Welcome to a New Era of Sustainability Reporting in Canada, heralded a recent news release.

Here’s what that’s about:

• The Canadian Sustainability Standards Board (CSSB) is proud to announce the release of CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS 2, Climate-related Disclosures, Canada’s inaugural sustainability disclosure standards.
• These standards represent a significant milestone in promoting consistency and comparability in sustainability reporting.
• In comparison to IFRS S1 and IFRS S2, the CSSB proposed in its Exposure Drafts (Proposed CSDS 1 and Proposed CSDS 2) additional transition relief of one year for each of the following:
  • The effective date of the standards.
  • The start date for reporting on sustainability matters beyond climate.
  • The start date for reporting on Scope 3 GHG emissions.
• The CSSB decided to maintain such transition reliefs from the Exposure Drafts and to include the following further transitional reliefs when finalizing CSDS 1 and CSDS 2:
  • Two additional years of relief for the start of aligned reporting, with such reporting being required within the first six months following the second- and third-year end respectively.
  • Three years of relief for only the quantitative aspects of scenario analysis data reporting (not qualitative aspects).
  • An additional year of transition relief for Scope 3 GHG emissions reporting.

Here are some comments from the Globe and Mail’s coverage:

• Major institutional investors on Wednesday welcomed the standards and urged companies to adopt them without delay, while environmental advocates expressed disappointment about the extended implementation periods…
• Ten of the largest Canadian pension funds, including Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan, said the new standards offer a robust framework that will boost the competitiveness of Canadian companies in the race for global capital.
• However, Sonia li Trottier, the director of the Canada Climate Law Initiative, lamented the additional time granted for implementation, saying companies have long known they would have to eventually disclose the data. “One year of relief is enough time, as there have been many years of guidance on climate-related disclosure and methodologies,” she said in a statement.

It’s impossible to assess the significance of the new standards without acknowledging that they will only be mandatory for Canadian public companies if and when securities regulators decide that they are, and that even if those regulators adopted the CSSB’s standards wholesale as a starting point, they might sweep away its carefully calibrated points of relief and impose their own. Further, the regulators don’t seem to be approaching this area with any sense of urgency, and have already signaled that any rules they issue will be focused solely on climate change, that is (at best) on a subset of the CSSB standards. It’s also necessary to acknowledge that Canadian securities regulators are generally paranoid about not issuing rules perceived as more “onerous” than those applying in the US, at a time when the new Trumpian regime makes it more than likely that the rules passed by the SEC in this area will never actually be implemented. Many respondents to the CSSB’s exposure drafts commented on this area, as we summarized here, and as acknowledged in the basis for conclusions:

• Some comments raised concerns that differing from the U.S. regulatory environment could harm comparability and competitiveness with Canada’s main trade partner. The competitiveness concerns flagged two aspects: the additional costs and the additional disclosure content…
• While the implementation of CSDS 1 would involve additional costs, materiality and proportionality provisions embedded in the standard are designed to alleviate the reporting requirements for preparers. The CSSB also considered that while some respondents argued that additional disclosure of material general sustainability disclosure risks would make Canadian companies less attractive to investors than their American peers, others argue more disclosure would make Canadian companies more attractive by instilling greater investor confidence in transparency of material risks and the companies’ corresponding management and mitigation of such risks. Finally, the Board refers to the IFRS Foundation’s Effects Analysis report published June 2023. On balance, the Board determined to maintain CSDS 1 with the relief provisions noted above.
• While acknowledging respondents’ concerns, the CSSB also notes the difference between the two bodies: the SEC (a federal regulator) and the CSSB (a standard setter of sustainability standards, not just climate-related). Therefore, their respective roles are distinct.

That last comment seems to be saying in effect that the CSSB is best advised to set a high disclosure bar, and that if regulators choose to impose a requirement that amounts to less than that, the blame (or the praise, if you look at it that way) will all belong to them. That’s perhaps understandable, but given that Canadian regulators, as noted, will certainly grapple with the same issues in deciding what if any rules to impose on public companies, it might cause one to wonder what purpose the CSSB serves. I realize of course that the Canadian standards are available to all Canadian entities that want to report on sustainability-related matters in a credible and comparable manner, but the success of the endeavor will primarily be measured by its impact on our most visible, market-facing entities, or put another way, by its ability to influence the workings of capitalism…

The opinions expressed are solely those of the author.