Sustainability reporting in Canada is at a pivotal moment, driven by evolving regulatory requirements and frameworks, and increasing sustainability-related expectations from a wide range of stakeholders. As stakeholders demand greater transparency on corporate sustainability practices, companies in Canada are facing evolving reporting requirements to meet these expectations.
Voluntary frameworks have long-existed and have been used by Canadian companies to enhance credibility and meet stakeholder expectations. Laws have also been set in place to ensure sustainability is integrated into business practices.
The Corporate Diversity Reporting rules require corporations to annually report data related to diversity and inclusion, detailing on the diversity of their board of directors and senior management. Under this rule, corporations also have to report on the representation of women, indigenous peoples, people with disabilities, and members of visible minorities on their board of directors and senior management teams.
Aligned with recent EU laws such as the CSDDD and CSRD, which upholds supply chain due diligence and reporting, the S-211 Supply Chain Reporting Bill or An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff recently took effect last January 2024. The bill requires companies to disclose their prevention and risk management strategies on reducing the risk of forced labor and child labor across their supply chain.
Canada, with its long-standing commitment to sustainability, has also taken another big step towards sustainable development through its recent publication of the finalized Canadian Sustainability Disclosure Standards.
Last December 2024, the Canadian Sustainability Standards Board (CSSB) published the Canadian Sustainability Disclosure Standards (CSDS). This new standard, based on the IFRS Foundation’s International Sustainability Standards Board (ISSB), allows companies to report their sustainability and climate-related information in alignment with the IFRS S1 and the IFRS S2 standards. Through contextualizing international frameworks to a national level and the Canadian context, companies based in Canada can properly craft reports that reflect their performance and how it impacts their business, the environment, and local communities.
As of January 2025, the CSDS takes effect. When it comes to mandatory reporting, regulators have yet to decide if using the CSDS will be mandatory. Companies and entities required to report under the CSDS will also be determined yet it is likely that large publicly listed companies and businesses under industries of interest will be required to report using the CSDS.
While the CSDS is based on the ISSB Standards, certain adjustments were made after feedback and comments from Canadian entities and capital markets. This is to help organizations properly transition to these new changes and prepare companies for more robust sustainability reporting in the future. Once the transition period has passed, reporting entities are expected to follow through and effectively report using the new global baseline.
The key differences and changes between the CSDS and the ISSB Standards are seen in the entity’s timeline for reporting. The CSSB added one year of transitional relief for the effective date of reporting using the CSDS, the start date for reporting on sustainability matters beyond climate, and the start date for reporting on Scope 3 GHG emissions.
Starting dates for reporting using the CSDS were also altered, having two extra years of relief for the start of aligned reporting. Three years of transitional relief were also added for the quantitative aspects of scenario analysis data reporting. Lastly, one additional year for transitional relief was also set in place for Scope 3 GHG emissions reporting, giving companies a total of three years to prepare for Scope 3 reporting.
Through these changes in the reporting timeline, Canadian companies can ready themselves for improved sustainability reporting in an evolving regulatory environment.
Canada’s sustainability reporting requirements under the new Canadian Sustainability Disclosure Standards are split into two: the CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS 2, Climate-related Disclosures. As mentioned before, the CSDS is aligned with the reporting requirements under the ISSB Standards.
The CSDS 1 focuses on the general requirements needed for disclosing sustainability-related financial information. Like the ISSB Standards, it also takes after the TCFD Recommendations, splitting requirements into the following:
The CSDS 2 is used by companies to report on their climate-related disclosures. Here companies are mandated to report climate-related risks and opportunities. Companies must disclose governance processes, controls, and procedures used to monitor, manage and oversee climate-related risks and opportunities. Strategies for managing these risks and opportunities are also included in this report. Climate-related risk management plans, metrics, targets, and performance are detailed as well.
Given the growing need to accelerate the transition to a low-carbon economy, Canadian companies are also asked to report their Scope 1, 2, and 3 GHG emissions.
The CSDS 2 also details the business model and value chain, financial performance, and climate resilience of the company. Through this reporting standard, companies are able to create an effective sustainability report that helps stakeholders, especially investors, understand the financial and sustainability-related impact the business has on people and the planet.
With the new CSDS now taking effect, companies in Canada must be prepared to create their sustainability reports. This entails creating and improving sustainability strategies, conducting materiality assessments to better understand their impact and sustainability priorities, engaging with stakeholders to listen to their concerns, gathering data from multiple external and internal sources, and measuring their GHG emissions.
Through this robust framework for ESG reporting, the CSDS not only enhances corporate transparency but also supports Canada’s broader sustainability objectives. As organizations embrace these standards, they will play a critical role in driving positive environmental and social outcomes, ensuring long-term value creation in an increasingly complex world.
At Keslio, we are deeply passionate about sustainability reporting, having the expertise and extensive network needed to guide clients through their sustainability journey effectively and efficiently. Our expertise is particularly valuable for companies looking to embed sustainability practices into their businesses and investors looking to integrate ESG and impact into investment portfolios.
To learn more about how Keslio can assist your organization in its sustainability journey, reach out to us here or through hello@keslio.com
