Sustainability regulatory compliance

Did you know Canada already has mandatory sustainability requirements that could impact your organization’s reporting? Canadian businesses are facing mandatory domestic regulations, including Canada’s Modern Slavery Act, Extractive Sector Transparency Measures Act, Bill C-59 for combatting greenwashing and Office of the Superintendent of Financial Institutions’ (OSFI’s) B-15 guidance.

Canadian companies with entities or operations beyond Canada’s borders must also assess whether they’re caught in the scope of any global sustainability reporting obligations. These include the European Union’s Corporate Sustainability Reporting Directive (CSRD), California Air Resources Board (CARB) greenhouse gas (GHG) and climate reporting regulations, Mexico’s Normas de Informacion de Sostenabilidad (NIS) and Australia’s Sustainability Reporting Standards (ASRS), some of which include extensive disclosure requirements across environmental and social topics.

Amid a quickly evolving regulatory environment, there’s an opportunity for all organizations, regardless of current reporting obligations, to be proactive in their approach to sustainability disclosures. It’s critical for organizations to develop roadmaps that assess the impact of existing requirements and anticipate future obligations based on potential business changes. This strategic planning enables companies to focus their efforts, enhance their sustainability programs and achieve high-quality reporting that meets compliance standards and stakeholder expectations.

Navigating mandatory and voluntary sustainability reporting for Canadian Companies

As Canadian companies navigate the evolving sustainability landscape, understanding and managing both mandatory and voluntary reporting can help unlock value and better meet stakeholder expectations.

What is currently mandatory for Sustainability reporting in Canada?

For companies operating in Canada, enacted legislation includes:

Canada’s Modern Slavery Act: Officially known as the Fighting Against Forced Labour and Child Labour in Supply Chains Act, Canada’s Modern Slavery Act came into effect on January 1, 2024. It requires Canadian public companies and certain private entities—those listed or meeting size thresholds of $20M assets, $40M revenue, or 250 employees—to report on efforts to prevent forced and child labour in their operations and supply chains.

Bill C-59: Canadian companies are required to comply with Bill C-59, aimed at preventing greenwashing in sustainability disclosures. The provisions target claims that promote environmental, social and ecological benefits of a product or environmental benefits of a business or activity without adequate testing or proper substantiation. Companies must test and support their sustainability-related claims.

OSFI’s B-15 Guidance: This guidance sets expectations for federally regulated financial institutions (FRFIs) to integrate climate-related risks—both physical and transition risks—into governance, risk management, and financial planning. This guideline is designed to be interoperable with the Canadian Sustainability Standards Board (CSSB) standards as well as other OSFI requirements. FRFIs are required to publicly disclose information in four key areas: governance, risk identification and management, scenario analysis and climate resilience, and financial impacts with strategic responses. These requirements strengthen oversight and transparency, helping institutions build long-term resilience to climate-related challenges.

Extractive Sector Transparency Measures Act: This legislation requires that certain businesses involved in the commercial development of oil, gas and minerals report the payments they make to governments in Canada and abroad.

Federal Plastics Registry: This registry requires certain manufacturers and importers of plastic resins, producers of plastic products, generators of plastic waste and service providers in plastic management to report annually on the quantities and types of plastics they place on the Canadian market and how those plastics flow through the economy.

The Canadian Securities Administrator (CSA) announced in an April 2025 press release that it would be pausing its work on the development of a new mandatory climate-related disclosure rule and amendments to the existing diversity-related disclosure requirements. This decision aims to support Canadian markets and companies as they adapt to US and global regulatory shifts, including the US Securities and Exchange Commission’s (SEC’s) March 2025 vote to end the defence of its climate reporting rule. Despite this pause in the development of mandatory Canadian standards, the press release emphasizes that Canadian companies should continue to manage and disclose climate-related risks and are encouraged to leverage the CSSB standards as a voluntary disclosure framework.

Furthermore, Canadian companies must remain vigilant about regulatory obligations beyond Canadian jurisdiction. Even in the absence of Canadian-specific mandatory regulations, many Canadian companies remain subject to foreign regulations, such as California’s climate rules, which continue to capture companies with relevant operations in California.

How do globally operating Canadian companies navigate mandatory sustainability reporting?

In an ever-changing global landscape, Canadian companies with international operations must stay vigilant in understanding mandatory sustainability reporting obligations—an often complex task.

Canadian companies with entities or operations beyond Canada’s borders may be required to report under the following:

Corporate Sustainability Reporting Directive (CSRD)
California Climate-Related Disclosure Requirements
Australian Sustainability Reporting Standards (ASRS)
Normas de Información de Sostenibilidad (NIS)

Corporate Sustainability Reporting Directive (CSRD)

Corporate Sustainability Reporting Directive (CSRD): Canadian entities with European Union subsidiaries or operations that meet certain thresholds will be required to comply with the CSRD’s European Sustainability Reporting Standards (ESRS). The ESRS requires entities to assess the outward impacts of corporate activities on environmental and social issues and the inward impacts to the company itself, an approach known as a double-materiality assessment (DMA). The results of the DMA inform which of the standard’s extensive list of metrics must be publicly disclosed. Certain simplifications/reliefs have recently been proposed, and these updates will need to be closely monitored.

California Climate-Related Disclosure Requirements

California Climate-Related Disclosure Requirements: Companies that meet certain size thresholds with operations in the United States that have a connection with California (even where this connection is fairly slight) must comply with a series of climate-related legislative mandates aimed at enhancing disclosure and accountability. Assembly Bill 1305 and Senate Bills 253 and 261 outline broad requirements for reporting on GHG emissions across a company’s operations. These bills prompt businesses to deliver comprehensive data on their environmental footprint, emphasizing transparency and strategic planning in alignment with California’s forward-looking climate goals. In addition, other states continue to advance potential legislation on climate reporting.

Australian Sustainability Reporting Standards (ASRS)

Australian Sustainability Reporting Standards (ASRS): The ASRS consists of AASB S1, a voluntary standard covering sustainability-related financial disclosures, and AASB S2, a mandatory climate-only standard that aligns with the ISSB’s sustainability disclosure standards. Under Chapter 2M of the Corporations Act, entities meeting specific criteria for revenue, gross assets, or employee count are obligated to comply. AASB S2 narrows the scope of mandatory reporting compared to International Sustainability Reporting Standards . Canadian companies must evaluate if their operations meet these criteria and align their reporting practices accordingly.

Normas de Información de Sostenibilidad (NIS)

Normas de Información de Sostenibilidad (NIS): Established by the Mexican accounting and sustainability standard setter, Consejo Mexicano de Normas de Información Financiera y Sostenibilidad (CINIF), these standards require in-scope companies to disclose sustainability information in financial statements prepared under Mexican Financial Reporting Standards. NIS A-1 offers foundational guidelines for sustainability data, while NIS B-1 mandates the disclosure of 30 Basic Sustainability Indicators covering environmental, social and governance metrics, with no materiality threshold. Canadian companies with private subsidiaries in Mexico should be aware of how these regulations could affect their reporting obligations.

These frameworks represent some of the key sustainability standards internationally. But this list isn’t exhaustive, and companies should remain aware of other applicable standards as they navigate the global reporting landscape.

Navigating evolving reporting requirements: European Union (EU) Omnibus proposals

The EU’s Omnibus proposals were introduced in February 2025, with the aim of simplifying sustainability reporting requirements for companies reporting under the Corporate Sustainability Reporting Directive (CSRD), EU Taxonomy and Corporate Sustainability Due Diligence Directive (CSDDD).

The EU issued two proposals to update the CSRD: the “stop the clock” and “content” proposals. The “stop the clock” proposal delays the implementation dates for certain in-scope companies, while the “content” proposal includes amendments aimed at reducing the number of companies in scope, simplifying disclosure requirements and reporting criteria, removing sector-specific standards, and removing the requirements for future reasonable assurance while maintaining requirements for limited assurance.

The introduction of the Omnibus proposals exemplifies the unpredictable nature of today’s sustainability reporting landscape. In a world where sustainability is increasingly central to corporate success, maintaining diligence in preparation is a strategic imperative.

How can Canadian companies lead through voluntary sustainability reporting?

The Canadian Sustainability Standards Board (CSSB) provides a voluntary framework through the Canadian Sustainability Disclosure Standards (CSDS) for companies seeking to maintain momentum in risk management and sustainability strategy.

Canadian Sustainability Disclosure Standards (CSDS): The CSSB issued CSDS 1 and CSDS 2 in December 2024, with the earliest voluntary adoption effective as of fiscal year 2025. These standards largely align with those issued by the International Sustainability Standards Board (ISSB). Their objective is to help Canadian companies align more closely with IFRS Sustainability Disclosure standards that aim to facilitate standardized and seamless reporting—especially for companies operating across multiple jurisdictions or those with both group and component reporting requirements. Participation in voluntary reporting under the CSSB can help companies implement a top-down approach that integrates sustainability reporting with risk management and business strategy.

Sustainability reporting adoption tracker

See the adoption of sustainability reporting requirements by territory

No-regrets moves for Canadian companies

Canadian companies with a global footprint, including those listed on foreign stock exchanges, are navigating increasingly uncertain reporting requirements and associated implementation timelines. As reporting requirements evolve, staying ahead and preparing for future implementation are key to establishing your company as a leader in the sustainability space.

What steps can your organization take now to prepare and embrace proactive compliance?

1 Determine and understand your mandatory reporting obligations.

2 Assess the gaps between current and upcoming mandatory reporting and any voluntary reporting by your organization.

3 Consider the operational impact of complying with standards, including activities within the organization’s value chain that will impact the data to be gathered and reported on and whether double-materiality reporting will be required.

4 Assess your sustainability reporting ambition and what is material to your organization. To what degree are sustainability matters embedded within your organization’s strategy and value chain, and to what extent will reporting be focused on describing key value drivers versus compliance?

5 Assess data gathering processes and controls and develop non-financial accounting policies.

6 Evaluate enabling technologies to determine whether they’re optimized for enhanced reporting requirements.

7 Develop a comprehensive timeline and roadmap to comply with both regulatory and voluntary reporting. This process will require identifying interdependencies and addressing common needs across evolving standards.

8 Assess how acquisitions, divestitures and other deals may impact sustainability reporting obligations.

Global sustainability reporting standards are evolving

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Sustainability reporting and non-financial disclosures aren’t just a compliance exercise aimed at ticking boxes. If adopted as intended, sustainability regulations offer a framework for organizations to successfully address challenges and opportunities and make sure their strategies and activities are effectively communicated. Adopting voluntary standards can be pivotal for companies recognizing the importance of sustainability in risk management, and effective reporting allows companies to develop strategies for better governance, reduced risks and improved sustainability performance. Reliable reports with metrics and targets can build trust in your company and lead to improved relationships with stakeholders.

Looking ahead, mandatory sustainability reporting is likely to be a permanent fixture of general reporting obligations. As sustainability reporting converges with financial reporting standards globally, the risks of non-compliance will rise and may result in monetary penalties, decreased competitiveness, reputational damage and even criminal convictions. With expectations and regulations in flux, Canadian organizations looking to build stakeholder trust and improve sustainability performance should not only be thinking about compiling the information they need to report and considering the potential need for such information to be independently assured, but also embracing voluntary standards to reinforce transparency and solidify their role as a sustainability leader.

Steps to prepare your sustainability regulatory compliance