Sustainability reporting regulatory updates

Sustainability is at the core of countless conversations as regulatory bodies such as the US Securities and Exchange Commission (SEC) and the Canadian Securities Administrators (CSA) propose new disclosure requirements. The International Sustainability Standards Board (ISSB) has also released new standards that are changing how organizations measure and report their sustainability initiatives and impact. Although these new standards don’t yet apply in Canada, they’re already shaping the thinking of the CSA, which may issue a requirement in the near future for Canadian companies to report on the ISSB standards as well as any new standards the Canadian Sustainability Standards Board (CSSB) form.

Stay tuned—we add content to this page as important information for Canadian organizations comes to light.

Corporate Sustainability Reporting Directive (CSRD)

The European Union (EU) has issued the Corporate Sustainability Reporting Directive (CSRD), legislation that requires sustainability reporting and may go into effect as early as 2024. In Canada, it is expected that about 1,300 companies (including private companies) will be impacted due to having either EU operations or a debt/equity listing on an EU- regulated market. The CSRD disclosure requirements are significantly broader than those being contemplated by the SEC and the CSA, adding to the complexity of determining whether compliance with this new legislation is required.

New ISSB standards

With the issuance of the ISSB new standards, organizations are looking to navigate a new era of reporting on their climate and sustainability performance. The ISSB was established by the International Financial Reporting Standards (IFRS) Foundation to develop a global, consistent baseline for sustainability-related financial disclosures. Its new standards call for high-quality, transparent, and reliable reporting by companies on climate and other sustainability topics.

The ISSB standards represent the biggest changes to corporate reporting in decades and are essential for addressing the needs of global capital markets.

Key takeaways:

What we are waiting for in the Canadian landscape:

• The CSSB will review the ISSB standards and decide whether any changes are necessary to make them appropriate for the Canadian landscape (i.e. forming CSSB’s standards).
• The CSA will then consider whether and over what time these CSSB standards should be mandate. 

Here are three major impacts on Canadian companies resulting from the new standards:

1. Sustainability reporting will be different from what it’s been up until now—the ISSB standards require companies to disclose the links between environmental risks and financial results.
2. The finance function’s role in reporting is changing—getting alignment on the target operating model for reporting and the role that finance and other parts of the organization are going to play is a crucial first step.
3. Reporting cycles are likely to get shorter—sustainability reporting will most likely be included in the same reporting cycle as the annual information form (AIF) or management’s discussion and analysis (MD&A).