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 and standardized reporting.
- CSDS 1: General Requirements for Disclosure of Sustainability-related Financial Information: This framework helps organizations disclose how sustainability issues impact their financial health, risk management and operations.
- CSDS 2: Climate-related Disclosures: Focusing on climate-specific reporting, this standard emphasizes greenhouse gas (GHG) emissions, including Scopes 1, 2 and 3. It also guides companies in assessing the financial impacts of climate change and disclosing their mitigation strategies.
What Are the Key Reporting Requirements?
Together, CSDS 1 and 2 aim to provide stakeholders with reliable, comparable and decision-useful data.
- Disclosure of Risks and Opportunities: Companies must identify and disclose sustainability risks and opportunities that may affect their future outlook.
- Disclosure of Transition Plan: As part of its strategy, companies need to disclose any climate-related transition plan they may have, including information about key assumptions used in developing the plan.
- Detailed Value Chain Information: Businesses must explain how climate-related risks and opportunities could affect their entire value chain.
- Scope 3 Greenhouse Gas Emissions Reporting: Reporting emissions throughout the value chain is critical. To ease the transition, companies are exempt from Scope 3 reporting during the first three annual reporting periods (longer relief period compared with that provided under the ISSB standards).
- Consistent Presentation Standards: Disclosures must follow specific content and presentation standards to maintain or enhance usability for stakeholders.
- The CSDS 1 and 2 largely align with the ISSB standards, but the CSSB made certain amendments that enable the standards to be adopted better in the Canadian context. The longer transition periods and ability to address broader environmental, social and governance (ESG) issues acknowledges the diverse capabilities of Canadian businesses and promotes a smoother transition to comprehensive sustainability reporting.
When Do These Standards Take Effect
The Canadian Sustainability Disclosure Standards (CSDS) are effective for annual reporting periods beginning on or after January 1, 2025. The standards remain voluntary until they are mandated by regulators or the Canadian government. In October 2024, the government announced plans to introduce mandatory climate-related reporting for large companies in Canada.
Who is obligated to Comply?
As a standard-setting organization, the CSSB does not have the authority to mandate its standards. Regulators like the Canadian Securities Administrators (CSA), Office of Superintendent of Financial Institutions (OSFI) and other regulatory bodies, including the Canadian Government, will be pivotal in determining the scope of entities subject to compliance with CSDS. Political and regional factors – such as strong opposition from provinces like Alberta and ongoing tension with the U.S. – may influence the final shape and timeline of these regulatory measures.
In the October 2024 plan, the Canadian government stated that the climate disclosure obligation would be for large, federally incorporated private companies in Canada – final determinations are still pending. Small- and medium-sized (SME) businesses would therefore not be subject to the requirements. The government expressed interest in exploring ways in which SMEs could be encouraged to still voluntarily release climate disclosures.
Why does Early Compliance Matter?
Although the standards are currently voluntary, adopting CSDS 1 and 2 early can give Canadian organizations a strategic advantage. Early action positions businesses to stay ahead of evolving expectations, manage risks effectively and gain a competitive edge in the global marketplace. Key benefits include:
- Meet Investor Expectations: Detailed sustainability reports are increasingly demanded by investors to guide their decisions. Early compliance demonstrates transparency and builds trust.
- Prepare for Regulatory Changes: Global mandates for sustainability disclosures are rising, making compliance inevitable. Starting now ensures businesses are ready when regulations tighten.
- Advance Global Competitiveness: Adhering to internationally recognized standards positions Canadian businesses for growth and partnerships worldwide.
- Mitigate Risks Proactively: Sustainability risks—whether operational, financial or reputational—can have significant consequences. Early adoption allows businesses to identify, address and manage these risks before they become critical.
Working with a sustainability partner, like STRIVE by STX, can provide the guidance and support needed to navigate the complexities of developing an efficient mitigation strategy for sustainability risks.
Looking ahead
The launch of CSDS 1 and 2 is a major milestone in Canada’s push for sustainability. These standards give businesses a clear framework to enhance transparency, accountability, and long-term resilience. As more companies adopt them, the impact will ripple outward—benefiting investors, stakeholders, and the environment while driving lasting value.
