Corporate Canada is moving a step closer to standardized sustainability reporting this week as an industry group charged with adapting international disclosure guidelines to the domestic economy finalizes its first drafts.
The Canadian Sustainability Standards Board, which comprises 12 accounting, management, legal and sustainability experts, is expected to sign off on three documents that will guide climate-related disclosures. The documents will go out for a 90-day public comment period starting in March.
These are international guidelines, tailored for the Canadian context, that could eventually be required by regulators such as the provincial securities commissions and the federal financial-industry watchdog, CSSB chair Charles-Antoine St-Jean said on Monday.
“We issue the standards for Canada, but the regulators have the magic wand to make it mandatory,” Mr. St-Jean said in an interview.
“But no doubt that they are looking very, very closely at our consultation to seek the perspective of Canadians. That’s fair to say that it’s part of our due diligence in preparation of the consultation paper.”
Financial experts, including those serving on the Sustainable Finance Action Council, who were appointed by Ottawa, have called for mandatory climate disclosure to be adopted quickly in Canada, saying it is a competitive imperative as the rest of the world proceeds with the standards.
Canadian Securities Administrators, the umbrella group for the country’s securities commissions, has said it is waiting for the CSSB to finalize its guidelines so that it can work toward formalizing such disclosure to be presented alongside other financial filings.
The CSSB includes members from companies, investment agencies and institutional investors, including Nutrien Ltd., Fondaction, Business Development Bank of Canada and Manulife Investment Management.
It has said from its inception last year that it will make sure such factors as Canada’s large concentration of small and medium-sized businesses and natural resource developers factor into the proposals. Environmental activists have expressed trepidation that the standards could be watered down to protect high-emitting industries.
The global rules, developed by the International Sustainability Standards Board, began coming into effect at the start of January. The ISSB’s standards are aimed at developing what’s known as a global baseline. They are designed to improve transparency, guard against greenwashing and eliminate confusion caused by a mishmash of reporting guidelines now in use.
Mr. St-Jean said the CSSB’s proposals are based on those developed by its international counterpart, which are known as IFRS S1 and IFRS S2. They were the first to emerge from the board, which has its North American head office in Montreal.
The Canadian Sustainability Disclosure Standard 1 includes general requirements for reporting material information about sustainability-related financial, market and legal risks, in similar fashion to traditional accounting.
Its second standard, CSDS 2, includes similar requirements for reporting on climate-specific factors. The ISSB version calls for reporting risks tied to physical damage from climate change and the transition to lower-carbon energy, as well as opportunities from technological advances.
One possible change from the international standard on the climate front could involve the timing of requirements to report Scope 3 emissions – those that stem from companies’ value chains and from the end use of their products. One possibility is delaying Scope 3 reporting by a year in Canada, given the need for many companies to become familiar with what are the most difficult emissions data to quantify, Mr. St-Jean said.
The board will decide this week if it will propose such a break, he said. “It takes a bit of time before people feel comfortable with the approach they use to calculate the Scope 3. So just recognizing there’s a need for capacity building, additional relief might be appropriate. We’re going to be asking Canadians, ‘Is this relief necessary?’”
A third document will provide details of proposed changes and modifications to the international standards. One of those under consideration relates to how Indigenous rights could be integrated into reporting standards, given their importance to natural resource and infrastructure development in Canada.
“I think it’s important to send the message clearly that it’s going to be a disciplined approach, and it’s going to be done very much with a focus on Canadian public interest at that time,” Mr. St-Jean said.