Canada's Path Towards Mandatory Climate Reporting

The Canadian Sustainability Standards Board (CSSB) has unveiled new proposed standards designed to revolutionise sustainability and climate-related reporting for companies across Canada. These standards, inspired by the International Sustainability Standards Board (ISSB) under the IFRS Foundation, signify a significant leap towards establishing mandatory climate reporting requirements for Canadian firms. With Prime Minister Justin Trudeau's directive in 2021 and subsequent governmental initiatives, including OSFI's mandate for financial institutions, Canada is poised to lead the charge in integrating sustainability into financial disclosures.

At the heart of this groundbreaking development is the ISSB, established in November 2021 at the COP26 climate conference. The ISSB's mission to develop IFRS Sustainability Disclosure Standards has garnered widespread support from investors, companies, governments, and regulators alike. The release of the ISSB's inaugural sustainability and climate reporting standards in June 2023 set the stage for a global standardisation of sustainability disclosures, endorsed by IOSCO, the leading international policy forum for securities regulators.

The CSSB's collaboration with the ISSB underscores Canada's commitment to adopting internationally recognized sustainability standards while addressing the country's unique needs. The newly proposed Canadian standards, CSDS 1 and CSDS 2, closely align with the ISSB's guidelines while introducing Canadian-specific modifications. Notably, the CSSB has extended the effective date of the standards to January 1, 2025, to provide companies with ample time to prepare for compliance. Additionally, certain reliefs have been extended to ease the transition, including the disclosure of Scope 3 emissions and climate resilience reporting.

Charles-Antoine St-Jean, Chair of the CSSB, emphasised the transformative impact of the proposed standards, stating, "We're taking a significant step towards ensuring that sustainability is not just a buzzword but a fundamental aspect of our economic fabric." The CSSB's consultation process invites stakeholders to provide feedback on key aspects of the standards, including the alignment of reporting timelines and the integration of climate resilience requirements.

The CSSB's initiative has garnered support from the Canadian Securities Administrators (CSA), with plans to incorporate the final standards into Canadian securities legislation. Stan Magidson, Chair of the CSA, emphasised the importance of stakeholder engagement in shaping the future of climate-related disclosure, urging interested parties to contribute to the consultation process.

As Canada embraces sustainability as a core tenet of corporate reporting, the CSSB's proposed standards represent a pivotal moment in the country's journey towards a greener, more resilient economy. By aligning with global best practices and tailoring standards to meet local needs, Canada is poised to lead by example in the global transition towards sustainable finance and responsible business practices.

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