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Centre for Building Sustainable Value · Nadine de Gannes, Julie Bernard and Matthew Lynch

Key questions for a future Canadian Sustainability Standards Board

Apr 27, 2022

Green Accounting V2

Canada may soon have its own Canadian Sustainability Standards Board (CSSB), established as a new body within the existing accounting standards institutions, and tasked with driving standardized approaches in sustainability reporting.

This is the recommendation of the Independent Review Committee on Standard Setting in Canada, the first major review of the accounting standards setting process in Canada in 20 years.

The CSSB will mirror the International Sustainability Standards Board (ISSB), established through the IFRS Foundation, and announced with great fanfare at the Glasgow Climate Conference in November 2021. The ISSB has made a running start to its work, already publishing draft standards on general sustainability-related and climate-related disclosures for comment.

The lack of consistent and comparable information[1] has long been a key barrier to a full, comprehensive consideration of sustainability in investment decision-making[2]. The ISSB – formed through the amalgamation of several existing standing-setting organizations including the Climate Disclosure Standards Board and the Value Reporting Foundation – is attempting to tackle this problem at a global level.

The proposed CSSB will give Canada, already well regarded in international standards setting, a key platform for consolidating and inputting local perspectives into the ISSB’s processes. With the recent opening of the ISSB Americas Office in Montreal, this positions Canada for an influential role in this key sustainability agenda.

However, there are some important challenges and critical questions that will need to be addressed in the establishment of a CSSB and the definition of its focus, composition, and mandate.

In reviewing the Independent Review Committee’s consultation paper, we highlight the following major questions that the Committee should be considering in framing their recommendations in the coming months:


How can Canadian standards setting be a model of reconciliation with Indigenous Peoples?

The consultation paper identified Indigenous rights as a key concept for framing its mandate, and notes that Indigenous communities are also users of existing Canadian accounting standards. To a certain extent, the document also acknowledges the historical absence of Indigenous voices in standard setting processes.

Unfortunately, despite well-meaning intentions, this consultation process appears flawed from the start. It fails the test of “nothing for us without us” that many Indigenous leaders advocate for reconciliation, with no evidence of substantive Indigenous involvement or participation in the formation of the Committee or in the development of the consultation paper.

This should be rectified as soon as possible. Indigenous community representatives should be invited to the table to be part of the Committee’s work and in shaping any recommendations relating to Indigenous communities. There are Indigenous organizations and bodies that could make valuable contributions on these points and to the quality of the process more broadly, such as the Reconciliation and Responsible Investment Initiative (RRII), created in 2018 by combining the knowledge and expertise of SHARE (Shareholder Association for Research and Education) and NATOA (National Aboriginal Trust Officers Association). Indigenous representation and consideration are also essential in the membership of a future CSSB.

A future CSSB will need to help tackle the systemic issues of a lack of understanding and integration of Indigenous Peoples’ rights and perspectives in investment decision making. Recently-published research at Ivey identified significant issues with respect to Indigenous Peoples in the responsible investment domain of the Canadian financial sector. A blog piece from RRII’s Mark Sevestre and Katherine Wheatley explores this further.

More broadly, it is important to note that the existing ESG and sustainability standards do not adequately consider the rights and interests of Indigenous Peoples and were developed without their input. As some have framed the problem: where is the I in ESG?  The First Nations Major Project Coalition identifies that the current standards and frameworks are missing appropriate inclusion of: Indigenous territories; lands and waters; Indigenous inherent, constitutional, or treaty rights; Indigenous Knowledge; and cultural heritage, principles, or traditions. What is needed in the Canadian sustainability standards setting landscape is a more-inclusive interpretation of ESG and sustainability that directly incorporates the interests of Indigenous Peoples. Canada should also be a leading advocate of these intese interests in international processes too.


How will the CSSB manage tensions between international consistency versus local adaptation?

The fundamental driver for the establishment of the ISSB – and the source of opportunity for profound systemic impact – is its focus on developing standards that drive global consistency and comparability of sustainability information. This is absolutely crucial in a world of multinational, cross-border capitalism.

Under the current Canadian accounting standard setting regime, Canada is primarily a “standards taker” from the IFRS, without significant modification. Continuing this approach would be in keeping with the ISSB philosophy.

However, given the growing focus and interest on sustainability standards, there will likely be calls and requests for modifications and exceptions from some local stakeholders. The more Canadian sustainability standards diverge from the international versions, the more the overall power of global standardization will be diluted.

In the establishment of the working rules of the new CSSB, it will be important that maintaining international comparability is the key north star for standards setting, and the development of the Canadian versions focus primarily on additional elaboration that facilitates and enables their adoption in the Canadian context. This means balancing being inclusive of wide stakeholder perspectives, while avoiding catering to special interests – always a tough balance to get right.


How will the CSSB manage the single v’s double materiality tensions in sustainability standard setting?

The ISSB has said its primary focus is to “…deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions”. This is the concept of “single materiality” i.e., primary consideration of the impact of sustainability issues on the firm and its immediate stakeholders.

However, many stakeholders advocate for the critical importance of considering “double materiality” in corporate reporting – also providing comprehensive and comparable information on the wider impact of the firm on the environment and society. This is the framing of the Global Reporting Initiative (GRI) Standards, set by the Global Sustainability Standards Board (GSSB).

In the last few weeks, the ISSB and the GSSB announced a collaborative approach through a formal MoU. As noted by the GRI, this agreement “…reflects the importance of ensuring compatibility and interconnectedness of investor-focused baseline sustainability information that meets the needs of the capital markets, with information intended to serve the needs of a broader range of stakeholders.”

It is important to consider the potential future implications of this new development for the future work of the CSSB. In the consultation paper, the Independent Review Committee advocates that the membership of the CSSB should be diverse and representative of key stakeholder groups across Canadian society. So, while nominally it would appear that the CSSB would follow the ISSB’s single materiality “investor focus”, the new Board would be institutionally positioned (and inclined by way of its membership?) to be thinking about double materiality and wider stakeholder perspectives.

This is also in the wider context that the divide between single and double materiality perspectives may eventually begin to dissolve, in the growing shift from “shareholder capitalism” to “stakeholder capitalism”, advocated by the World Economic Forum and others. In this paradigm, impacts on the environmental and society (and the perspectives of stakeholders such as customers, communities, and staff) become, by definition, material to the firm and its long-term value creation.

It may be hard to chart a firm course on this issue at the moment, but the Independent Review Committee should leave the door open for a future expansion of CSSB mandate to be formally considering stakeholder-related standards setting.

In the face of two global crises—the COVID-19 pandemic and global warming— the urgency for rethinking our practices, including how organizations take action on their environmental and societal impacts, has never been greater. The climate crisis and the pandemic are intertwined in complex ways; requiring engagement with a wide variety of expertise, including health equity and governance, environmental and social science and Indigenous ways of knowing. While Indigenous Peoples represent about 5% of the world's population, they protect 80% of global biodiversity. Their role in finding concrete solutions for the current global problems we are facing is essential. This is why their ontology in approaching the land and its ecosystem should be meaningfully embedded in the oversight of sustainability standards.




[1] Boiral, 2013; Boiral & Henri, 2016; Fernandez-Feijoo et al., 2014; Hahn & Lülfs, 2014; Talbot & Boiral, 2018

[2] Boiral et al., 2020, 2021; Chatterji et al., 2009; Chelli & Gendron, 2013