By: Brett Wills - Founder, CarbonOne
Given the lightning speed of change around Carbon Reporting Requirements, it can be difficult to keep up with the latest developments. As the CEO of Canada’s Trusted Partner for Carbon Intelligence, CarbonOne, our company is committed to keeping Canadian Food and Beverage companies up to speed. We’ve been following the latest developments in the Carbon Reporting Space closely and recently there was a major development companies need to be aware of. Here’s a recap of what’s happening:
On March 13, 2024, the Canadian Sustainability Standards Board (CSSB) released a draft of the proposed sustainability disclosure standards for publicly listed companies in Canada. The standards are based on the International Sustainability Standards Board (ISSB) S1 & S2 Standards modified for a Canadian context and require listed entities (including Canada's major Grocery Retailers) to report carbon emissions annually.
Why It Matters to All Food and Beverage Companies: While the standards will apply to listed entities such as retailers, the inclusion of Scope 3 means that suppliers to these entities, listed or not, are very likely to be required to report the carbon footprint of their products. When and how this will happen is still unclear but will likely be quickly determined by the entities required to report. Given the relatively quick timeline, Canadian Food and Beverage companies are well advised to start preparing now to stay competitive in today's Circular, Net Zero world.
The Canadian Sustainability Disclosure Standards (CSDS) are divided into two key sections:
CSDS 1 lays out the general reporting requirements based on a set of Core Content:
Governance: Requires disclosure on Processes used to monitor, manage, and oversee sustainability-related risks & opportunities (R&O). (The Canadian Sustainability Standards Board [CSSB], 2024a)
Strategy: Requires disclosure on how the reporting entity manages sustainability-related R&O.
Risk Management: Requires disclosure on the process to identify, assess, prioritize and monitor sustainability-related R&O. (The Canadian Sustainability Standards Board [CSSB], 2024a)
Metrics & Targets: Requires disclosure on various metrics and targets that allow users of Financial Reports to understand an entity’s performance concerning its sustainability-related R&O. (The Canadian Sustainability Standards Board [CSSB], 2024a)
It is important to note that CSSB has proposed modifications to ISSB Standards that will allow for a deferral of non-climate-related disclosures for 2 years.
CSDS 2 is based on a similar set of Core Content but more granular and specific to climate-related risks and opportunities. For example, Governance & Strategy in CSDS is specific to disclosures on how an entity governs and manages climate-related R&O.(The Canadian Sustainability Standards Board [CSSB], 2024b)
There are also specific disclosures required on the effects of climate-related R&O on the entity’s Financial Performance in the short, medium and long term. (The Canadian Sustainability Standards Board [CSSB], 2024b)
Further, CSDS 2 also defines what specific climate-related metrics and targets must be disclosed which include:
Scope 1: Direct emissions from company-owned or controlled assets.
Scope 2: Indirect emissions from the use of purchased electricity and steam.
Scope 3: Indirect emissions from the supply chain and across the value chain. (Forba Retailer, Category 1: " Purchased Goods and Services" includes products Purchased and sold in Stores or other Distribution Channels). (The Canadian Sustainability Standards Board [CSSB], 2024b)
Companies must also disclose several other climate-related metrics including but not limited to the % of assets or business activities vulnerable to climate-related physical risks, the amount of capital deployed toward climate, the internal price of carbon and how climate-related considerations are factored into executive remuneration. (The Canadian Sustainability Standards Board [CSSB], 2024b)
Public Consultation & Timeline: The draft is open for public consultation until June 10, 2024. Following the consultation, the CSSB plans to review feedback and publish their findings in fall 2024. A final standard is expected by year-end. Once the standards are finalized by CSSB, the standards will be reviewed by the Canadian Securities Administrators for adoption across the Country. While the timing of adoption is unclear at this point, it has been stated by the CSSB that reporting could start as early as 2025 for the 2024 reporting year. With a 2-year deferral allowance for Scope 3, reporting Scope 3 could begin as early as 2027 for the 2026 reporting year.
The Canadian Sustainability Standards Board [CSSB]. (2024, March 13). CSSB Exposure Draft – Proposed Canadian Sustainability Disclosure Standard (CSDS) 1, General requirements for disclosure of sustainability-related financial information. FRAS Canada.
https://www.frascanada.ca/-/media/frascanada/sustainability/documents/cssb-ed-csds-1.pdf?rev=b74b7632730445519561dd16ac2bca5b
The Canadian Sustainability Standards Board [CSSB]. (2024b, March 13). CSSB Exposure Draft – Proposed Canadian Sustainability Disclosure Standard (CSDS) 2, Climate-related disclosures.FRAS Canada.
https://www.frascanada.ca/-/media/frascanada/sustainability/documents/cssb-ed-csds-2.pdfrev=37dd7b66f4c049a5890502b5c852134d