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The Canadian Sustainability Standards Board Releases Exposure Drafts of Proposed Canadian Sustainability Disclosure Standards (CSDS) 1 and 2

This blog was originally posted on 19th March, 2024. Further regulatory developments may have occurred after publication. To keep up-to-date with the latest compliance news, sign up to our newsletter.

AUTHORED BY CELIA LE LIEVRE, SENIOR REGULATORY COMPLIANCE SPECIALIST, COMPLIANCE & RISKS

Introduction

The Canadian Sustainability Standards Board (CSSB) works to advance the adoption of sustainability disclosure standards in Canada. In this blog, we examine the recently published Exposure Drafts of the proposed Canadian Sustainability Disclosure Standards, CSDS 1 and CSDS 2.

Exposure Drafts of Proposed Canadian Sustainability Disclosure Standards – CSDS 1 and CSDS 2

The Exposure Drafts of the proposed Canadian Sustainability Disclosure Standards, CSDS 1 and CSDS 2, are now available for public consultation until June 10, 2024.

The two Exposure Drafts are:

Proposed CSDS 1: General Requirements for Disclosure of Sustainability-related Financial Information
Proposed CSDS 2: Climate-related Disclosures

The draft standards would require in-scope entities to disclose information about climate and sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term. As such, CSDS 1 and 2 are closely aligned with the International Sustainability Standards Board’s (ISSB) Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, respectively.

Both CSDS 1 and CSDS 2 would become voluntarily effective for annual reporting periods beginning on or after January 1, 2025. However, the draft standards provide for a 2-year transition period during which companies may decide to disclose information on only climate-related risks and opportunities in accordance with CSDS 2. Likewise, it would be possible to omit disclosures on Scope 3 greenhouse gas emissions during the first two annual reporting periods in which a reporting entity applies CSDS 2.

What is more, disclosures of comparative information on sustainability-related risks and opportunities under CSDS 1 would not be required during the first three annual reporting periods. Consequently, companies which, for the first time, start reporting in accordance with CSDS 1 for the reporting period starting on January 1, 2025 would not be required to disclose comparative information on their sustainability-related risks and opportunities (other than climate-related risks and opportunities) before the reporting year beginning on January 1, 2028.

A Consultation Paper on the proposed Criteria for Modification Framework was also released by the Board. In this framework, the Board proposes two deviations from the ISSB standards. The objective is to ensure that the CSDSs are fit for purpose in Canada. As outlined above, these modifications mainly relate to effective dates and proposed transition reliefs.

What’s Next for CSDS 1 and CSDS 2?

The proposed CSDS were published on 13 March 2024. Comments on the Draft Standards can be submitted until 10 June 2024.

It is important to note that the proposed Canadian standards will remain voluntary until they are mandated by the appropriate Canadian authorities.

The EU Council approved version has been sent to the EU Parliament for approval. Should the EU Parliament adopt its position on first reading, the EU Council would approve the EU Parliament’s position and the Act would be adopted into law.

Due to copyright protection we are currently unable to add the full text of the draft standards to C2P. We will add the standards as soon as we obtain permission. The full text of the draft standards can be viewed on the CSSB’s website.

Stay Ahead Of Regulatory Changes

Want to stay ahead of ESG regulatory developments like the Exposure Drafts of the proposed Canadian Sustainability Disclosure Standards, CSDS 1 and CSDS 2?

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