly committed to amending the Canadian Business Corporations Act to mandate climate-related financial disclosures for large, federally incorporated private companies. This amendment is necessary for the CSSB standards to become, in part or in whole, legally binding and mandatory for private entities.
As for public companies, the Canadian Securities Administrators (the regulator for capital markets) is developing a public proposal for a disclosure rule based on the CSSB standards, which will require feedback and revisions before adoption.
In the meantime, disclosing sustainability and climate-related information following the CSSB standards remains voluntary but highly encouraged to prepare the transition. The standards also include a two-year transition relief for specific areas, giving reporting entities time to adapt. Nevertheless, they are available for immediate application starting January 1, 2025, and are integrated into the Canadian CPA Handbook.
The new Canadian sustainability disclosure standards provide a clear, standardized framework for companies choosing to disclose sustainability and climate-related information voluntarily. Full implementation will depend on the government passing the necessary amendments in 2025 to make these disclosures a legal requirement.
References:
Canadian Sustainability Standards Board (2024). Exposure Draft – Canadian Sustainability Disclosure Standard (CSDS) 1, General Requirements for Disclosure of Sustainability-related Financial Information. https://www.frascanada.ca/en/sustainability/documents/cssb-ed-csds-1
Canadian Sustainability Standards Board (2024). Exposure Draft – Canadian Sustainability Disclosure Standard (CSDS) 2, Climate-related Disclosures. https://www.frascanada.ca/en/sustainability/documents/cssb-ed-csds-2
- https://www.theglobeandmail.com/business/article-canadian-sustainability-board-close-to-issuing-first-climate/
- https://www.canada.ca/en/department-finance/news/2024/10/government-advances-made-in-canada-sustainable-investment-guidelines-to-accelerate-progress-to-net-zero-emissions-by-2050.html
- https://www.securities-administrators.ca/news/csa-issues-market-update-on-climate-related-disclosure-project/
- https://www.cpaontario.ca/sustainability/sustainability-reporting-standards/csds-sustainability-reporting-standards
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