Top 5 Tips for SMEs on CSSB Disclosure

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The sustainability and climate reporting landscape has evolved significantly over the last decade. Following a proliferation of standards that made harmonization next to impossible – and created a huge reporting burden for many organizations – we are finally moving towards a unified global standard set by the International Sustainability Standards Board (ISSB). SMEs need to be prepared, as larger organizations will increasingly require their data for compliance and those not ready may face market access challenges. 

In June 2023, the ISSB released two robust standards for reporting on sustainability-related information that is financially material. ISSB’s approach is influenced by the Task Force on Climate-related Financial Disclosures (TCFD) framework, which was developed in response to increasing demands from investors and stakeholders for more comparable and reliable sustainability- and climate-related information in annual filings. 

Historically, sustainability- and climate-related reporting has been voluntary. However, this is changing: regulators like the Office of the Superintendent of Financial Institutions (OSFI), which regulates Canada’s banking industry, are making reporting mandatory. OSFI’s guideline incorporates ISSB standards and requires federally regulated financial institutions to disclose climate-related risks. In addition, earlier this year the Canadian Securities Administrators (CSA) welcomed the launch of the CSSB standards and noted their plans to potentially integrate them into Canadian climate-related disclosure rules.  

How do ISSB’s standards affect organizations in Canada? 

In March 2024, the Canadian Sustainability Standards Board (CSSB) released a Canadianized version of ISSB’s standards, the Canadian Sustainability Disclosure Standards (CSDS), for public comment. CSDS 1 includes the General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS 2 the requirements for Climate-related Disclosures. The CSSB aims to finalize these standards by the end of 2024.  

CSDS 1 and CSDS 2 become voluntarily effective for annual reporting periods starting on or after January 1, 2025. However, there is a transition relief period of two years for disclosures beyond climate-related risks and opportunities as well as scope 3 reporting. Companies voluntarily adopting the standards on January 1, 2025, will be required to report full CSDS 1, 2, and Scope 3 emissions for their 2027 fiscal year. 

Figure 1: Timeline for disclosure requirements (comparison ISSB and CSSB) 

The CSSB was established by the Financial Reporting & Assurance Standards Canada (FRAS) in 2023. The CSSB’s mandate is to advance the development and adoption of best-practice sustainability disclosure standards that are aligned with existing accounting standards. This includes adapting the ISSB’s standards to the Canadian business and economic context while maintaining international interoperability.  

Why CSSB and CSDS Matter to SMEs 

As of December 2021, 1.19 million, or 97.9%, of Canadian businesses were small businesses, and 22,700 (1.9%) were medium-sized businesses. Their participation in sustainability reporting is vital for comprehensive and meaningful disclosures – and for ensuring Canada can get to net zero. In addition, while the CSSB standards are not yet mandatory, there is a global trend towards mandatory reporting and SMEs are likely to be affected given they are often part of larger organizations’ value chains. Paying attention and preparing to meet these standards now will help SMEs stay ahead of the curve and avoid being caught off guard when the time comes. 

5 Top Tips for SMEs Disclosing to CSSB

1. Leverage Transition Relief Strategically: The proposed transition relief gives SMEs time to prepare before mandatory compliance kicks in. Use this period to conduct a gap analysis to identify areas needing improvement, experiment with your disclosures, refine internal processes, and gradually build up your reporting capabilities. Strategic use of this time will ensure you’re not scrambling when full compliance is required.
2. Prioritize Action Based on Impact: Start by identifying and focusing on the sustainability topics that are most financially material to your business. Whether it’s energy use, waste management, or supply chain impacts, concentrating on key business activities will help you make significant strides in managing risks and seizing opportunities.
3. Address Capacity and Practical Implementation: Meeting the new standards can be resource-intensive, especially for smaller businesses. Seek out targeted support such as industry guidance, partnerships, or external consultants to help you build capacity. Consider appointing a dedicated person or committee to oversee these efforts. This proactive approach can prevent capacity constraints from hindering your progress and expose solutions to these challenges.
4. Engage in Continuous Improvement: Sustainability reporting is not a one-time task; it requires ongoing focus and integration into your company’s strategy and risk management. Establish a routine for regularly addressing sustainability issues, taking tangible actions, and updating your data and disclosures. By embedding sustainability into the everyday operations of your business, you’ll ensure your reporting (a) stays accurate and up to date, (b) is aligned with evolving standards and stakeholder expectations, and (c) demonstrates your long-term commitment to sustainability.  
5. Leverage your Relationships and Collaborate: For SMEs, collaborating with upstream and downstream partners can greatly enhance sustainability efforts. By aligning with value–chain partners on shared goals, you can share costs and tackle challenges like waste and emissions together. Knowledge-sharing and resource pooling help drive joint progress, strengthen reporting, and improve your competitive edge. The CSSB is poised to play a pivotal role in advancing sustainability disclosure standards in Canada.  

If you’re looking for guidance on how your organization can align with evolving reporting requirements and integrate sustainability into your business practices, Delphi is here to help. Reach out to learn how we can support your journey toward compliance, resilience, and long-term sustainability success: Adam Schwarz at aschwarz@delphi.ca, Ghannush Nithiy at gnithiy@delphi.ca, or Dave Photiadis at dphotiadis@delphi.ca. 

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