Canada ESG Reporting Requirements and Laws in 2024 - Last Updated: March 15, 2024

As an international economic hub, Canada is an important region for environmental, social and governance (ESG) laws, regulations, and investor disclosure. In line with other major financial centers like New York, London, and Hong Kong, Canada's government and security regulators are increasingly integrating ESG factors and reporting requirements for companies publicly traded on the Toronto Stock Exchange (TSX), and elsewhere, such as sustainable government procurement tenders.

This article provides an overview of key Canadian ESG regulations and requirements. These requirements continue to change regularly (and frequently), and we'll do our best to keep them updated as reporting requirements evolve.

Key Canadian ESG Reporting Standards, Rules & Requirements in 2024

  • Corporate Diversity Reporting - Corporations Canada requires corporations to report annually on the diversity of their board of directors and senior management. Corporations have to report on the representation of 4 designated groups defined in Canada's Employment Equity Act, on their board of directors and senior management teams: (1) women, (2) Indigenous peoples (First Nations, Inuit and Métis), (3) persons with disabilities, and (4) members of visible minorities.
  • S-211 Supply Chain Reporting - An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (Bill S-211), is a new law passed by Canada's Parliament which takes effect January 1, 2024. The bill focuses on forced labour, child labour, and human rights in supply chains, and requires companies to explain how they’re preventing and reducing the risk of forced and child labour in their own supply chain. This aligns with recent EU laws which are also making supply chain due diligence a target topic for ESG legislation. Disclosures must be submitted annually to the Minister of Public Safety and Emergency Preparedness (Public Safety Canada), starting May 31, 2024. Read more on S-211 reporting here.
  • Canadian Securites Administrators (CSA) Corporate ESG Reporting and Disclosure - The CSA regulates securities and publicly traded companies in Canada. In November 2022, the CSA outlined a notice on ESG reporting by issuers where the agency shared guidance designed to discourage "greenwashing" and unsubstantiated ESG claims. The CSA's view is all ESG claims and disclosure should be factual, balanced, and substantiated. Moreover, commentary on ESG targets and forecasts may constitute forward-looking information ("FLI"). The CSA does not currently require any mandatory ESG disclosure from issuers, however, the agency plans to start requiring specific ESG reporting and climate disclosures from large Canadian banks, insurance companies, and federally regulated financial institutions starting in 2024. We expect more ESG reporting requirements are likely in the future to align disclosure with ESG reporting requirements in other financial markets like the UK, Hong Kong, and the European Union (EU).
  • Canadian Sustainability Standards Board (CSSB) Reporting - In March 2024, the Canadian Sustainability Standards Board (CSSB) released a proposed set of draft standards for companies to report their sustainability and climate-related information, the Canadian Sustainability Disclosure Standards (CSDS), based on recently released sustainability disclosure standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB). The CSSB has proposed making the standards effective as of January 1, 2025. It remains up to Canadian regulators to decide if the CSDS will be mandatory, and which companies and entities will need to apply the standards over which time horizon. The CSA has noted that it will likely revise its climate-related disclosure rules following the finalization of CSDS 1 & 2, expected later in 2024.
  • CSA ESG Investment Fund Disclosure - In 2022, the CSA also outlined ESG disclosure guidance for investment funds. This guidance applies to all investment funds that either (a) focus on ESG as a core strategy or investment objective, or (b) consider ESG investment risk and opportunity factors as part of their investment process.
  • Supplier ESG Disclosure for Large Federal Contractors - Large suppliers to the Government of Canada are required to disclose their greenhouse gas (GHG) emissions and set targets to reduce them, starting April 1, 2023, according to new the new "Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets" rule. This rule applies to federal procurements greater than $25 million.
  • Canada's Climate Investment Taxonomy - In March 2023, the Sustainable Finance Action Council (SFAC) in the Department of Finance Canda released its Taxonomy Roadmap Report, featuring a framework to establish standardized definitions of climate-compatible investments, similar to the EU Taxonomy on Sustainable Activities. The "Canadian Green and Transition Financial Taxonomy" framework, backed by Canada’s 25 largest financial institutions, is being designed to help align capital flows and investments with Canada’s climate targets and economic opportunities. The framework identifies two taxonomy categories: (1) "Green" projects and investments focused on low or no carbon solutions that help accelerate our transition to net zero (ex: renewable energy, EV batteries, carbon capture, etc.) and "Transition" projects and investments which significantly reduce emissions from high-emitting sectors (ex: oil and gas, iron and steel, chemicals, aluminum and cement production).
"Canada needs to scale up climate investment rapidly to achieve a net-zero economy by 2050. By some estimates, Canada’s climate investment gap is as high as $115 billion annually."
- Department of Finance Canada
Canada ESG, Climate & Sustainable Finance Taxonomy

Canada: Key ESG Reporting Regulations

Canada ESG Reporting Regulations

Canada's CSA plans to start requiring ESG reporting and climate disclosures from large Canadian banks, insurance companies, and federally regulated financial institutions in 2024. Canadian listed companies also need to comply with certain ESG-related provisions, such as gender diversity disclosure related to board composition

Proposed: 2021-2023, expected to start taking effect in 2024

Beginning in 2021, the CSA has proposed climate-related disclosure requirements for financial institutions based on the Task Force on Climate-related Financial Disclosures (TCFD) framework, as well as other ESG-related provisions for large and listed entities. In 2023, it was announced that TCFD would fall under the purview of the new International Sustainability Standards Board (ISSB) standards.

From 2024 onward, eligible banks, insurance companies, and federally regulated financial institutions will need to provide ESG disclosures on their climate-related risks, including:

  • Governance: an issuer’s board’s oversight of and management’s role in assessing and managing climate-related risks and opportunities
  • Strategy: disclosure on the short-, medium- and long-term climate-related risks and opportunities the issuer has identified and the impact on its business, strategy and financial planning, where such information is material. As a modification from the TCFD recommendations, the proposed disclosure would not include the requirement to disclose “scenario analysis”, which is an issuer’s description of the resilience of its strategy within different climate-related scenarios, including a 2°C or lower scenario
  • Risk management: how an issuer identifies, assesses and manages climate-related risks and how these processes are integrated into its overall risk management
  • Metrics and targets: the ESG metrics and targets used by an issuer to assess and manage climate-related risks and opportunities where the information is material, including Scope 1, 2, and 3 greenhouse gas emissions

Canada: ESG Board and Management Diversity Reporting

All Canadian corporations must report at least annually on the corporation's board and management diversity. Corporations should:

  • Use a table format to present diversity information in a clear and consistent manner
  • Identify the timeframe for disclosure to distinguish diversity information as of a certain date as opposed to a future or past reporting period
  • Present targets for representation on the board and among senior management separately, indicating timeframe for each target
  • Provide an explanation if the issuer has not adopted a target for specific designated groups covered by the Act
  • Disclose separately any optional information on diversity targets such as those for the total workforce or other groups that contribute to diversity
  • Provide this information directly to Corporations Canada

Board and senior management diversity disclosure must include:

  • Whether the corporation has adopted term limits or other mechanisms of board renewal
  • Whether it has a formal, written policy relating to the identification and nomination of directors from the designated groups, and if so, a description of the policy
  • Whether and, if so, how the board or nominating committee considers diversity on the board in identifying and nominating candidates for election or re-election to the board
  • Whether and, if so, how the corporation considers diversity when making senior management appointments
  • Whether the corporation has targets for representation on the board and among senior management for each of the designated groups and, if so, progress in achieving those targets
  • The number and percentage of directors from each of the designated groups on the board and among senior management

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S-211: Supply Chain Human Rights, Forced Labour and Child Labour Reporting

Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff, requires businesses that meet certain criteria to file detailed public reports on measures they have taken to identify, address, and prevent forced labour, prison labour, and child labour in their supply chains. The first round of S-211 reporting must be filed on or before May 31, 2024.

S-211 applies to companies and entities who:

  • Produce, sell, and/or distribute goods in Canada
  • Import goods into Canada
  • Control one or more entities doing either of the above two activities

That also meet the following eligibility threshold(s:

  • Are publicly listed on a stock exchange in Canada (like the TSX)
  • Has a place of business in Canada, does business in Canada, or has assets in Canada and meets at least two of these three conditions in at least one of its last two financial years:
    1. Has over C$20 million in assets
    2. Generated over C$40 million in annual revenue
    3. Employed 250 or more employees
  • Or is otherwise required to report under S-211 by law

Eligibility for a reporting entity is based on its consolidated financial statements. S-211 also applies its reach to international businesses operating in Canada as well as Canadian federal government insitutions, ministries, and departments.

The following disclosures must be included in a reporting entity’s annual public report and be submitted to the Minister of Public Safety and Emergency Preparedness (Public Safety Canada) by May 31, 2024:

  • The reporting entity’s structure, activities, and supply chain(s)
  • Its policies and due diligence processes in relation to forced labour, child labour, and prison labour
  • The parts of its business and supply chains that carry a risk of forced labour or child labour being used, and the steps taken to assess and manage that risk
  • Any measures taken to remediate any forced labour or child labour
  • Any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains
  • Any training provided to employees on forced labour and child labour
  • How the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains

Organizations that do not submit public reports that meet all of the Bill’s requirements, or do not comply with designated officials who have the right to conduct audits and search property, may be fined up to $250,000.

Brightest Canada S-211 ESG Reporting Software

Brightest's ESG management and reporting software includes supplier engagement, due diligence, and S-211 reporting and disclosure templates

Government of Canada: Sustainable Procurement Requirements

As part of the government's Policy on Green Procurement, major suppliers and contractors to the Government of Canada are required to disclose their greenhouse gas (GHG) emissions and set targets to reduce them, starting April 1, 2023, according to new the new "Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets". This rule applies to federal procurements and tenders of $25 million or more.

Any major Canadian government supplier needs to either (a) adopt a science-based emissions target, or (b) participate in Canada's Net Zero Challenge program. Both programs require the organization to demonstrate a credible, fact-based plan to achieve net zero emissions by 2050 or sooner.

Canada ESG and Net Zero

CSA: ESG Investment Fund Disclosure Guidelines

Per the CSA, investment funds that do not have ESG-related investment objectives may still use ESG strategies. However, any fund that uses one or more ESG strategies as a material or essential aspect of the fund, as evidenced by the name of the fund or the manner in which it is marketed, is required to disclose its ESG strategies as an investment objective in its prospectus, as well as in its Fund Facts or ETF Facts, as applicable. This rule also applies to funds that primarily invest in a type of issuer, asset class, or industry segment associated with ESG, such as green bonds or a focus on investments in low carbon economic transition companies.

While it is not a requirement, a mutual fund that includes ESG in its fundamental investment objectives may characterize itself as a fund that is focused on ESG in addition to its primary fund type. For example, an ESG Fund may wish to identify itself as an ESG Canadian equity fund. By comparison, any fund that does not include ESG in its fundamental investment objectives should not characterize itself as an ESG fund.

According to the CSA, any ESG investment fund is required to disclose, in its prospectus, the principal investment strategies that the fund uses (or intends to use) to achieve its investment objectives and the process by which the fund's portfolio adviser selects securities for the fund's portfolio, including any investment approach, philosophy, practices and techniques used. This information should include detailed information about the fund's use of ESG strategies, principles, data, monitoring, and targets. A prospectus must provide full, true, and plain disclosure of all material facts, including how the fund incorporates ESG.

Related to proxy voting, CSA requires investment funds to include in its prospectus and/or AIF, as applicable, a summary of the policies and procedures that the fund follows when voting proxies relating to portfolio securities. If a fund uses proxy voting as an ESG investment strategy, the prospectus and/or AIF must include a summary of the ESG aspects of the fund's proxy voting policies and procedures.

A Few Helpful ESG Reporting Recommendations for Canadian Companies and Funds

Your Next Steps With ESG Reporting in Canada

Global attitudes, stakeholder expectations, proxy voting trends, and shareholder activism in relation to ESG issues have evolved significantly in recent years, a trend we expect will continue. As a result, we anticipate Canada, the CSA, and other government agencies and regulatory authorities will continue to adopt additional ESG rules and reporting requirements. If your company is listed on the TSX, plans to IPO in the future, or generates a meaningful percentage of its revenue from government contracts, ESG data collection and disclosure should be a priority for your organization if it isn't already.

As you can tell from the length of this article alone, there are a lot of new and evolving ESG reporting and disclosure developments in Canada, as well as others likely to be announced and go into effect in 2024, 2025, and future years. In fairness, all these regulations can feel very complex and daunting. However, from a positive perspective:

  • Most of these laws are being phased in over several years, synthesizing public and market commentary (with the exception of S-211)
  • The CSA and Canadian government recognize we're in an early phase of a global economic transition to a more sustainable, low-carbon economy, and are looking to help Canadian companies and ESG investors successfully adopt and implement these changes
  • There's sufficient time to implement the necessary measures, standards, process changes, and reporting capabilities to keep pace on the corporate and listed disclosure side, particularly for organizations who are proactive and have already begun
  • There are lots of existing market resources to help organizations and investors track, manage, and report around these changes more efficiently and effectively, including Brightest's software and services

For organizations in the early stages of their ESG data and reporting work, or planning an IPO on the TSX, we have a few general recommendations, additional reading, and suggested next steps:

ESG leadership structure - Ultimately, the board has a responsibility to oversee ESG issues, and to assess the potential ESG risks to a company’s overall strategy. Clarify the board's role, structure, and processes around ESG, including which committee(s) will review and decide on ESG matters. Your company will likely also want to set up one or more ESG working groups, comprising senior management and staff, to report to the board.

Materiality assessment - The principle of Materiality is embedded in most interntionally recognized ESG disclosure standards, particularly within TCFD and ISSB-aligned reporting and the concept of double materiality. Materiality essentially asks and attempts to answer a fundamental question: what are the most important (re: material) ESG, climate, and sustainability risks and considerations for a business or investment? If your organization hasn't already done so, a materiality assessment can help determine what your top ESG issues, targets, risks, and priorities should be in relation to regulatory or investor ESG reporting strategy. In turn, this can help clarify where to focus, what to prioritize, and what aspects of pending or forthcoming Canadian or other international legislations and developments that matter most to you. Many securities regulators recommend every listed company completes a materiality assessment, and this practice will become mandatory for large European companies (or international companies generating over 150 million euros per year in Europe) between 2024 and 2026.

Understand Canadian securities laws in depth - A full, in-depth breakdown of each CSA guidance note, law, and disclosure requirement related to ESG is outside the scope of this piece. That said, if your organization or fund meets the CSA or Corporate Canada's ESG disclosure criteria, work with your leadership, directors, legal counsel, auditors, and other stakeholders to understand your organization's specific obligations under each law.

ESG data systems and process - While this might go without saying, in order to report your organization's ESG information, you need to know what it is - with a high degree of accuracy. Your materiality process can help guide you toward the main ESG themes you may need to focus on and collect data around. Many organizations start their ESG reporting with relatively simple spreadsheets, surveys, and documents, but things can get complex fast - particularly for larger companies. If you're an organisation with a medium-to-large or complex environmental footprint, you likely need dedicated sustainability reporting and ESG data management software, like the kind we design here at Brightest to help organizations stay compliant with international ESG reporting requirements. Ongoing report archiving, version control, audit readiness, and governance are all important to think about if you're reporting annually.

Further reading - Our free guide to starting an ESG reporting program provides additional, detailed guidance and insights on how to measure and report your ESG disclosures in line with the ISSB, Canadian issuer requirements, and other international standards.