What are the Canadian Sustainability Disclosure Standards (CSDS)?

Canada is making substantial moves to improve corporate transparency and accountability when it comes to sustainability reporting.

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At the forefront of these efforts is the Canadian Sustainability Disclosure Standards (CSDS).

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Developed by the Canadian Sustainability Standards Board (CSSB), these proposed standards aim to change the way Canadian businesses disclose sustainability and climate-related financial information.

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Let’s explore what CSDS entails, how it works, what it requires, and its impact on businesses across Canada.

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What is CSDS?

The Canadian Sustainability Disclosure Standards (CSDS) are a set of proposed guidelines designed by the Canadian Sustainability Standards Board (CSSB) to enhance transparency in sustainability and climate-related financial disclosures.

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The CSDS framework, tailored for Canadian enterprises, is derived from the International Sustainability Standards Board (ISSB) framework and is customized to reflect unique Canadian concerns and requirements. The goal of the ISSB and CSSB is to create a consistent global framework. The CSSB has ensured that the CSDS standards align with existing IFRS standards, differing only in transition periods.

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How does CSDS work?

CSDS includes two main standards serving as the foundation for corporate sustainability reporting:

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CSDS 1: General Requirements for Disclosure of Sustainability-related Financial Information

This standard focuses on the overall requirements for reporting sustainability-related financial information.

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CSDS 2: Climate-related Disclosures

It specifically addresses the reporting of climate-related details, ensuring companies provide a comprehensive account of climate risks and opportunities tied to their operations.

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Together, these standards aim to create a transparent and consistent framework for reporting, allowing for comparability and reliability.

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What are the requirements of CSDS?

CSDS compliance involves several key reporting requirements:

Disclosure of Risks and Opportunities: Companies must identify and disclose sustainability-related risks and opportunities that could impact their future outlook.
Scope 3 Greenhouse Gas Emissions Reporting: A critical requirement is reporting emissions throughout the value chain of the company. To provide additional transition help, companies are not required to disclose their Scope 3 GHG emissions for the first year.
Detailed Value Chain Information: Businesses must explain how climate-related risks and opportunities could affect their entire value chain.
Consistent Presentation Standards: Disclosures must follow specific content and presentation standards to maintain stakeholder usefulness.

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When does CSDS become mandatory?

CSDS standards are set to take effect for annual reporting periods starting on or after January 1, 2025. This timeline gives companies a preparatory period, even as the mandatory aspect awaits judicial and legislative resolution.

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Who needs to comply with CSDS?

CSDS 1 and CSDS 2 are voluntary. As a standard-setting organization, the CSSB does not have the authority to mandate its standards.

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This job is left to regulators like the Canadian Securities Administrators (CSA) and other bodies, such as the Office of Superintendent of Financial Institutions (OSFI), who are pivotal in determining the scope of entities subject to compliance with CSDS.

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Regulatory bodies will define who must comply, broadening the anticipation and readiness across various corporation types pending regulatory clarity.

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Why should you care about CSDS?

Understanding and aligning with CSDS is essential for several reasons:

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Regulatory Landscapes: Across the globe, mandated sustainability disclosures are becoming more prevalent, and compliance is likely.
Investor Expectations: Detailed sustainability reports are increasingly demanded by investors who use them to make investment decisions.
Global Standing: Adhering to internationally recognized standards ensures that Canada remains a leader in sustainable business practices.
Risk Management: Early adoption helps identify and strategically address potential sustainability-related risks.

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How can Arbor help you with CSDS?

Arbor provides a vital solution for navigating CSDS obligations through its adept carbon accounting platform.

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Here’s how Arbor assists:

Efficient Carbon Footprint Calculation: Arbor’s automated processes allow companies to quickly and accurately assess product carbon footprints.
Identifying Carbon Hotspots: The platform helps spotlight emission-heavy areas in supply chains, aiding better management and scope 3 reduction.
Data Transparency for Reporting: Arbor equips businesses with the necessary data to meet transparency and compliance requirements outlined by CSDS 2, Climate-related disclosures.

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