Navigating the Canadian Sustainability Disclosure Standards (CSDS)

Regulations - North America

Sep 22, 2025

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.