As of last month, the Canadian Sustainability Standards Board has released its first two Canadian Sustainability Disclosure Standards, which may voluntarily be used in reporting for periods starting on or after Jan. 1, KPMG LLP said in a recent article.
The article noted that the Canadian Securities Administrators (CSA) can mandate these standards. In March, the CSA stated that it was expecting to adopt only the provisions needed to support climate-related disclosures.
KPMG stressed that mandatory ESG reporting requirements, presently in effect for many organizations operating in Europe, are being finalized in Canada and other jurisdictions.
“Organizations cannot leave mandatory ESG reporting preparedness to the last minute,” said Michael Ort, partner for accounting advisory services at KPMG in Canada. “We've learned from other jurisdictions that companies that successfully migrate to mandatory reporting start years ahead.”
“It is crucial to be prepared for new and evolving reporting requirements,” said Dave Power, partner for consumer and industrial markets audit at KPMG in Canada.
KPMG’s article highlighted new government regulations targeting greenwashing. Under Bill C-59, the anti-greenwashing amendments to the Competition Act, organizations are now required to meet certain tests for environmental claims relating to their products and services and comply with international standards for operational claims.
KPMG also noted that the European Union’s Corporate Sustainability Reporting Directive, which came into force in 2023, would require reporting on multi-stakeholder-focused sustainability topics in accordance with the European Sustainability Reporting Standards.
Tackling mandatory ESG reporting
The article urged organizations to be ready for ESG reporting requirements, which would entail data collection across numerous domains, data analysis, and the development of reporting systems with detailed written plans and potentially with the aid of external resources.
KPMG said audit committees can guide their organizations as they face ESG reporting requirements that are about to take effect and can drive management to prepare for compliance with new requirements and keep abreast of evolving standards.
“Audit committees have an opportunity to proactively challenge management to ensure compliance with the requirements in a timely manner,” Power said in the article.
“Audit committees should ensure management has a roadmap in place to meet the new reporting requirements,” Ort said in the article.
According to KPMG’s article, management can meet deadlines by developing a written roadmap with five stages: establish, assess, design, implement, and sustain. First, the organization should establish the regulations applicable to all the jurisdictions where it has operations.
Second, the article said the organization should assess whether it has an operating model – specifically, the proper people, processes, technology, and controls – in place to meet ESG reporting requirements. The article added that organizations can identify the resources that they need at this stage and can acquire them in advance.
KPMG explained that in the design and implementation stages, the organization will undergo the changes needed to meet the applicable ESG requirements and will identify any adjustments and amendments needed for its current reporting processes to adhere to future standards.
Lastly, KPMG concluded that the organization would work to sustain the new operational model, potentially by implementing a regular assurance process and staying up to date with evolving regulatory requirements. KPMG pointed out that future standards may focus on biodiversity, water, and social issues.