Background
On June 26, 2023, the International Sustainability Standards Board (ISSB) released:
The Canadian Sustainability Standards Board (CSSB) used these standards as baselines to develop:
The Board proposes modifications in accordance with its Proposed “Criteria for Modification Framework,” which takes into account the Canadian public interest.
These modifications relate to effective dates and transition relief. The Board also acknowledges that specific concerns have been raised on provisions within the global standards. Consequently, the Board is conducting a focused consultation to explore these concerns.
Objectives of the project:
- To learn more about the perspectives of individuals, communities, sectors, and business entities in Canada.
- To ensure CSDSs are fit for purpose in Canada, recognizing the benefits of a global baseline.
To meet these objectives, the CSSB requests your feedback on the following topics:
The CSSB welcomes your input on any section of CSDS 1 and CSDS 2 and encourages you to explain your rationale.
Key features of the proposed CSDSs
CSDS 1 and CSDS 2 are based on IFRS S1 and IFRS S2, respectively. The CSSB proposes specific amendments summarized below.
| Amendment |
Illustration |
| Effective date (paragraph E1 of CSDS 1 & paragraph C1 of CSDS 2) |
| The proposed effective dates for CSDS 1 and CSDS 2 have been extended by one year. |
The proposed standards would become voluntarily effective for annual reporting periods beginning on or after January 1, 2025. |
| Disclosures beyond climate (paragraph E5 of CSDS 1) |
| The proposed transition relief for disclosures beyond climate-related risks and opportunities has been extended from one year granted by the ISSB to two years. |
Assuming a calendar year end, if an entity applies the proposed standard for the first time in the reporting period beginning on January 1, 2025, it will be required to disclose information on all sustainability-related risks and opportunities from the reporting period beginning on January 1, 2027. |
| Comparative information (paragraph E6 of CSDS 1) |
The proposed requirements to disclose comparative information have been changed to align with the modification made to paragraph E5.
|
Assuming a calendar year end, if an entity applies the proposed standard for the first time in the reporting period beginning on January 1, 2025, and applies the relief in paragraph E5, to delay reporting about its sustainability-related risks and opportunities (other than disclosure of information on only climate-related risks and opportunities), an entity will be required to disclose comparative information on all sustainability-related risks and opportunities from the reporting period beginning on January 1, 2028. |
| Scope 3 GHG emissions (paragraph C4 of CSDS 2) |
| The proposed transition relief for disclosure of Scope 3 GHG emissions has been extended from one year granted by the ISSB to two years. |
Assuming a calendar year end, if an entity applies the proposed standard for the first time in the reporting period beginning on January 1, 2025, it will be required to disclose its Scope 3 GHG emissions from the reporting period beginning on January 1, 2027. |
Focus areas
While the CSSB welcomes comments on all aspects of the Exposure Drafts’ proposals, it particularly welcomes comments on the aspects listed below.
Scope of proposed CSDS 1 (paragraphs 1-4 of CSDS 1)
CSDS 1 proposes to adopt IFRS S1 without any modifications, except for the effective date and transition relief. Its primary objective is to require an entity to disclose information about its sustainability-related risks and opportunities. Proposed CSDS 1 includes definitions and information required to prepare a complete set of sustainability disclosures and a standard for sustainability-related disclosures.
Accordingly, the CSSB proposes that CSDS 1 and CSDS 2, once finalized, become effective on the same date. However, the Board proposes extending the one-year transition relief within IFRS S1 to two years for disclosures beyond climate-related risks and opportunities.
Timing of reporting (paragraphs 64-69 of CSDS 1)
Aligning timing of sustainability reports with financial statements improves connectivity and ensures decision-useful information for users of general-purpose financial reports. Canadian respondents to the ISSB’s IFRS S1 Exposure Draft expressed broad support for an integration in reporting approach but noted challenges in aligning timing of sustainability disclosures with financial statements. The CSSB considered various possible amendments to the timing of reporting provisions, including deferring or deleting the alignment in timing of reporting requirement. However, a deferral may not provide enough time for preparers to fully resolve the issues, while a deletion could hinder progress in the sustainability disclosures landscape. So, the CSSB seeks feedback on the timing of reporting provisions
Climate resilience (paragraph 22 of CSDS 2)
Scenario analysis is a well-established method used to develop strategic plans that contemplate a range of plausible future states. As climate-related impacts grow increasingly uncertain, scenario analysis is an effective tool to help an entity assess alternatives that may significantly alter the basis for “business as usual” and to communicate its plans for responding to the potential risks and opportunities to investors.
The CSSB supports the global baseline requirements on climate resilience, but acknowledges that:
- climate-related scenario analysis is new to many entities; and
- preparers are concerned about the potential level of resources, skills, and capacity required to prepare these disclosures.
The CSSB seeks views on whether transition relief and/or guidance would help preparers and users in their assessment of climate resilience.
Scope 3 GHG emissions (paragraph C4 of CSDS 2)
It is widely recognized that, for many companies, Scope 3 GHG emissions make up a significant part of an entity’s total GHG emissions inventory and contain important information about a company’s exposure to climate-related risks and opportunities within its value chain.
Preparers have raised concerns about:
- measurement uncertainty; and
- process and capacity challenges to deliver disclosures at the same time as general-purpose financial reports.
The CSSB’s goal is to balance these concerns with the urgent need to address climate-related risks. Proposed CSDS 2 provides additional transitional relief by proposing that the entity is not required to disclose its Scope 3 GHG emissions in the first two annual reporting periods in which an entity applies the standard.
Influencing change
The CSSB offers many ways for you to understand, discuss, and respond to the proposed standards.
- Register for our live webinar taking place on April 10, 2024, to learn more about the Exposure Drafts.
- Attend a discussion session and connect directly with the CSSB. To set up a session, email [email protected].
- Participate in the Connect.FRASCanada.ca survey.
- Submit a response letter via our online form for Exposure Draft on CSDS 1.
- Submit a response letter via our online form for Exposure Draft on CSDS 2.
The response deadline is June 10, 2024.
All responses will be a matter of public record unless confidentiality is requested.
Next steps
The next steps for these projects are as follows:
- June 10, 2024: Comment period ends.
- July-August 2024: Deliberation period.
- By fourth quarter 2024: Project complete, including Feedback Statement, and Basis for Conclusions.
- January 1, 2025: Effective date (voluntary).
Stay informed
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Please contact:
Email our staff: [email protected]