Canada’s accounting and auditing bodies are establishing a homegrown standards board for sustainability measures as investors and regulators call for better transparency and comparability of key environmental and social data from companies.
The Canadian Sustainability Standards Board (CSSB) is being set up amid an international push to standardize the reporting of metrics on a range of items, from climate risks to work force diversity to boardroom gender equity. With numerous reporting frameworks currently in use, greenwashing – making false or exaggerated environmental claims – has become a major concern.
The CSSB will work closely with the new International Sustainability Standards Board (ISSB), which has released its first draft proposals for measuring and disclosing general sustainability factors, as well as those tied specifically to climate change.
“It’s critical a Canadian Sustainability Standards Board feeds into the development of that global sustainability disclosure baseline as those standards are being developed,” said Lisa French, the vice-president of sustainability standards for Financial Reporting & Assurance Standards Canada.
Once those global conventions are finalized, the CSSB will review them to make sure they are appropriate for the Canadian market, then endorse them for use. Canada’s economy requires sustainability standards that recognize its high concentration of resource-extraction companies as well as its large number of small and medium-size enterprises, Ms. French said.
The CSSB is being formed in response to recommendations from the Independent Review Committee on Standard Setting in Canada (IRCSS), which is studying the processes for establishing accounting, auditing and assurance standards. Its final report is due this summer, but the group decided to fast-track the formation of the CSSB given the topic’s momentum.
“We believe it will help ensure that Canada stays apace, with sustainability reporting and assurance standard setting processes and standards that are aligned with those developed by the ISSB while remaining relevant and responsive to our unique economic and social features and aspirations,” IRCSS chairman Ed Waitzer said at a conference in Banff early this month.
The British-based International Financial Reporting Standards Foundation launched the ISSB at the COP26 climate summit in Glasgow, Scotland, in November and has opened a North American headquarters in Montreal. Investors, regulators and companies around the world have complained that confusion and uncertainty about corporate claims stem from a lack of uniformity in disclosure.
“The greenwash issue is top-of-mind for investors. They want to be able to compare companies that are using a same set of standards and hold them accountable for the assertions that they are making – net-zero targets, whatever their assertions are. They want those companies to be accountable,” Ms. French said.
“For the businesses, this is not about reporting for reporting’s sake. This is to effect behavioural change. It is to improve the resilience of companies.”
The Accounting Standards Oversight Council and the Auditing and Assurance Standards Oversight Council are forming a committee to do the initial groundwork for the CSSB. This will include establishing a recruitment process for the chair and board members. The new board is expected to be operational by April 1, 2023.
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