More relief, same standards. The Canadian Sustainability Standards Board (CSSB), in the final version of its standards released on December 18, 2024, has given companies more time to fully implement the standards' rules when making their sustainability disclosure. Otherwise, the finalized standards hold no surprises and remain consistent with the standards issued by the International Sustainability Standard Board (ISSB) in June 2023.
While the CSSB standards remain a voluntary framework, they will act as an influential reference point for Canadian regulators deciding on mandatory rules for climate-related disclosure.
The Canadian Securities Administrators (CSA) are working towards a revised climate-related disclosure rule for public companies that will consider the CSSB standards and may include modifications to adapt to the Canadian capital markets and factor in developments in the United States, where the topic has been polarizing.
A Few More Years to Adjust
The additional relief granted by the CSSB provides companies more time to: (1) begin aligning sustainability-related financial disclosures with financial reporting, (2) provide the quantitative (not qualitative) aspects of scenario analysis data reporting, and (3) initiate Scope 3 GHG emissions disclosure.
Except for those extensions, the CSSB standards parallel those of the ISSB.
Like the ISSB standards, the CSSB standards require entities to disclose information regarding sustainability-related (CSDS 1) and climate-related (CSDS 2) risks and opportunities that are useful to investors, lenders, and other creditors in making their decisions, and which could reasonably be expected to affect the entity’s cash flows, as well as its access to finance, or cost of capital over the short, medium or long term. Both standards require disclosure in the areas of governance, strategy, climate-related risks and opportunities, business model and value chain, strategy and decision-making, financial position, financial performance and cash flows, climate resilience, and climate-related metrics and targets.
The individual areas of relief are as follows:
| ISSB Standards | Draft CSSB Standards | Final CSSB Standards | |
| Effective Date | Effective for annual reporting periods beginning on or after January 1, 2024. | Effective for annual reporting periods beginning one year later, on or after January 1, 2025. | No change. |
| Disclosure Beyond Climate | For the first year of application, disclosure can be climate-related only. | For the first two years of application, disclosure can be climate-related only. |
No change. |
| Comparative Information | No requirement to report comparative information in the first year of application. |
No requirement until the third year of applicability. |
No change. |
| Scope 3 GHG Emissions | No requirement to report to disclose Scope 3 GHG emissions for the first year of application. |
Extension of relief period for a total of two years. |
Extension of relief period for a total of three years. |
| Concurrent Publication of Sustainability Disclosure and Financial Statements |
For the first year of reporting, sustainability disclosure is made within nine months of the end of the annual reporting period. For the second reporting year, sustainability disclosure is made at the same time as the publication of the annual financial statements (both documents covering the same period). |
No relief. |
For the first year of reporting, sustainability reporting is made within nine months (if not earlier based on various factors) after the end of the annual reporting period. For the second and third reporting periods, sustainability reporting is made within six months of the end of each such annual reporting period. |
| Climate Scenario Analysis | No relief. | No relief. | Three years of relief for the quantitative aspects only (not qualitative). |
Why Do the Final CSSB Standards Provide Additional Relief?
After having released its draft standards for comment in March 2024, the CSSB indicates that its final standards result from a long process of consultation sessions, response letters, and online surveys, including engaging with approximately 3,900 individuals, representing organizations from a wide range of interests, perspectives, and expertise.
As part of those discussions, many respondents supported transition relief for the publication of sustainability disclosure concurrently with financial statements, citing capacity issues and data accuracy concerns, among other things. Many also expressed the need for more time for climate-resilience disclosures (i.e. scenario analysis), mentioning resource constraints, nascent methodologies, process limitations, and concerns over information quality.
On the question of Scope 3 GHG emissions disclosure, the feedback received was mixed. Some felt the original two-year period was adequate or even too long, arguing that entities would have enough time to build their reporting capabilities and favored “progress over perfection”. Others argued in favor of extended relief or the strict removal of the requirement, citing the U.S. Securities and Exchange Commission’s decision to exclude Scope 3 reporting from its final climate disclosure rules. Since then, the SEC’s final rules were put on hold, mainly due to ongoing legal challenges from certain states and business groups.
While some major institutional investors had previously raised concerns that providing further relief might disadvantage Canadian companies, ten of Canada’s largest pension investors and investment managers, representing more than C$2.25 trillion in assets under management, expressly confirmed their support for the final CSSB standards upon their release on December 18, 2024. They indicated that this is a crucial step in strengthening the Canadian market’s sustainability disclosure infrastructure and improving the quality of information available to investors, stakeholders, and regulators.
Next Step: A New Mandatory Rule
For private companies in Canada, mandatory climate-related disclosures may be coming through amendments to the Canada Business Corporations Act. In October 2024, the Government of Canada confirmed its intention to bring in mandatory climate-related disclosures for large companies incorporated under the federal CBCA. It is likely any mandatory disclosures under the CBCA would incorporate the CSSB standards.
Further Reading
- Detailed Changes of CSDS 1 and CSDS 2: From Exposure Drafts to Final Standards
- CSSB Releases its Draft Standards: One Step Closer to Mandatory Sustainability Reporting in Canada
- SEC Climate Disclosure Rule Paused
- The SEC's Final Rules on Climate Related Disclosure and What They May Mean for Canadian Issuers
- To ISSB or Not to ISSB, That is the Question: The New ISSB Sustainability Disclosure Standards Are Not Mandatory in Canada, But They Could Soon Be
- New ISSB Standards – Is This the End of the 'Alphabet Soup' for ESG Disclosure Requirements and How Will Canada Position Itself?
- 2024 ESG Disclosure Study
