Canada playing catch-up again after EU vote to move ahead with sustainability reporting standards: ISF’s Riordan
October 20, 2023
In a vote this week, members of European Parliament reaffirmed their commitment to the European Sustainability Reporting Standards (ESRS), which means mandatory reporting for thousands of companies from January 2024 onwards.
“Europe is leaving Canada in the rear-view mirror again on sustainable finance regulations,” said Ryan Riordan, Director of Research at the Institute for Sustainable Finance. “This highlights the importance for Canada to move forward quickly on its own regime. Canadian firms will be affected through their EU operations and EU firms operating in Canada will be affected, too.”
Recently, there have been some tweaks to the reporting standard, mainly around the phasing in of Scope 3 reporting (emissions from a firm’s customers and suppliers) and the ability for companies to decide what is or isn’t material. These adjustments highlight the common tensions between corporate entities and governing bodies.
Despite the hard negotiations, progress is being made and “The endorsement of the ESRS by the European Parliament is welcome because it signals the transition from political debate to practical implementation for these new rules – which are a game changer for corporate accountability, in the EU and globally,” said Eelco van der Enden, CEO of GRI (Global Reporting Initiative).
These sustainability reporting rules will also apply to some non-EU companies, based on various criteria, mainly if non-EU companies have securities listed in the EU. Refinitiv has previously reported that an estimated 1311 Canadian companies would be required to disclose sustainability information under this new regulation.
These advancements, and their effect on Canadian firms highlight the need for Canada to move quickly with regards to climate disclosing rules and related taxonomies. Some Canadian companies may also be caught off guard. Canada should aim to lead, or at least keep pace with, EU sustainability related reporting standards.
While details such as timelines and provisions for smaller reporting firms might be up for discussion, the fundamental idea that investors and efficient capital markets need reliable and material information should not be up for political debate.
Media contact
David Watson, Associate Director, Communications
Institute for Sustainable Finance
613-796-3605