As we addressed here, the Canadian Sustainability Standards Board issued for comment its first two proposed standards.

These are proposed Canadian Sustainability Disclosure Standard (CSDS) 1 General Requirements for Disclosure of Sustainability-related Financial Information  and CSDS 2 Climate-related Disclosures, built on the pre-existing IFRS S1 and S2; the CSSB didn’t propose any major changes to the underlying ISSB standards except to modify proposed effective dates and transitional reliefs. The CSSB recently made many of the comment letters available for review; we’ll spend a few posts looking at elements of the feedback.

We’ll start with the accounting firms, many of whom noted a comment in a release from the Canadian Securities Administrators (Canada’s securities regulators) that their eventual proposed rules “will consider the final CSSB standards and may include modifications appropriate for the Canadian capital markets. The CSA anticipates adopting only those provisions of the sustainability standards that are necessary to support climate-related disclosures.” Although that’s not very specific (and even less encouraging), it does make clear that the CSA doesn’t feel obliged to adopt Canadian standards that exactly mirror those of the ISSB. But KPMG and others argued for “an approach that leads to Canadian listed companies adopting sustainability disclosure standards that maximize the use of ISSB Standards and minimize further fragmentation of sustainability reporting.” To the extent that the Canadian standards do differ from the ISSB standards, Deloitte mused it might possibly be by requiring more rather than less:

• We fully support the Board’s objectives to perform a robust consultation process to understand the perspectives and priorities of First Nations, Métis and Inuit Peoples in the context of developing its standards in an inclusive manner. These perspectives are critical to fully identify any unique Canadian circumstances which could require the inclusion of additional disclosures in the CSSB standards…(However), we would recommend the Board consider limiting the use of carve-outs and/or deletions. This will support greater alignment with IFRS S1 and IFRS S2, and comparability and transparency in the global capital markets. It will also provide multi-national entities with the ability to, if needed, achieve compliance with both ISSB and CSSB sustainability disclosure standards without undue duplication and/or complex reconciliations.

We’ll return to that first sentence in a future post, but on the theme of limiting carve-outs and deletions, PricewaterhouseCoopers believed “it would be optimal for both preparers and investors to be able to reference CSSB standards…We strongly encourage the CSSB to work closely with the CSA so that the CSSB produces final standards written in a manner which allows the CSA to easily incorporate CSSB standards into applicable securities laws and regulations.” In other words, while Canadian companies might only be required to implement a subset of the ISSB standards, at least initially, they should be allowed to apply the whole package if they so choose. This might involve some form of (to use the regulatory term) “transition relief,” in which (say) the Canadian rules are essentially based on the ISSB ones, but with certain specified sections made non-mandatory for some or all companies until a (possibly unspecified) future date. This is from Grant Thornton:

• We recommend the CSSB consider the potential implications on Canadian entities’ ability to compete and attract global investment if they were to adopt a more extensive sustainability-related disclosure regime than that of a larger, adjacent economy with many ties to Canada (being the United States) in the near term. We do not believe that the CSDSs should include exemptions from any particular climate-related disclosures compared to the ISSB’s standards, as this would undermine the global standardization of sustainability disclosure standards. Instead, we recommend the CSSB provide greater transition relief specifically for Scope 3 GHG emissions disclosures. For example, this could involve a longer deferral period than the two years currently proposed to provide Canadian entities with additional time to develop the ability to measure and report those disclosures, as well as time for investors’ sustainability-related information needs and expectations to align further across markets.

We’ll return too to the US-related angle on all this. In the meantime, Ernst & Young would also seem to support longer timelines:

• (EY’s findings) could indicate that Canadian companies would struggle to disclose high quality climate-related information as sought by CSDS 2. However, we also know that companies are preparing and developing methodologies, gaining experience, and understanding, but not yet disclosing the results, pending more certainty on what will be mandatory. Preparing high quality disclosures does take time and the transition reliefs proposed by CSSB will be necessary. Indeed, these may not be sufficient for some companies.

Perhaps that would be true, if the CSSB’s rules were becoming effective tomorrow, but even in the best case, adoption will only happen after the CSA issues its own proposed rules for comment (which, as noted, will “consider” the CSSB’s rules without being bound by them); given regulatory timelines, and the apparent absence of much sense of urgency, Canadian rules won’t be effective for several years at least. By then, companies will surely have had ample time to prepare, and even if they haven’t, users will most certainly have been made to wait long enough…

The opinions expressed are solely those of the author.