The body in charge of sustainability accounting in Canada has issued its first standards, sticking closely to international guidelines but giving companies extra time to adopt some contentious provisions for emissions reporting, scenario analysis and timing of disclosures.
The Canadian Sustainability Standards Board said the additional time, or transition relief, for those measures will help strike a balance between providing investors the data they’ve demanded to make informed decisions and not putting companies at a competitive disadvantage as they take on additional reporting.
Major institutional investors on Wednesday welcomed the standards and urged companies to adopt them without delay, while environmental advocates expressed disappointment about the extended implementation periods.
The guidelines are based on those developed by the International Sustainability Standards Board to replace a mishmash of reporting templates for environmental and social risks with a global baseline. The CSSB started its work in 2023 to tailor those rules to an economy heavy in resource extraction and in small and medium-sized businesses.
The CSSB said its initial standards preserve the baseline by making sure all the provisions come into effect after its transition periods end. The guidelines follow months of public consultation on a draft it released early this year.
“What this means for Canada is we now have the first set of Canadian sustainability disclosure standards. They’re voluntary at this stage,” Bruce Marchand, interim chair of the CSSB, said in an interview. “We believe that with the transition relief that we’ve now included in response to what we heard from all of the respondents, that these are practical and able to be implemented.”
Sustainable investing professionals have been waiting for the standards. The new guidelines, along with a green and transitionary investment taxonomy recently approved by Ottawa, are aimed at adding certainty to sustainable investments, avoiding greenwashing and bolstering Canada’s ability to compete for green capital, their authors say.
The standards prescribe how to report key sustainability and climate metrics, including carbon emissions, risks and opportunities tied to environmental issues, analysis of potential policy options, and other items.
The rules are voluntary, though Canadian Securities Administrators, which represents provincial and territorial securities commissions, said it will use them to determine a future set of compulsory measures, starting with climate-related reporting.
The CSA said in a statement that it aims to issue rules that balance investor demands for consistent disclosures while contributing to efficient capital markets and keeping the capabilities of public companies of different sizes in mind. It will study the feedback the CSSB received, while also conducting its own consultation.
The regulator also said it plans to monitor events in the U.S. closely, given the interconnectedness of the two markets. With the change in administrations in Washington, the fate of planned climate reporting rules set by the Securities and Exchange Commission is now a major question mark.
Where the CSSB standards differ from the international ones is the time granted for adoption of some of the measures that faced opposition from many companies that submitted comments to the process.
For Scope 3 emissions – greenhouse gases that stem from a company’s supply chain and end use of its products – the CSSB is allowing until Jan. 1, 2028, to begin tallying and reporting that data. That is three years beyond what is prescribed by the ISSB.
Where the ISSB calls for sustainability and climate reports to be issued with annual financial statements, the CSSB has decided companies can also conform to that standard by 2028. In the interim, companies can issue those reports nine months from their financials in the first year, and in the subsequent two years they are allowed a six-month gap.
For climate resilience, the CSSB is not granting companies transition relief for qualitative scenario analysis – how companies could fare under a range of potential policy, price and physical outcomes. But it is offering three years to develop and implement quantitative analysis – number crunching associated with that analysis.
“Part of the reason for that is to acknowledge what is required to accomplish that. There’s expertise required, resources required, methodologies to be matured, process implications and so on,” Mr. Marchand said.
Ten of the largest Canadian pension funds, including Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan, said the new standards offer a robust framework that will boost the competitiveness of Canadian companies in the race for global capital.
However, Sonia li Trottier, the director of the Canada Climate Law Initiative, lamented the additional time granted for implementation, saying companies have long known they would have to eventually disclose the data. “One year of relief is enough time, as there have been many years of guidance on climate-related disclosure and methodologies,” she said in a statement.