There is an unprecedented transformation in reporting for Canadian businesses driven by the need for reliable and comparable non-financial information. This dynamic disclosure landscape is prompting important questions from CFOs and their teams. Although the practical implementation of these standards is a work in progress, finance can take a leading role in understanding and articulating the ESG value of their organization to stakeholders.
Mandated sustainability disclosures are on the horizon
The first half of 2023 full of announcements in the Canadian sustainability disclosure space, which indicates we are rapidly moving towards a regulated and compliance-driven environment. In April, Canadian Sustainability Standards Board of Canada (CSSB) appointed Charles-Antoine St-Jean to lead the board. The CSSB is tasked with working with the International Sustainability Standards Board (ISSB) “to support the uptake of ISSB standards in Canada, highlight key issues for the Canadian context, and facilitate interoperability between ISSB standards and any forthcoming CSSB standards.”
While there has been no official announcement on whether Canada will adopt the ISSB’s standards the CSA welcomes continued engagement with the CSSB and the ISSB and is working on how the international sustainability disclosure standards will impact the Canadian economy especially for small and medium sized businesses.
In the meantime, the government of Canada and the Office of the Superintendent of Financial Institutions have issued guidance on modern slavery and climate risk management that regardless of decisions on adoption of ISSB standards brings new rules for select Canadian organizations.
How we see it: Getting started now in preparing mandatory sustainability disclosures is key to the future success of your ESG reporting. Waiting until the standards are mandatory could lead to resource constraints and a missed opportunity for finance to provide new value to the organization.
Where do finance professionals begin?
CFOs are recognizing the importance of finance’s role in ESG matters and are pivoting to get up to speed on sustainability reporting, working alongside a broader team from across their organizations.
Here are 3 key recommendations for CFOs as they become more actively involved in their organization’s sustainability reporting:
- Start building capacity: There are several reporting standards that Canadian companies will want to stay abreast of including those issued by the ISSB, U.S. Securities and Exchange Commission, and the European Commission. It can be challenging for an organization to determine what will be applicable and how to source the data needed for this reporting. Time should be invested in educating employees and those charged with governance on the upcoming requirements that may be applicable. What works best is when organizations can bring together a cross functional team from areas such as operations, IT, finance and sustainability to understand where knowledge and skill exist, and what resource gaps they need to fill.
- Understand your current state and target state to identify reporting gaps: Understanding what is currently publicly reported and comparing to disclosure requirements is often difficult given the subject matter may be new to many within finance teams. Depending on how advanced an organization is in their current sustainability reporting, performing the gap assessment at a high level rather than diving into the details can be an efficient way of highlighting the prominent gaps. It can be a good starting point and less overwhelming. After supporting organizations in completing their gap assessments, we are seeing resulting dialogue around target operating models, controls, streamlining various reports, and identifying resource needs.
- Build an implementation roadmap: The timeline for getting sustainable disclosure ready is a lot closer than companies realise when considering all the components that need to be included, such as scenario analysis and quantification of risks and opportunities. A detailed roadmap helps frame and accelerate conversations around optimal target operating model and highlights the business case for resources with sustainability expertise. Organizations have been able to use their roadmaps to help secure budget to close their significant and top priority gaps. It can be a powerful tool to articulate the most pressing, strategic priorities and reframe the value finance is bring to the organization.
