Sustainability Reporting Explained

Canada is entering a new era of corporate transparency with the introduction of the Canadian Sustainability Disclosure Standards (CSDS). These standards, developed by the Canadian Sustainability Standards Board (CSSB), are designed to align with international sustainability reporting frameworks while addressing the unique needs of the Canadian market.

With growing pressure from investors, regulators, and the public, the CSDS will play a pivotal role in how Canadian companies disclose and manage environmental, social, and governance (ESG) risks and opportunities.

Global Context

The CSDS is Canada’s response to the international momentum toward standardized sustainability reporting. The International Sustainability Standards Board (ISSB), established by the IFRS Foundation, released two global baseline standards in 2023:

• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information

• IFRS S2: Climate-related Disclosures

The CSSB, formed in 2022, is tasked with adapting these standards for the Canadian context. In March 2024, the CSSB issued exposure drafts for CSDS 1 and CSDS 2, based directly on IFRS S1 and S2, respectively. The CSDS was released in December 2024 and the effective date for voluntary adoption was the annual reporting period beginning on or after January 1, 2025.

Overview of CSDS 1 and CSDS 2

CSDS 1: General Requirements for Sustainability-related Financial Disclosures

CSDS 1 establishes a comprehensive framework for disclosing material sustainability-related risks and opportunities. It emphasizes:

• The integration of sustainability and financial reporting

• The use of industry-specific metrics

• A requirement to disclose material information—i.e., information that could influence investor decisions

CSDS 1 also encourages companies to apply the SASB (Sustainability Accounting Standards Board) standards to ensure sector-specific relevance.

CSDS 2: Climate-related Disclosures

CSDS 2 focuses on climate-related risks and opportunities, aligning closely with the Task Force on Climate-related Financial Disclosures (TCFD) framework. Key elements include:

• Governance: How climate risks are overseen by leadership

• Strategy: How climate risks and opportunities affect business models

• Risk Management: How climate risks are identified and managed

• Metrics and Targets: Including Scope 1 and Scope 2 GHG emissions, and eventually Scope 3

The CSSB has proposed a phased approach for Scope 3 disclosures, recognizing data collection challenges, particularly for smaller entities.

Voluntary Adoption and Future Mandates

While the standards are voluntary at first, regulatory bodies like the Canadian Securities Administrators (CSA) are expected to integrate CSDS into mandatory disclosure frameworks over time.

The CSDS is intended to eventually apply to publicly accountable enterprises (PAEs)—including:

• Companies listed on Canadian stock exchanges

• Financial institutions

• Other entities required to file public financial statements

However, the standards are expected to influence private companies, especially those seeking external capital or operating in ESG-sensitive sectors.

Key Considerations for Canadian Companies

1. Materiality Assessment

The CSDS adopts a single materiality lens—focused on what is material to investors. Companies must develop robust processes to determine which sustainability issues are financially material to their operations.

2. Governance and Oversight

Boards and senior management will need to be directly involved in overseeing sustainability disclosures. This includes documenting roles, responsibilities, and internal controls.

3. Data and Systems Readiness

Many companies will need to invest in data collection, analysis, and reporting systems—especially for GHG emissions and scenario analysis.

4. Cross-border Consistency

For multinational companies, the CSDS offers interoperability with other global frameworks, reducing duplication and ensuring consistency in reporting across jurisdictions.

Final Thoughts

The Canadian Sustainability Disclosure Standards are a transformative step toward embedding ESG considerations into the fabric of Canadian corporate reporting. While implementation will require effort and investment, the long-term benefits—increased investor trust, improved risk management, and global alignment—are substantial.

Organizations should begin preparing now by:

• Conducting materiality assessments

• Reviewing governance structures

• Investing in data infrastructure

• Engaging stakeholders and advisors

As the CSSB finalizes the standards and regulators move toward mandatory implementation, early adopters will be best positioned to lead in Canada’s sustainable economy. Contact us for more information about how our bespoke solutions can help your organization with sustainability due diligence including CSDS. 

Additional Resources

• Canadian Sustainability Standards Board (CSSB)

• IFRS Sustainability Standards

As the global economy shifts towards sustainability, ESG considerations are becoming increasingly embedded into the due diligence considerations of organizations, whether due to shareholder and investor demand or regulatory compliance.

However, current due diligence processes often suffer from high labor and time costs due to process bottlenecks. Below, we explore 5 of the most common bottlenecks that organizations face in implementing effective sustainable due diligence, and how Carbon Impact’s automated solutions can help. If your organization is running into these problems, you are definitely not alone:

1. Data Availability and Quality

One of the most significant challenges is the lack of reliable and comprehensive ESG data. Many companies do not disclose sufficient information, and when they do, it often lacks standardization. This inconsistency makes it difficult for financial institutions to assess the sustainability risks and opportunities associated with potential investments.

• Data Gaps: Many companies either do not collect relevant ESG metrics, or do not use the collected data to properly calculate common benchmark KPI’s such as emissions, energy usage, and waste generation. For example, even among large companies listed in the S&P Global Broad Market Index, just over half (58%) disclosed Scope 1 and 2 emissions in 2022. Of these, only 32% of companies reported Scope 1 emissions comprehensively, without need for further adjustment or supplementing.

• Standardization Issues: Different reporting frameworks and regulations (e.g., CSRD, GHGRP, GRI, SASB, TCFD) can lead to inconsistencies in data reporting, especially if source data gaps existed in the first place.

2. Integration into Existing Processes

Integrating ESG factors into traditional financial due diligence processes is challenging. Many institutions struggle to adapt their existing frameworks to incorporate these new considerations effectively.

• Resource Constraints: Implementing new processes requires time, expertise, and financial resources that may be scarce.

• Lack of Available Tools: As a relatively new dimension when it comes to investment decisions, the market of tools for processing and integrating ESG data is not as well developed as that of traditional financial information. A survey of US companies by KPMG in 2024 found that half of major firms still used excel as their primary ESG data management system.

3. Technological Limitations

While technology can aid in ESG data collection and analysis, many financial institutions lack the necessary tools and systems to manage this efficiently.

• Legacy Systems: Older IT systems may not support the integration of new ESG data analytics tools.

• Data Management: Handling large volumes of ESG data which may also be variable in availability and quality requires robust data management systems that many organizations have yet to develop, especially for the types of KPIs commonly seen in ESG datasets.

4. Risk Assessment Complexity

Assessing ESG risks involves a high degree of complexity and uncertainty. Unlike traditional financial risks, ESG risks can be more qualitative and long-term in nature.

• Qualitative Factors: ESG risks often involve qualitative judgments, making them harder to quantify. This can be seen in the high variation among ratings from ESG ratings providers (as examined in multiple academic reviews including https://doi.org/10.1093/rof/rfac033) as compared to traditional financial credit ratings.

• Interconnectedness: ESG issues are often interconnected, requiring a holistic approach to risk assessment. For example, a company’s GHG emissions are directly tied to multiple aspects of the organization including its primary industry, key product design, energy usage, supply chains, logistics, and more.

5. Capacity Building and Expertise

There is a shortage of skilled professionals who can effectively integrate ESG considerations into financial analysis and decision-making.

• Training Needs: Staff require training to understand and implement ESG criteria effectively.

• Expertise Shortage: The rapid growth in demand for ESG expertise has outpaced supply, especially as demand for experienced professionals in the relatively new field has grown exponentially. Among respondents to EY’s 2024 Global Corporate Reporting Survey, only 43% reported employing full-time sustainability analysts.

Overcoming the Bottlenecks with Carbon Impact

1. Automated data processing: Carbon Impact’s bespoke data processing solutions leverage the latest in AI-enabled features to improve efficiency and reduce costs, with options for human checks to ensure data fidelity and accuracy. Input data can be in the form of invoices, bills, and other readily available company data which will be ingested and, after automated calculations, output as useful environmental KPIs

2. Seamless Integration Tools: Carbon Impact offers tools that integrate ESG considerations into existing due diligence processes, while helping to cut down the amount of time and labour required. Solutions are designed to work with legacy systems, minimizing disruption and facilitating smoother transitions.

3. Advanced Technological Capabilities: With cutting-edge analytics and data management systems, Carbon Impact HQ enables institutions to handle large volumes of ESG data efficiently. Options for downstream data processing including export, visualization, and audit enable further integration with existing processes. 

4. Multi-Dimensional Platform: Carbon Impact enables decision-making by hosting all the different dimensions of sustainability within one integrated platform, helping to reduce the complexity of decisions by putting all the pertinent KPIs together in one source of truth. 

5. External Expertise: Carbon Impact’s software leverages the expertise of its in-house sustainability experts to deliver the latest and most accurate information and best practices regarding regulatory reporting requirements, data processing and calculation procedures, and much more.

Final Thoughts

While the path to integrating sustainable due diligence is challenging, technology solutions such as Carbon Impact can significantly cut time and labour costs while improving data accuracy and availability. Contact us today for more information about how our bespoke solutions can help your organization with sustainability due diligence. 

In the face of escalating climate challenges, the importance of managing energy usage has never been more critical. Energy consumption is a leading source of greenhouse gas emissions, which are driving global climate change. As we strive for a sustainable future, the transition to renewable energy and the automation of emissions tracking are key strategies that can make a significant difference.

Understanding the Impact of Energy Usage

Energy is a critical resource for businesses to manage due to its necessity in just about every type of business operation.  However, the majority of the world’s energy still comes from fossil fuels, which results in a significant amount of emissions, categorized under Scope 2 of the GHG Protocol. These emissions contribute to global warming, air pollution, and health issues.

Managing energy usage effectively can lead to:

• Reduced Carbon Footprint: By optimizing energy efficiency, businesses and individuals can significantly cut down their carbon emissions.

• Cost Savings: Energy-efficient practices and technologies can lower energy bills and reduce operational costs.

• Resource Conservation: Efficient energy use helps conserve natural resources and reduce environmental degradation.

Monitoring and Saving Energy

Some general steps for businesses to monitor and reduce their energy usage, as well as reduce energy-related emissions:

1. Assess Your Energy Profile

Begin by evaluating your current energy consumption patterns. This involves understanding where and how energy is used, identifying inefficiencies, and setting goals for improvement.

2. Explore Renewable Options

Consider which renewable energy sources are most viable for your needs. Solar panels, for example, are ideal for locations with abundant sunlight, while wind turbines are suited for areas with consistent wind patterns.

3. Invest in Energy-Efficient Technologies

Upgrading to energy-efficient appliances and systems can dramatically reduce energy usage. This includes LED lighting, smart thermostats, and high-efficiency HVAC systems.

4. Partner with Renewable Energy Providers

Engage with energy providers that offer renewable energy options. This can include purchasing renewable energy certificates (RECs) or entering into power purchase agreements (PPAs) with renewable energy producers.

5. Monitor and Optimize

Continuously monitor energy usage and make adjustments to maximize efficiency and the use of renewable energy. This requires ongoing assessment and adaptation to new technologies and practices.

Automating Emissions Tracking with Technology

Tracking emissions from energy usage is crucial for understanding environmental impact and making informed decisions. Automation enhances this process by providing accurate, real-time data and analytics. This is where Carbon Impact’s services come into play.

Carbon Impact’s Solutions for Emissions Management

Carbon Impact offers a comprehensive suite of tools tailored to simplify emissions tracking and management:

• Automated Data Collection: Our software seamlessly integrates with existing energy systems to automatically gather and analyze energy usage data. This reduces reliance on manual data entry and minimizes errors, ensuring data accuracy and reliability.

• Real-Time Analytics and Insights: With our intuitive dashboards, users gain access to real-time insights into energy consumption patterns and emissions. This helps identify inefficiencies, track progress, and uncover opportunities for improvement.

• Customizable Reporting: Generate detailed reports that meet regulatory requirements and align with sustainability goals. These reports facilitate transparent communication with stakeholders and support strategic decision-making.

• Integration with Renewable Systems: Our solutions support the integration of renewable energy sources into your energy management plan. This ensures optimal use and accurate tracking of clean energy contributions.

Benefits of Automated Emissions Tracking

• Enhanced Accuracy: Automated systems reduce human error and provide precise data, essential for effective emissions management.

• Efficiency and Time Savings: Automation streamlines data collection and analysis, freeing up resources for strategic initiatives.

• Informed Decision-Making: Access to comprehensive data enables better decision-making and supports strategic sustainability planning.

Transitioning to renewable energy and automating emissions tracking are pivotal steps toward a sustainable future. By leveraging technology and renewable resources, we can reduce our carbon footprint, enhance energy efficiency, and contribute to global sustainability efforts. Carbon Impact is committed to supporting businesses and individuals on this journey. Our innovative solutions make it easier to track emissions, optimize energy usage, and integrate renewable energy sources. For more information on how Carbon Impact can help you achieve your sustainability goals, visit carbonimpacthq.com.

Malaysia’s National Sustainability Reporting Framework is a significant step towards enhancing corporate transparency and accountability in environmental, social, and governance (ESG) matters. Here’s an overview of the framework, including its applicability, implementation timeline, and specific requirements:

Applicability

The framework primarily targets:

• Public Listed Companies (PLCs): All companies listed on Bursa Malaysia are required to adhere to the framework.

• Large Enterprises: While initially focusing on PLCs, the framework may eventually extend to large private enterprises to encourage broader adoption of sustainability practices.

Implementation Timeline

The framework is being phased in to allow companies adequate time to adapt:

1. Phase 1 (2024): Large-cap PLCs are required to begin full compliance with the disclosure requirements. These companies are expected to have the resources and capacity to lead the transition.

2. Phase 2 (2025): Mid-cap PLCs are brought into the fold, allowing them additional time to prepare and adapt their reporting processes.

3. Phase 3 (2026): Small-cap PLCs are required to comply, with the Securities Commission providing extra support and resources to assist these firms.

Specific Requirements

Malaysia’s National Sustainability Reporting Framework incorporates elements from the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards, specifically IFRS S1 and S2. These standards are designed to provide a comprehensive framework for sustainability reporting. Specific requirements include:

• Materiality Assessment: Organizations are required to conduct a materiality assessment to identify and prioritize ESG issues relevant to their operations and stakeholders.

• Disclosure of ESG Metrics: Companies must disclose specific ESG metrics, including carbon emissions, energy consumption, water usage, waste management, and social impact initiatives.

• Governance and Oversight: There should be clear governance structures in place to oversee sustainability initiatives, including board-level responsibility.

• Assurance of Reports: Reports should be subject to third-party assurance to enhance credibility and reliability.

• Stakeholder Engagement: Companies are encouraged to engage with stakeholders to ensure that their sustainability efforts align with stakeholder expectations and needs.

Goals and Benefits

The overarching goals of the framework include:

• Enhancing Transparency: Providing investors and stakeholders with clear, comparable, and reliable information on corporate sustainability practices.

• Driving Sustainable Development: Encouraging companies to integrate sustainability into their business strategies and operations, thereby contributing to Malaysia’s sustainable development goals.

• Improving Competitiveness: Helping Malaysian companies remain competitive in global markets where sustainability is increasingly a key differentiator.

Challenges and Support

While the framework presents opportunities, companies may face challenges such as resource constraints and the need for capacity building. To address these, the Malaysian government and Bursa Malaysia are providing guidance and support, including training programs and resources to facilitate compliance.

In summary, Malaysia’s National Sustainability Reporting Framework is a comprehensive initiative designed to promote sustainable business practices and enhance corporate accountability. Its phased implementation allows companies to progressively adapt, ensuring a smooth transition towards more sustainable operations.

Contact experts at Carbon Impact today to see how our solutions can help your business prepare for compliance with Malaysia’s National Sustainability Reporting Framework.

Australia’s AASB S1 and AASB S2 standards are part of an initiative to enhance sustainability reporting and climate-related financial disclosures. These standards are aligned with global efforts to improve transparency and accountability in sustainability matters. The AASB standards are closely aligned with the International Financial Reporting Standards (IFRS) to maintain global comparability.

Applicability

AASB standards apply to a wide range of entities, including:

• Publicly listed companies

• Large proprietary companies

• Government entities

• Not-for-profit organizations

• Certain other entities that are required by law to prepare financial statements in accordance with AASB standards

Phasing in of Standards

Australian businesses are split into 3 groups based on the following criteria for adoption of AASB sustainability disclosure standards:

• Group 1 entities, which have their first annual reporting period starting on or after January 1, 2025, are those which fulfill 2 of the 3 following criteria:

  • Consolidated financial year revenue of AUD 500 million or more 

  • Consolidated gross assets of AUD 1 billion or more

  • 500 full time equivalent employees or more

Additionally, any entities above the National Greenhouse and Energy Reporting (NGER) threshold of 50,000 tCO2e Scope 1 and 2 emissions are included in Group 1

• Group 2 entities, which have their first annual reporting period starting on or after January 1, 2026, are those which fulfill 2 of the 3 following criteria:

  • Consolidated financial year revenue of AUD 200 million or more 

  • Consolidated gross assets of AUD 500 million or more

  • 250 full time equivalent employees or more

Additionally, all other NGER reporters and asset owners with AUD 5 billion or more assets are also included in Group 2

• Group 3 entities, which have their first annual reporting period starting on or after January 1, 2027, are those which fulfill 2 of the 3 following criteria:

  • Consolidated financial year revenue of AUD 50 million or more 

  • Consolidated gross assets of AUD 25 million or more

  • 100 full time equivalent employees or more

AASB S1: General Requirements for Sustainability-Related Financial Disclosures

Purpose: AASB S1 aims to provide a framework for entities to disclose sustainability-related financial information. It focuses on the relevance, reliability, and comparability of the information provided.

Specific Requirements:

• Entities must disclose information on sustainability risks and opportunities that could affect their financial position, performance, and cash flows.

• Requires a management approach to sustainability, outlining governance, strategy, risk management, and metrics used.

• Emphasizes the need for consistency and comparability across reporting periods.

AASB S2: Climate-Related Disclosures

Purpose: AASB S2 focuses specifically on climate-related financial disclosures, ensuring entities provide comprehensive information about climate risks and opportunities.

Specific Requirements:

• Entities must disclose climate-related risks and their impact on business operations and financial planning.

• Requires detailed reporting on governance, strategy, risk management, and metrics related to climate change.

• Encourages scenario analysis to assess the resilience of the entity’s strategy under different climate-related scenarios.

Key Components of Both Standards

1. Governance:

   • Disclosures on the board’s oversight of sustainability and climate-related risks.

   • Management’s role in assessing and managing these risks.

2. Strategy:

   • Impact of sustainability and climate-related risks on business strategy and financial planning.

   • Description of the resilience of the strategy under different scenarios.

3. Risk Management:

   • Processes for identifying, assessing, and managing sustainability and climate-related risks.

4. Metrics and Targets:

   • Metrics used to assess risks and opportunities.

   • Targets set by the entity and performance against these targets.

Relation to IFRS S1 and S2

The AASB standards are closely aligned with IFRS standards, including the new sustainability-related standards:

• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information. This standard requires entities to disclose sustainability-related risks and opportunities that could affect their financial position and performance.

• IFRS S2: Climate-related Disclosures. This standard focuses specifically on climate-related risks and opportunities, requiring entities to provide detailed information on their climate impact and strategies.

These standards reflect a growing recognition of the importance of sustainability and climate-related issues in financial reporting. They are designed to improve the quality and consistency of disclosures, aiding investors and stakeholders in making informed decisions.

Contact us today to see how Carbon Impact can help your business prepare for AASB S1 and S2 compliance

The Corporate Sustainability Reporting Directive (CSRD) is a significant regulatory development in the European Union aimed at enhancing and standardizing sustainability reporting which we explain in depth in our CSRD article. It impacts a wide range of companies, including non-EU companies with European subsidiaries or significant operations in the EU. Here’s an overview of what this means for such companies:

Overview of CSRD

1. Objective: The Corporate Sustainability Reporting Directive (CSRD) aims to enhance transparency and standardization in sustainability reporting by mandating detailed disclosures on environmental, social, and governance (ESG) performance.

2. Scope: The directive applies broadly to large companies and listed SMEs within the EU, but also extends to non-EU companies with significant operations in the EU. 

3. Reporting Standards: Companies must adhere to the European Sustainability Reporting Standards (ESRS), censuring consistent and comparable sustainability reporting.

Implications for Non-EU Companies

1. Significant EU Operations: Non-EU companies with substantial operations in the EU (meeting the below thresholds) must also comply with the CSRD. This includes aligning their reporting practices with ESRS.

   1. More than €40 million in net turnover within the EU.

   2. More than €20 million in total assets or more than 250 employees within the EU.

2. EU Subsidiaries: Companies with subsidiaries in the EU that meet applicable thresholds will follow the same timelines as EU companies as detailed below:

Timelines for Compliance

1. Large Public Interest Entities: Beginning in 2024, large public interest entities with more than 500 employees must start reporting under the CSRD for the 2025 financial year.

2. Large Companies: From 2025, all large companies (meeting two of the following: €40 million in turnover, €20 million in assets, 250 employees) must report for the 2026 financial year.

3. Listed SMEs and Other Entities: Starting in 2026, listed SMEs and other specified entities must report for the 2027 financial year.

Key Requirements

1. Data Collection and Management: Companies need robust systems for data collection and management to meet the comprehensive reporting requirements, including information on climate impact, diversity, and human rights.

2. Integration with Financial Reporting: Sustainability information must be integrated with financial reporting, requiring collaboration between sustainability and financial teams.

3. Audit and Assurance: Limited assurance of sustainability information is mandatory, necessitating external verification of ESG data.

Challenges and Opportunities

• Challenges:

  • Complexity and Cost: Implementing the necessary systems and processes for compliance can be complex and costly.

  • Regulatory, Cultural and Operational Differences: Aligning practices with European standards may pose challenges due to differences in regulatory environments, business culture, and operational procedures.

• Opportunities:

  • Improved Risk Management: Enhanced ESG reporting can lead to better risk management and decision-making.

  • Market Access and Reputation: Compliance can improve market access and enhance corporate reputation in the EU.

Steps for Compliance

1. Assessment and Gap Analysis: Conduct a thorough assessment of current sustainability practices and identify gaps relative to CSRD requirements.

2. Develop Reporting Capabilities: Invest in systems and processes to collect, analyze, and report ESG data in line with ESRS.

3. Engage Stakeholders: Work with internal and external stakeholders, including auditors, to ensure comprehensive and accurate reporting.

4. Training and Awareness: Educate staff on CSRD requirements and the importance of sustainability reporting.

5. Continuous Improvement: Use the reporting process to identify areas for improvement in sustainability performance and strategy.

By addressing CSRD requirements proactively, non-EU companies can ensure compliance and strengthen their sustainability initiatives and market position in the EU. 

Contact us today to see how our solutions can help your business prepare for CSRD and ESRS compliance.