Canadian sustainability board close to issuing first climate disclosure rules

The body developing Canada’s version of new international climate and sustainability disclosure rules will issue its first reporting standards in December, and it will be up to regulators and governments to decide if and when those standards will be compulsory.
The Canadian Sustainability Standards Board on Monday released a report from a public campaign it held earlier this year to get input into proposed guidelines. The standards are scheduled to be ready for adoption at the beginning of 2025 on a voluntary basis, said Bruce Marchand, interim chair of the CSSB.
The board is now in the process of finalizing its guidelines, factoring in the submissions it received. Mr. Marchand said the response rate was very high for a standard-setting exercise in accounting.
“That’s good thing because we need that kind of feedback to determine what to do with these standards. And in particular, under our criteria for modification, we’re looking at only those modifications that are in the Canadian public interest,” he said in an interview. “We depend on the Canadian respondents to spell out what those issues are, and their arguments and concerns, and they have done so in spades.”
Investors have been calling for the rules to be applied in financial markets, so they can judge companies’ non-financial risks tied to climate change and other environmental and social issues in line with a growing number of jurisdictions around the world.
The CSSB said it is in talks with governments and regulators, including Canadian Securities Administrators (CSA), which will make their own decisions about what to make mandatory.
Two weeks ago, federal Finance Minister Chrystia Freeland announced her government is proceeding with mandating climate-related financial disclosures for large, federally incorporated companies. The move will require amending the Canada Business Corporations Act. Mr. Marchand said the CSSB is hopeful that Ottawa will use its soon-to-be released standards as the basis for its rules.
Investors support proposed Canadian sustainability disclosures, but companies are pushing back
Meantime, CSA, the umbrella group for provincial and territorial securities commissions, has said it will examine the CSSB’s work before deciding on moving to mandatory reporting.
The draft standards are based on those developed by the International Sustainability Standards Board. The CSSB was formed to tailor the new rules to an economy heavy in resource extraction, and in small and medium-sized companies.
The standards prescribe reporting key sustainability and climate metrics, including carbon emissions, risks tied to environmental issues, analysis of potential policy scenarios and other items. The international stands call for disclosures in conjunction with financial filings.
In its report, the CSSB said it considered responses from 529 individuals and 392 organizations. Investors, policy makers, regulators, sustainability professionals and Indigenous people are among those who participated via roundtable discussions, surveys and response letters.
In July, The Globe and Mail reported that publicly available submissions showed a stark divide on the proposals between institutional investors and public companies, notably those in energy, utilities and mining. The report bears that out.
The former group is pushing for for quick adoption of sustainability and climate reporting standards that are closely aligned with the international ones, while the latter want much of the disclosure to remain voluntary and exclude some items, including Scope 3 emissions. Those are emissions that stem from entities in a company’s supply chain and from end use of its products.
It said many large investors oppose lengthy relief periods for adopting the standards, and support inclusion of Scope 3 emissions as is the case in the international rules, even if initial reporting is incomplete.
Opposition came mostly from preparers of disclosures, and warned of increased reporting burdens and costs, especially on small businesses, as they must also compile required financial data.
Mr. Marchand said Ottawa’s recent passing of anti-greenwashing provisions within the Competition Act, which puts companies at risk of financial penalties for making false or exaggerated environmental claims, added “new context” as the board went about its work. Related to that, some companies voiced support for “safe-harbour” provisions within the CSSB standards to guard against legal threats, he said.
Preparers also cautioned that Canada could suffer a loss of competitiveness of its requirements are more stringent than those in the United States. They noted the U.S. Securities and Exchange Commission excluded the indirect emissions from reporting requirements enacted earlier this year.