Trade disputes and uncertainty in Canada: resetting the sustainability agenda

1. Paused disclosure regulations

2025 has seen the temporary halt or postponement of several key sustainability disclosure regulations. In April, the Canadian Securities Administrators (CSA) paused work to make the Canadian Sustainability Disclosure Standards (CSDSs) mandatory. March saw the US Securities and Exchange Commission (SEC) pausing — effectively withdrawing — its climate change disclosure rule. And in February the European Union’s Omnibus bill delayed and lightened the application of the Corporate Sustainability Reporting Directive (CSRD).

The CSRD delays were welcomed by preparers to allow a more measured pace of change. But let’s be clear: businesses must still make a significant investment to prepare for the delayed regulation.

Additionally, investors are still demanding transparent and consistent sustainability reporting to make risk-informed decisions. Companies that hold themselves up due to a lack of clarity on regulations risk losing sight of the expectations of clients and other stakeholders, let alone their ability to drive meaningful change.

Amid this turbulence, one might think that sustainability has quickly become an afterthought. But the reality is that Canadian companies have an opportunity to reset their sustainability agendas to not only weather the storm, but to emerge more resilient and more productive on the other side. They can craft an adequate business response around four key strategic priorities:

• Comply
• Manage risks
• Compete
• Differentiate

Finding the right balance for these priorities will empower businesses to thrive in an increasingly complex and uncertain global market.

1. Comply

Canadian companies must obviously prioritize compliance with existing mandatory regulations such as human rights Bill S-211, a plethora of environmental, health and safety (EHS) regulations, and specific mandates like Bill C-15 respecting the rights of Indigenous Peoples, and Bill C-59, the federal Competition Act targeting greenwashing, to name but a few.

Compliance and transparent reporting are legal imperatives both in Canada and abroad, that require navigating an evolving regulatory environment. To achieve cohesive and streamlined disclosures, compliance efforts must be underpinned by a strong reporting program that effectively coordinates diverse contributors. This requires integrated systems, reliable data, and digital infrastructure to support timely and high-quality inputs, along with robust processes and controls to enhance data completeness and accuracy. Below are a few compliance focus areas applicable to most Canadian businesses.

Human rights, health and safety: Proactive compliance with human rights and EHS standards is — and will remain — foundational. EHS compliance is a non-negotiable element of doing business, and so are human rights monitoring and reporting with the implementation of Bill S-211 in Canada, or for companies in scope for CSRD reporting.

Packaging, waste and product responsibility: Canadian exporters to the EU and other markets face new sustainability compliance and data obligations for exported products across the value chain. For instance, the EU’s Ecodesign for Sustainable Products Regulation (ESPR), in effect since July 2024, introduces phased sustainability requirements across sectors.^[4] Starting in July 2025, large companies must begin disclosing environmental performance for priority products such as textiles, electronics, furniture, aluminum and steel.

2. Manage risks

In today’s turbulent business environment, sustainability risk management is still essential for companies’ operational success and business resilience. Sustainability-related risks have not gone away and remain very much on top of the list of enterprise risks for virtually every organization anywhere on the planet.

These risks include:

Environmental risks: Improper management of environmental aspects leads to noncompliance, resulting in contamination of air, water and soil. This can result in regulatory penalties and damage to a company’s reputation. While many companies still underestimate these risks, stakeholders are paying increasing attention to environmental risk impacts to the business, such as water risk or biodiversity dependencies. By adopting sound environmental management systems, businesses can not only mitigate these risks comply with environmental regulations and achieve their sustainability goals, they can also enhance operational efficiency, productivity and reduce long-term costs.

Social risks and dependencies: There are countless impacts organizations may have on society, such as labour rights violations, their impact on communities, direct and indirect health impacts, affordability and unequal access to products or services. At the same time, most businesses depend on the availability of a healthy and skilled workforce, as well as functioning social services and communities. Effective management of social risks can lead to improved worker satisfaction, improved brand reputation and consumer loyalty and overall business resilience.

Physical climate risks: Businesses must assess how climate-related risks such as extreme weather events translate to financial risk and may result in asset degradation, operational interruptions and reduced infrastructure resilience. 2024 was the fifth year in a row with global insured losses greater than US$100b, while Canada saw record insured losses exceeding C$8.5 billion across the country. For instance, companies in the agriculture sector may face challenges related to chronic changes in weather patterns that affect crop yields, while manufacturers or resource companies may encounter disruptions in supply chains due to acute impacts of natural disasters; think flooding and wildfires in Canada. Climate risks are projected to continue escalating, which will require robust adaptation and business resilience strategies.

Transition risks: As the world continues to shift towards a low-carbon economy, however indirect the course, businesses still need to navigate the implications of changing consumer demand, regulatory pressures, new technology and market dynamics. A disorderly transition — which many would argue we are experiencing — may lead to oversupply or shortages in different areas of the economy or country that could be very costly. Companies that fail to adapt may find themselves at a competitive disadvantage. 

3. Compete

Strong sustainability management provides a competitive edge because many sustainability initiatives present a positive ROI, often in the form of attracting capital, accessing new markets or realizing cost savings. Companies that focus on the right sustainability programs enhance their top line, margins and ability to compete in the market.

Attracting capital through transparent disclosures: Investor focus on sustainability remains strong, not as a trend, but as a lens for evaluating long-term risk and opportunity. Investors monitor sustainability ratings and nonfinancial performance, channelling capital towards companies that manage their sustainability risks.

This is especially true for European LP investors, who require incremental sustainability information — but not only that. As of 2025, 88% of institutional investors factor sustainability data into their analysis, particularly around resilience, regulatory exposure and supply chain risk.

In Canada, where foreign direct investment and export-driven growth are priorities, access to this data is critical for demonstrating resilience and removing regulatory barriers.^[5]

For companies now looking to compete for global capital, demonstrating how they manage material sustainability risks is no longer optional, it’s expected.

Accessing new markets: With many businesses looking to access new markets, sustainability performance is becoming a prerequisite for global trade.

The EU’s Carbon Border Adjustment Mechanism (CBAM), now in its transitional phase, requires importers to report on embedded emissions in carbon-intensive goods. By 2026, Canadian exporters will need to provide verified emissions data to avoid penalties. Companies aiming to expand into the EU should also keep both the Corporate Sustainability Reporting Directive (CSRD) and the EU Deforestation Regulation top of mind.

Likewise, Canadian businesses eyeing the United Kingdom should anticipate the future adoption of Sustainability Reporting Standards aligned with the ISSB framework.

In Asia, Japan and South Korea are implementing mandatory climate-related financial disclosures aligned with the ISSB standards starting in 2025, which will affect listed companies and their supply chains and extend requirements to foreign suppliers. Canadian exporters targeting these markets may need to consider alignment with these frameworks to remain competitive, meet buyer expectations and access new markets amid tariffs.

Simple actions that can save money: Businesses that invest in sustainable practices often find that the initial costs are offset by savings and improved operational efficiency. For example, implementing energy efficiency measures typically presents an attractive payback — sometimes less than five years — for initiatives such as cogeneration, fuel switching, building energy efficiency, and even electrification of processes and transportation, especially in industries such as oil and gas, and manufacturing. These initiatives have become even more attractive due to federal and provincial funding programs such as investment tax credits, which are expected to continue, perhaps even increase in Canada under the new government.

Organizations are also paying greater attention to their power purchase agreements (PPAs) when evaluating energy use and efficiency measures to boost both cost savings and decarbonization objectives. Waste minimization can also help reduce businesses’ third-party waste management bills and product waste, and optimize for eco-fees and packaging costs in the very short term.

4. Differentiate

To thrive in today’s turbulent landscape, meaningful sustainability actions can further help companies differentiate their brand, products and services in the market. However, many organizations find themselves in need of “resetting” their strategic priorities with respect to sustainability objectives. Whether they are quietly continuing their sustainability programs under the radar of the public eye or ramping up their data analytics to stand by their sustainability claims, progress towards improved sustainability is continuing.

Canada as the epitome of tomorrow’s resource economy: In an era of renewed political interest and major capital spend on large-scale energy, transportation and resource projects, Canadian businesses are faced with a generational opportunity to showcase what tomorrow’s resource economy needs to look like. There is probably no better place in the world than Canada to demonstrate what the mine of the future looks like, what responsible energy is made of or how regenerative agriculture can feed the world, for example.

Responding to procurement shifts: Procurement teams, especially in government and large enterprise sectors, are embedding sustainability criteria into supplier evaluations. Examples include low-carbon concrete and steel in government infrastructure projects. Businesses that can demonstrate strong sustainability credentials are gaining a competitive edge in RFPs and long-term contracts.

Product innovation and market fit: Meeting evolving expectations also means innovating to meet emerging client needs, whether through new business models, refined value propositions, or advancements in product materials and technologies. Consumers continue to prioritize sustainability in their purchasing decisions, even amid growing economic pressures. This can be a simple focus to buy local, or to focus on reducing individual and household waste — signalling a clear demand for products that align with environmental values.

To differentiate themselves, companies embed sustainability into product development as a core strategy, for example through circular design or low-impact materials. Business models are also evolving towards servicing models — think car sharing — further responding to market shifts. Focusing on evolving expectations helps align with client values and positions businesses not just to respond to consumer expectations, but to shape them.

Value chain transformation: Businesses must review their entire value chain for risks and opportunities such as optimization of manufacturing processes, circularity, strategic energy management and value-based capital stewardship.

As a simple example, airports have a role to play to make sustainable aviation fuels available to their clients, even if they won’t use them. Similarly, ports need to provide the right infrastructure to electrify shipping operations.

In those contexts, companies that want to differentiate themselves will collaborate with partners in their value chain and benefit from optimized digital infrastructure that removes key barriers — like limited visibility across value chains, fragmented data collection and inconsistent input formats across operations.

AI and digitalization: As data demands intensify, businesses are turning to AI to manage complexity, improve accuracy and unlock new efficiencies. From automating emissions tracking to forecasting climate risks and optimizing resource use, AI is helping companies move from reactive compliance to proactive performance. It also plays a critical role in navigating and tracking global regulatory requirements, enabling organizations to stay ahead of evolving disclosure obligations.^{[6], [7]}

EY’s Global Smarter networks, greener planet report, in collaboration with Liberty, has explored a wide range of case studies where businesses are using AI to support their sustainability objectives.