Navigating Canada’s Evolving Sustainability Landscape in 2025: Key Updates and Practical Insights

With businesses entering into Sustainability Reporting Season, Carbonzero outlines a number of key developments that will shape 2025 sustainability disclosures and commitments in North America and beyond.

Overview

Through the conclusion of 2024 into the first few months of 2025, the ESG and Sustainability Reporting landscape has been in a dynamic state. In a significant move to bolster corporate accountability and transparency in sustainability reporting, in December 2024 the Canadian Sustainability Standards Boards (CSSB) introduced the long-awaited Canadian Sustainability Disclosure Standards (CSDS), covering both General Requirements (CSDS1) and Climate-related Disclosures (CSDS2). 

Meanwhile, other significant developments in the sustainability landscape include updates to the Greenhouse Gas (GHG) Protocol and forthcoming revisions to the Science Based Target Initiative’s (SBTi) Corporate Net-Zero Standard. 

Here’s what Canadian businesses need to know about the latest developments and their implications.

Introduction of Canadian Sustainability Disclosure Standards (CSDS 1 and CSDS 2)

The Canadian Sustainability Standards Board (CSSB) has established two new standards, CSDS 1 and CSDS 2, to enhance corporate sustainability disclosures across environmental, social, and governance (ESG) factors.

• CSDS 1: Focuses on general sustainability disclosures, guiding companies on reporting material sustainability risks, governance structures, and performance metrics.

• CSDS 2: Concentrates on climate-related disclosures, with specific emphasis on GHG emissions, climate risks, and adaptation strategies. It aligns with the Task Force on Climate-related Financial Disclosure recommendations (now part of the ISSB) and mandates detailed disclosures for Scope 1, Scope 2, and Scope 3 emissions.

The alignment of these standards with international frameworks, such as those set by the ISSB ensures Canadian businesses remain in lockstep with sustainability disclosures relative to global markets.

Updates to CSA’s Climate-Related Disclosure Rule

The Canadian Securities Administrators (CSA) are expected to update their climate-related disclosure rule in response to CSDS1 and CSDS2 to enhance transparency and accountability in corporate sustainability reporting. 

The CSA’s updated disclosure rule is expected to align with international standards and the newly introduced CSDS 1 and CSDS 2 frameworks, and may require Canadian-listed companies to disclose material information regarding climate-related risks, governance, strategy, performance metrics, and targets. This includes alignment with the principles of the TCFD, which have since been incorporated under the requirements of the ISSB standards. 

Key details from the CSDS expected to inform the new CSA climate-related disclosure rule include:

• Standardized Emissions Reporting: Stricter requirements for defining organizational boundaries and quantifying Scope 1, Scope 2, and material Scope 3 greenhouse gas (GHG) emissions.

• Transparency and Validation: Emphasis is placed on data accuracy, transparency, and third-party validation is encouraged for targets, emissions data, and carbon credits.

• Scenario Analysis and Resilience: Companies must assess and disclose the resilience of their strategies to climate-related risks using scenario analysis, considering both quantitative and qualitative approaches.

Together, these changes have the potential to improve consistency in reporting, strengthen the credibility of disclosed data, and enhance investor confidence.

Implications for Businesses

The updated rules present both challenges and opportunities for Canadian businesses. Public companies choosing to report in alignment with the new standards would incorporate detailed GHG metrics and climate risks into regulatory filings such as annual reports and management discussion and analysis (MD&A), starting with periods beginning on or after January 1, 2025.

Private companies engaged in supply chains of public entities may also face increased requirements, particularly regarding reporting their own emissions up the supply chain to fulfill large customer Scope 3 emissions reporting requirements. 

While the updates impose additional reporting responsibilities, they also provide businesses with an opportunity to demonstrate leadership in climate accountability, fostering trust among investors, customers, and stakeholders.

Preparing for Alignment

To navigate these changes effectively, companies should take proactive measures, including:

• Conducting a gap analysis to assess if current practices are in alignment with CSDS1 and CSDS2 requirements.

• Enhancing internal systems for accurate and consistent data collection relating to company operations and supply chain. 

• Investing in qualified partners for GHG quantification and reporting.

• Integrating climate-related risks and opportunities into corporate governance frameworks to align with long-term sustainability goals.

By adopting these strategies, organizations can work towards alignment with the new CSDS requirements while positioning themselves as leaders in the transition to a low-carbon economy.

Updates to the Greenhouse Gas Protocol

Another significant development in the sustainability landscape concerns updates to the world’s leading emissions accounting standards. The Greenhouse Gas (GHG) Protocol, the globally recognized authority for measuring corporate emissions, is undergoing revisions to modernize the organization’s measurement and reporting standards. Key updates include:

• Enhanced methodologies for calculating Scope 3 emissions.

• Improved guidance on market-based emissions accounting.

• Strengthened oversight through new governance bodies and technical working groups.

Considering the vast majority of companies that publicly report their emissions rely on the GHG Protocol Standard, these updates will require the attention of sustainability managers to ensure continued alignment with best practices. 

These changes aim to improve the accuracy and consistency of emissions reporting, enabling businesses that follow the protocol to confidently address their sustainability objectives. The CSDS standards also frequently reference the GHG Protocol, highlighting many similarities in their requirements, which companies are likely to recognize.

SBTi Continues its Revision Process for Corporate Net-Zero Standard

On February 10, 2025, the Science Based Targets initiative (SBTi) announced further opportunities to get involved in the revision process of its Corporate Net-Zero Standard. The SBTi also announced the formation of new Expert Working Groups focusing on five key areas: 

• Scope 2 Emissions - Addressing methodologies for accounting and reducing emissions from purchased electricity.
• Scope 3 Emissions - Improving guidance on value chain emissions, which often constitute the largest share of a company’s footprint.
• Removals and Neutralization - Refining approaches for carbon removal and neutralization strategies.
• Ongoing Emissions and Beyond Value Chain Mitigation (BVCM) - Establishing best practices for addressing emissions beyond a company’s direct operations.
• Data Quality and Assurance - Strengthening data reliability and verification processes.

These groups will provide in-depth input to ensure the revised Standard is both practical and ambitious. 

The SBTi will conduct two public consultations aiming to gather expert and stakeholder input on the key areas listed above to ensure that the revised Corporate Net-Zero Standard remains ambitious and practical for companies hoping to achieve science-based net-zero targets. These consultations will take place after the first draft of the revised Standard is released, which is expected no earlier than March 2025. Pilot testing will follow to ensure the Standard's applicability across various business contexts. 

Throughout the revision period, the current Standard remains the most frequently used framework for companies aiming to set science-based net-zero targets. With expectations of a finalized Net Zero Standard sometime in 2025, businesses setting SBTs are likely to face a revised set of target-setting requirements relative to the original SBT Net Zero Standard published in 2021. 

Conclusion

The year 2025 will certainly leave its mark on the Canadian sustainability reporting landscape, with a series of new and revised standards impacting companies across the country and abroad. 

While these changes present new challenges, they also provide an opportunity for companies to demonstrate accountability, foster investor confidence, and lead the way in sustainable business practices. By embracing these updates proactively, Canadian businesses can not only meet regulatory requirements but also position themselves as key players in the global transition toward a sustainable future.