New Canadian Sustainability Standards: What It Means for Your Business

At the end of 2024, the Canadian Sustainability Standards Board (CSSB) introduced the Canadian Sustainability Disclosure Standards (CSDS) 1 and 2, setting a new benchmark for sustainability reporting in Canada. These standards aim to align Canada with global reporting practices, improving transparency and enabling more consistent and comparable environmental and climate-related disclosures.

What Are the New Standards?

Developed in alignment with the International Financial Reporting Standards (IFRS) set by the International Sustainability Standards Board (ISSB), CSDS 1 and 2 provide a solid framework for sustainability reporting in Canada. This reflects Canada’s commitment to addressing global environmental challenges with actionable reporting.

• CSDS 1: General Requirements for Disclosure of Sustainability-related Financial Information: How sustainability issues impact operations, risk management and financial health.
• CSDS 2: Climate-related Disclosures: Focused on greenhouse gas (GHG) emissions (Scopes 1, 2 and 3), assessing financial impacts of climate change and disclosing mitigation strategies.

Key Reporting Requirements

CSDS 1 and 2 aim to provide stakeholders with reliable, comparable and decision-useful data. Key requirements include:

• Disclosure of risks and opportunities that may affect future business performance.
• Disclosure of a transition plan, including the key assumptions used.
• Detailed value chain information, showing how climate-related risks and opportunities could affect the full value chain.
• Scope 3 GHG emissions reporting throughout the value chain. (Note: Exemptions for Scope 3 reporting apply during the first three annual reporting periods.)
• Consistent presentation standards to enhance usability for stakeholders.
• Adjustments made for the Canadian context: longer transition periods, and inclusion of broader ESG issues recognizing the diversity of Canadian businesses.

Effectiveness Timeline

The Canadian Sustainability Disclosure Standards (CSDS) take effect for annual reporting periods beginning on or after January 1, 2025. The standards remain voluntary until they are mandated by regulators or government. In October 2024 the government announced plans for mandatory climate-related reporting for large Canadian companies.

Who Must Comply?

CSDS are standards set by standard-setting bodies. They are not yet binding. Regulatory bodies such as the Canadian Securities Administrators (CSA), the Office of Superintendent of Financial Institutions (OSFI) and the Canadian government will determine which entities must comply.

In the current proposals, large federally incorporated private companies are likely to be subject to mandatory obligations. Small and medium sized enterprises (SMEs) are expected to remain voluntary participants at this stage.

Why Early Adoption Matters

Although standards are voluntary now, early adoption offers a competitive advantage:

• Meet investor expectations: detailed sustainability reports are increasingly required to earn trust.
• Prepare for regulatory changes: global requirements for reporting are rising, making compliance inevitable.
• Advance global competitiveness: adhering to recognized standards positions Canadian businesses for growth and partnerships globally.
• Mitigate risks proactively: operational, financial or reputational risks related to sustainability are real. Earlier adoption allows businesses to identify, address and manage these risks before they escalate.

Working with a sustainability partner like STRIVE by STX can help navigate the complexities and build an efficient mitigation strategy.

Looking Ahead

The launch of CSDS 1 and 2 marks a major milestone in Canada’s sustainability journey. These standards give businesses a transparent framework to enhance accountability and build long-term resilience. As more companies adopt them, the impact will ripple outward benefitting investors, stakeholders and the environment while creating lasting value.

Interested or have any questions?