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. One major issue is whether issuers should be required (maybe after an initial grace period) to issue their sustainability-related disclosures at the same time as their general-purpose financial reports. The CSDS 1 exposure draft noted: “While the CSSB acknowledges the benefits that integration in reporting provides to users and the long term benefits it offers to preparers, the Board also recognizes the challenges that preparers face. The Board deliberated on various amendments to address these challenges, including deferring the alignment in timing of reporting requirement for a period of time. However, the Board recognizes that this period may not provide enough time for preparers to fully resolve the issues. On the other hand, deleting the requirement could hinder progress in the sustainability disclosures landscape.”

This is from KPMG:

• From our work with preparers and investors, as well as our role as a provider of audit and assurance services, we know that connectivity between the financial statements and sustainability-related financial information is key to bridging the gap between the information sought by some investors and the disclosures that result from applying current accounting standards. Although the information provided in the front part of the annual report may be different in nature from the financial statements, it should be consistent where appropriate.
• Timing of reporting is an important aspect of connectivity and accordingly, we believe the goal should be for sustainability-related financial disclosures to be reported at the same time as the related financial statements.
• However, we recognize that a reporting timing gap currently exists, even for those entities that are well along their sustainability reporting journey, and bridging this gap may result in entities having to make additional estimates…We encourage the CSSB to carefully consider the responses from preparers regarding the time they need to prepare for implementation of the proposals to determine if extended transition relief for Canadian entities is warranted.

In contrast GLJ Ltd. argues that “the critical aspect of the disclosure is in the completeness and accuracy of decision-useful information rather than the specific timing of the disclosure”:

• Allowing for staggering of the timing of reporting of sustainability disclosures from the financial reporting statements is appropriate and this staggered timing should be permanent. The reporting burden, the staffing constraints, the increased costs, the data quality and the data collection process will be ongoing and is not unique to the first two years of reporting. For sustainability disclosures to be decision-useful, the quality of the reporting should remain paramount rather than the timing. Robust reporting will benefit from the inclusion of a diverse team from across each organization, many of whom are already fully committed through the first quarter. Without allowing for staggered reporting timing, sustainability reporting will always take a back seat to financial reporting thus minimizing the time commitment spent on the diverse aspects of sustainability-focused data and strategy development. Requiring both reporting disclosures to be finalized at the same time will always challenge the efficiency and efficacy of the process and the associated staff. Additionally, joint filing will limit the cross-organization collaboration that will result in the sustainability reporting being a guide towards continuous improvement rather than a “tick-the-box” exercise

Hydro One comments along similar lines:

• Aligning the timing of sustainability-related financial disclosures and the related financial statements, as proposed by the CSSB, presents Hydro One with a timing challenge. We publish our financial statements months earlier than our sustainability report. The timing of these reports is intentional and ensures that all our data disclosures have comprehensive internal controls and go through a robust governance process before disclosure. Aligning the timing may impact the data quality and accuracy. For example, it takes six to eight months to collect, validate and externally assure climate-related reporting data following our financial year end. In particular, some of the data required for our GHG emissions-related reporting comes from external sources, which are not always timely. Our current timeline allows us to accurately measure and report data according to best practice and get our emissions assured by an external third party. We believe the best way to address the challenge of this timing gap is to allow issuers the flexibility in choosing the appropriate public document(s) in which to publish the proposed disclosures. At the very least, we request transition relief so that we can begin to align our report timelines to decrease the probability of compromising data quality and integrity.

Honestly, given regulatory inaction, we’ll be lucky if the CSSB’s standards become mandatory at all in the foreseeable future, no matter what the time of year, so allowing issuers some flexibility on the timing of reporting seems to me an easy point to concede…

The opinions expressed are solely those of the author.