On October 6, 2022, 13 members were appointed to the Implementation Committee for the Canadian Sustainability Standards Board (CSSB). The Implementation Committee will develop the initial institutional structure for the CSSB, which is set to be operational by April 1, 2023.
ESG Global’s CEO, Sarah Keyes, is one of the members appointed to this important committee. We asked Sarah three key questions to better understand this new committee and the journey ahead to informing and adopting the International Sustainability Standards Board (ISSB) standards in a Canadian context.
What are the CSSB and the ISSB?
The creation of the CSSB responds to a recommendation put forth by the Independent Review Committee on Standard Setting in Canada (IRCSS). The establishment of the CSSB was mutually approved by the Accounting Standards Oversight Council (AcSOC) and the Auditing and Assurance Standards Oversight Council (AASOC) in June 2022 and was fast-tracked in response to rapid developments on the global stage.
Most notably, in 2021, the ISSB was established by the International Financial Reporting Standards (IFRS) Foundation. The intention is for the ISSB to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.
In March 2022, the ISSB published the Exposure Drafts of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. Once finalized, they will become part of the IFRS Sustainability Disclosure Standards, with additional standards to be added in the future work plans of the ISSB. Consultations on the two Exposure Drafts closed in July 2022 and over 1,400 comment letters were received by the ISSB, reflecting the significant global interest in this topic.
The Task Force on Climate-related Financial Disclosure (TCFD) recommendations are structurally core to IFRS S1 and IFRS S2. In August 2022, the Sustainability Accounting Standards Board (SASB) Standards, via the Value Reporting Foundation, were consolidated into the IFRS Foundation. The SASB Standards will form part of the foundation for the development of the IFRS Sustainability Disclosure Standards, including IFRS S1. The use of the SASB Standards and TCFD recommendations is an important point for Canadian organizations to note, which is consistent with the new proposed mandatory climate-related disclosure rules by the Canadian Securities Administrators (CSA) and the US Securities Exchange Commission (SEC).
What is the mandate of the Implementation Committee?
The Implementation Committee is tasked with establishing the CSSB’s governance and due process considerations. In addition, the Implementation Committee will provide transitional oversight to the CSSB until decisions on a permanent oversight structure are made and such structure becomes operational.
It is important to distinguish the mandates of the Implementation Committee and the CSSB. The Implementation Committee will focus on establishing the foundational governance structures and processes to ensure the CSSB can function efficiently and effectively. The CSSB will be responsible for developing the Canadian standards, acting on behalf of Canadians to ensure sustainability disclosures are standardized and as decision-useful as financial and audit reports. The Implementation Committee is not responsible for the standard-setting process; that is ultimately the responsibility of the CSSB.
Will the CSSB adopt the ISSB standards?
The CSSB will work in lockstep with the ISSB to develop and support the adoption of IFRS Sustainability Disclosure Standards, while ensuring that the Canadian perspective is part of international decision-making. The CSSB will work to ensure that Canadian sustainability standards are relevant, responsive, and fit for our country’s unique needs and circumstances.
Given the ISSB has established a satellite office in Montreal, Quebec, it appears that Canada is well positioned to influence the global sustainability standard setting process. This is good news for Canadian organizations and financial market participants, given the IFRS Sustainability Disclosure Standards are expected to form the global baseline for consistent and comparable disclosures on environmental, social and governance (ESG) issues. As a natural resource-based economy with a significant amount of risk and opportunity at stake in the low carbon transition, it is imperative that Canada’s voice is represented in these global initiatives.
What’s next for the Implementation Committee?
The Implementation Committee is now leading the recruitment process for the CSSB’s chair and members. In defining these roles and responsibilities, the diverse membership of the Implementation Committee is being leveraged to ensure multiple stakeholder viewpoints are considered, including standard setters and sustainability experts from across the country. In the immediate term, the call for the inaugural CSSB Chair is officially live on the Financial Reporting and Assurance Standards Canada website. Interested candidates are encouraged to apply by November 15, 2022.
Given the CSSB will be operational by April 2023, we have a lot of foundational work to do over the coming months – so stay tuned!