Canada Climate Week Xchange Part 4: Sustainability Disclosure and Regulation

The Canada Climate Week Xchange (CCWX) that recently took place brought together innovators, researchers, and leaders to support collaborative solutions and opportunities on the road to reducing greenhouse gas (GHG) emissions by 2030.

This conference chatter series spotlights a session from each day's events. Part 3 of the series can be found here.

The November 27, 2025, session titled, “Sustainability Disclosure and Regulation: A CPA's Guide to What's Next” was presented by the Chartered Professional Accountants of Canada. It examined the Canadian regulatory and legal landscape for sustainability reporting, including the progress and priorities of the Canadian Sustainability Standards Board (CSSB) and the Taskforce on Nature-Related Financial Disclosures (TNFD).

Setting Priorities in Reporting Standards and Indigenous Knowledge

CSSB Principal John Cameron highlighted the work the CSSB has done since issuing its Canadian Sustainability Disclosure Standards (CSDS) in December 2024 and provided an overview of the CSSB's strategic plan.

In his remarks, Cameron noted three priorities for 2026, including a focus on supporting the implementation and market adoption of CSDS 1 (General Requirements for Disclosure of Sustainability-Related Financial Information) and CSDS 2 (Climate-Related Disclosures) through engagement with Canadian companies, including Indigenous communities in the standard-setting process, and contributing a Canadian voice to the work of the International Sustainability Standards Board (ISSB).

In particular, Cameron highlighted the importance of incorporating Indigenous views and rights into sustainability issues. “It's crucial, given our history here in Canada, the impact of sustainability issues on Indigenous peoples, and the constitutionally recognized rights of Indigenous peoples in Canada,” he said.

Cameron also noted the international context of ISSB adoption, with 36 jurisdictions representing approximately 60% of global GDP advancing ISSB-aligned frameworks. This, Cameron said, is particularly important for Canada.

“We're at a critical moment for Canada,” said Cameron. “There is increasing interest in diversifying the country's trade flows, and with the global movement on ISSB-aligned standards, we're seeing an international convergence on those standards as a true baseline for sustainability disclosure.”

Canadian Sustainability Performance

Prateek Sood, research associate at the Institute for Sustainable Finance (ISF) at the Smith School of Business, Queen's University, provided a summary of the Fourth Edition of the Canadian Corporate Performance on GHG Emissions, Disclosures, and Target Setting.

Among the highlights were the results of research on trends in Canadian sustainability reporting. For Scope 1 and 2 reporting, there was slow growth in the number of firms reporting emissions from 72% in 2021 to 79% in 2023. However, the market capitalzation share of firms that report dropped from 91% to 88% of firms reporting, which Sood attributed to Canada's Bill C-59, which includes anti-greenwashing provisions to ban unsubstantiated claims about environmental benefits.

“We do see there is a noticeable drop by the energy sector in Scope 1 and 2 reporting,” said Sood. “So, we know that is a direct consequence of Bill C-59, which became law on June 20, 2024. The energy sector has had quite a notable reaction, and many pulled their sustainability reports.”

Sood noted that reporting Scope 3 emissions can indicate the maturity of a company's sustainability reporting program, since Scope 3 emissions are more difficult to track. The share of companies reporting their Scope 3 emissions in 2023 was 49%, which is a strong improvement over the 38% that did so in 2021. However, only 12% of firms reported all their material categories.

“While this is disappointing, I do think we also need to recognize the starting point for Scope 3 emissions is much further behind than other indicators,” said Sood. “This is the most complex indicator, so it does make sense for firms to start with easier-to-measure categories before scaling up to more material ones.”

Sood returned to the impact of Bill C-59 and its amendments to the Canadian Competition Act on environmental claims made by companies. The ISF analyzed the responses from the government's public consultations on the bill and noted that industries complained of difficulties with compliance, a lack of clarity and guidance, and the possibility of unintended consequences resulting from greenwashing or greenhushing accusations.

The analysis also highlighted policy recommendations that resulted from the consultations, including alignment with sector-specific rules, safe-harbor provisions for companies making forward-looking claims, a due diligence defense with lower penalties for firms that made sustainability claims in good faith, and a phased rollout. There were also some firms that were looking for Bill C-59 to be repealed.

Sood compared Canada's greenwashing amendments to similar rules in Australia, which feature more explicit guidance, strong coordination across regulators, and are more practical in scope.

“Regulation change is not always necessary to signal a change in enforcement priorities,” said Sood. “It may have been the case that this was not necessary.”

Sustainability Risks and Greenwashing

Conor Chell, partner and national leader in sustainability, environment, and regulatory law at KPMG Law LLP, highlighted research from KPMG's recent Global CEO Outlook.

The research showed that 61% of global CEOs believe they're on track to meet their net-zero ambitions, which Chell said implies they think they can support their underlying sustainability claims.

“The problem that we've seen in our research is that only 29% of those global CEOs have actually allocated the appropriate capital, resources, and effort required to meet those goals,” said Chell, referring to that discrepancy as the “substantiation gap.”

Chell noted that overall, many organizations are not prepared to meet the substantiation requirements that were introduced by Bill C-59. After having done several risk assessments, Chell found a disturbing trend among many organizations.

“What we're seeing across industry, across Canada, is one to two potential misrepresentations per page of sustainability disclosure,” said Chell. “That's very significant, because if you take your average 50-75 page ESG sustainability or climate report and multiply that by one-to-two, and then you also multiply that by the potential penalties, because the penalties apply on a representation-by-representation basis … very soon you get to astronomical penalties.”

Chell noted that many of the misrepresentations were found in the introductory, CEO outlook sections, and the organization's environment and climate sections, and he added that about 25% of the claims being made were determined to be high risk.

Since the release of the Canadian federal budget on November 4, 2025, the government proposed that business environmental activity claims would not need to be substantiated in accordance with an internationally recognized methodology. However, Chell noted that although the language about international methodologies was vague, removing it could increase risk.

“Those that work in the sustainability space have some inclination or idea of what that could mean,” said Chell. “So now you remove that requirement for international methodologies, and what you're left with is still the requirement to substantiate, but it's ambiguous … What that's going to mean, is you're going to have to substantiate in accordance with prior jurisprudence and case law on misleading advertising.” Chell said that in his experience, most organizations are not ready to meet that substantiation test.

Chell recommended that organizations should have a formal risk assessment that goes beyond just a legal risk assessment and includes scientific expertise.

“It's not only a legal review that you have to undertake,” said Chell. “Substantiation in accordance with these proposed amendments will require a multidisciplinary effort. You're going to have to substantiate based not only on the legal requirements but also on the technical, scientific, commercial, and regulatory requirements. All of those things will need to be addressed to verify the claims you're making.”

Beyond regulatory compliance, Chell noted that Bill C-59 could provide competitive advantage to those organizations that can demonstrate the ambition and impact of their efforts.

“Historically, organizations could basically say anything about sustainability and their goals and objectives without any sort of requirement to back those things up,” said Chell. “That's really the heart of what greenwashing is.” With the introduction of the new amendments, Chell believes there could be a competitive advantage for those organizations that have done the work and are willing to communicate their efforts to the market.

Progress on Nature-Related Reporting

Candace Dott, director of market engagement at the TNFD, provided insights from the TNFD's 2025 Status Report on nature-related reporting.

Dott noted that there have been more than 500 published reports aligned with TNFD recommendations, with 620 organizations that have publicly committed to begin reporting aligned to the TNFD from 64 of 77 Sustainable Industry Classification System (SICS) industries.

Dott also emphasized the growing number of companies that see the financial benefit of nature-based reporting.

“63% of organizations that responded to a survey that we used to publish the report believe that their nature-related risks and opportunities are more significant or as significant to their future financial prospects compared to their climate-related risks and opportunities,” she said.

Dott said that many organizations have critical nature-based dependencies along their supply chain, which makes it important for company directors to better understand how to have discussions on these topics with internal and external stakeholders.

“Sectors all have operations that are intricately linked to natural systems. Certainly, supply chains and procurement play critical roles in organizations,” said Dott. “Boards should really spend a lot more time with those stakeholders because they're sitting on some really valuable data and some critical decisions that are impacted by natural systems.”