Canadian businesses: prepare to be climate competitive

Global standards are reshaping climate disclosures. Learn what Canadian companies must do now to stay competitive and investor-ready.

In brief

• Market expectations for climate disclosures are rising, and Canadian companies face a narrowing window to prepare.
• Climate action is shifting from a cost centre to a driver of value, resilience, and operational efficiency.
• Mandatory investor-grade climate disclosures are approaching, and now is the time to act.

Canadian companies may be facing a narrowing window to prepare for evolving market expectations around expanded climate disclosures. This is more than a compliance issue. Investors, major project proponents and new international trading partners are seeking decision-useful information on emissions as well as climate-related risks and opportunities to make sure their investments are climate competitive. But while the window may be narrowing, the opportunity for Canadian companies could be widening — if you explore the possibilities now.

Climate action is not only a cost centre; it’s also a key a driver of value creation, risk resilience and operational efficiency. With mandatory investor-grade climate-related disclosures on Canada’s horizon, it’s time to get ready.

How are climate disclosure requirements taking shape in Canada and beyond? 

The Canadian Sustainability Standards Board (CSSB) finalized Canadian Sustainability Disclosure Standards 1 and 2 (CSDS 1 and CSDS 2) as voluntary standards. These mirror the International Sustainability Standards Board’s (ISSB’s) standards, with modifications related to transitional relief. However, the Canadian Securities Administrators (CSA) has paused work on climate disclosures for the time being.

Material information related to the current effects of climate-related risks must still be disclosed under existing securities laws, and facility-level GHG reporting remains mandatory for facilities with emissions above 10,000t CO₂e per year.  Canada also has a mixed bag of federal and provincial frameworks for limiting or pricing emissions.

Meanwhile, global momentum towards sustainability disclosures is accelerating. A veritable alphabet soup of sustainability reporting guidelines is distilling into a smaller number of frameworks, designed with key stakeholders in mind. What does that include? 

• The ISSB introduced International Financial Reporting Standards S1 and S2 (IFRS S1 and IFRS S2), which have become the investor-focused baseline. These standards integrate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) metrics focused on investors and shaping expectations worldwide. More than 35 jurisdictions are adopting, or have already adopted,  standards based on IFRS S1 and S2.
• The EU is moving ahead with its Corporate Sustainability Reporting Directive (CSRD) and connected European Sustainability Reporting Standards (ESRS). These address a broader set of stakeholders seeking information to make decisions. Although first-wave companies reported 2024 data in 2025, with limited assurance, the EU has paused second-wave reporting while leaders consider simplifying disclosure requirements and reducing the number of companies in scope. The EU’s Carbon Border Adjustment Mechanism (CBAM) remains (covering goods like steel, cement, aluminium, fertilizer, electricity, hydrogen imported into the EU).¹ This makes disclosure of product-level embedded carbon emissions more important and can be used to justify adjustments to transborder fees.
• In the US, the United States Eighth Circuit Court of Appeals ordered legal proceedings concerning the US Securities and Exchange Commission’s (SEC’s) climate disclosure rule to be temporarily suspended pending the SEC’s decision to amend, repeal or defend the rule. In the meanwhile, California has forged ahead with SB 261 253 requiring Scope 1, 2 and later Scope 3 emissions with first limited then reasonable assurance for companies exceeding certain revenue thresholds.²

Australia, Brazil and several Asian countries have also launched mandatory disclosure requirements, mostly with a climate-first approach.³

Mandatory, investor-grade climate reporting could be coming to Canada sooner than expected

Canada is likely on the cusp of a major shift towards expanded, decision-useful and investor-focused mandatory sustainability reporting. Global trade dynamics and domestic regulatory readiness are driving this, pushing Canadian companies to get climate competitive now. 

In a clear trade diversification strategy, Canada and the EU announced a new EU-Canada Strategic Partnership of the Future in 2025. Focused on enhancing trade, economic security, digital transition and climate action, the Strategy aims to drive economic opportunities and long-term prosperity while fostering shared values. 

In addition, a landmark security and defence partnership between Canada and the EU includes climate action commitments — signalling alignment with European priorities. With the EU’s CSRD and CBAM coming online, Canadian exporters already face pressure for assurance-ready emissions data. A national mandatory reporting regime would close their readiness gaps and strengthen Canada’s position in EU markets.

Many Canadian investors are keen to get their capital deployed in companies with climate-resilient business plans while also strengthening the economy.  But which are those climate-resilient companies? An attempt is being made to demystify this.  Work has advanced on the Sustainable Finance Action Council's Taxonomy Roadmap, and the made-in-Canada sustainable investment guidelines should eventually see the light of day. Companies should voluntarily review and disclose their activities aligned to the framework’s different criteria to access that new capital or modify their business plans to do so.

What’s more, Canada’s institutional infrastructure for climate disclosure is mostly in place. The CSSB’s CSDS 1 and 2 standards, aligned with the ISSB except for certain transitional relief, are ready for adoption. Meanwhile, the Office of the Superintendent of Financial Institution’s (OSFI’s) Guideline B‑15 already mandates climate disclosures for federally regulated financial institutions.

Longstanding emissions reporting requirements, as well as new educational material from the International Accounting Standards Board (IASB), that outline how existing reporting requirements of risks and their financial effects apply to climate risks suggest that the fundamentals of backward-looking climate reporting are already in place. 

The CSA’s pause on work related to climate disclosures may have reflected the uncertainty introduced by the Trump administration, but could readily be restarted. In the meantime, the federal government has an opportunity to introduce disclosure requirements for federally incorporated companies, as it has already done for Crown corporations.

Now’s the time for businesses in Canada to get climate competitive by preparing for mandatory reporting

Converging international standards, strengthened federal policies and shifting trade alliances — as well as domestic regulatory readiness — mean enhanced climate reporting is likely coming sooner rather than later.
Organizations can get ready by focusing on three key areas now:

1. Get the foundations of mandatory reporting in place before regulations come into effect.

Any kind of reporting change requires organizations to assess their existing processes, policies and platforms. This can help them support the shift effectively and make refinements as needed. Strengthen reporting foundations by:

• Capturing key stakeholder expectations and aligning around a recognized framework you can use to effectively gather that information.
• Solidifying corporate GHG inventories in line with the GHG Protocol, including Scope 1 and 2 boundaries and recalculation methodology.
• Establishing a Steering Committee or other governance model to systematically focus on climate emissions and disclosures.
• Carrying out a preliminary climate scenario analysis to spot high-level transition and physical risks and opportunities.

2. Proactively progress disclosure practices for tomorrow’s reporting reality.

Businesses will need a clear understanding of climate risks and opportunities to meet reporting requirements. You can address that need by conducting an early scenario analysis across climate futures to inform your approach. But that’s not the only priority that can benefit from a head start.

Progress disclosure practices by:

• Mapping data gaps in the Scope 3 value chain emissions that require collaboration with customers and suppliers, and refining estimates and calculations.
• Developing a strategic response by considering climate goals, exploring decarbonization and integrating adaptation into corporate strategy and enterprise risk management.
• Upgrading existing tools and technology.
• Translating risks and opportunities insights into measurable financial effects.
• Strengthening governance by assigning climate roles and building internal capacity through training.
• Understanding the elements of a climate transition plan and identifying gaps based on relevant guidance.

3. Think beyond disclosure by monitoring emerging practices.

Working through regulatory change is also a chance to assess and even adopt emerging leading practices that move you beyond compliance and enable you to be climate competitive. For example, this kind of analysis might move you to define an internal carbon price, guiding future decisions about investments and cost exposure. These kinds of innovative decisions can help position you as an industry leader.

Make the most of emerging practices by:

• Providing capital expenses (CAPEX) and operating expense (OPEX) rationales to demonstrate an ROI on emission reduction and resilience projects.
• Deep dive into supply chain Scope 3 emissions to inform procurement and supplier engagement, helping manage cost, risk and resilience, while supporting trade competitiveness and operational efficiency.
• Advancing product-level, embedded emissions measurement, reporting and verification for exports to strengthen trade position and options.
• Determining a suitable carbon credit strategy by setting clear objectives, either compliance or voluntary, choosing trusted standards and aligning with geographic or sectoral priorities.