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Sustainability standards developments and their implications for CPAs

Learn about recent global and Canadian developments in sustainability reporting and assurance and the implications for CPAs in public practice, and for their clients.

The March 2022 Audit Quality Blog focused on the changing landscape of sustainability assurance in Canada. Since March, there have been important regulatory and standard-setting developments globally, which will impact Canadian entities and their auditors or assurance practitioners. 

In this blog, we will cover updates on:

  • standard-setting developments from the International Sustainability Standards Board (ISSB)
  • global sustainability regulatory developments and whether assurance will be required 
  • sustainability assurance standard setting from the International Auditing and Assurance Standards Board (IAASB)
  • how these regulatory and standard-setting developments to sustainability impact the Canadian assurance profession
  • how to be involved in future CPA Canada research on sustainability assurance
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Update on the ISSB

Since March, the IFRS Foundation’s ISSB released their first two IFRS Sustainability Standard exposure drafts for public comment (closed July 29, 2022):

Responses to the consultation are currently being reviewed by the ISSB. CPA Canada’s response can be accessed here. If you would like to learn more about the ISSB and the recently released exposure drafts, we encourage you to register for CPA Canada's Webinar on International and Canadian Sustainability Reporting Developments.

Global sustainability regulatory developments – will assurance be required?

In the March 2022 Audit Quality Blogwe highlighted the Canadian Securities Administrators’ recently Proposed National Instrument 51-107 Disclosure of Climate Related Matters, which included proposals for companies to disclose climate-related information in line with the Task Force on Climate-related Disclosures (TCFD). Similar to Canada, other jurisdictions are increasingly focused on disclosure of sustainability-related information. 

U.S Securities and Exchange Commissions (SEC) Proposed Rule for Enhancement and Standardization of Climate-Related Disclosures

What is the proposed rule?

The rule would require a domestic or foreign registrant to include certain climate-related information in its registration statements or periodic reports. Like the CSA, these disclosures would be aligned with the TCFD recommendations.

Does the proposed rule require assurance?

Yes, the rule would require a phased approach for assurance, starting with limited assurance and eventually reasonable assurance dependent on filer status. 

What implications does this rule have for Canadian entities?

The SEC’s proposals are of particular interest in Canada given the interdependencies between the U.S. and Canadian markets. In their consultation, which closed in June 2022, the SEC requested feedback on whether Form 40-F filers should be required to comply with the SEC’s proposed climate-related disclosure requirements.

Given that there are several Canadian issuers inter-listed on U.S. exchanges, as well as interdependencies between the U.S. and Canadian markets, CPA Canada responded to the SEC consultation

European Corporate Sustainability Reporting Directive (CSRD)

What is the CSRD?

The European Union (EU) is set to adopt the CSRD in October 2022, amending the Non-Financial Reporting Directive, which lays down the current rules for sustainability reporting in the EU.

Under the CSRD, entities will need to report using the European Financial Reporting Advisory Group (EFRAG)’s sustainability standards. These standards extend to other sustainability topics beyond climate-related disclosures, such as water and marine resources. 

Does the CSRD require assurance?

Yes, the CSRD proposes a phased approach for assurance, starting with limited assurance and eventually reasonable assurance. 

What implications does the CSRD have for Canadian entities?

Non-EU companies, such as Canadian ones, which generate a net turnover of more than €150 million in the EU, and which have a subsidiary or branch in the EU, will be subject to sustainability reporting requirements in accordance with the CSRD.

Given the cross-jurisdictional implications of the European Sustainability Reporting Standards (ESRS) on Canadian entities, CPA Canada responded to the EFRAG consultation

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Update on the IAASB’s Sustainability Assurance Standard Setting

In our previous blog post, we referenced the IAASB’s workplan for 2022-2023, which includes increased capacity and resources to the assurance of sustainability or ESG reporting, to support a phased approach to sustainability assurance standard setting.  Currently, the IAASB has an umbrella standard, International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The IAASB is discussing the immediate action of developing a stand-alone and overarching standard for assurance on sustainability reporting. At its September 2022 meeting, the IAASB approved a project proposal for the overarching standard on sustainability assurance. The proposed standard will be separate from ISAE 3000 (Revised) but would draw on material in the existing IAASB standards and guidance with enhancements and specificity to address both limited and reasonable assurance on sustainability information reported. The proposed standard will be reporting framework-neutral but utilize globally developed sustainability reporting standards (such as the ISSB and Global Reporting Initiative [GRI] standards) as the basis for understanding whether the requirements are appropriate and can be practically applied. Future standard-setting actions are also being contemplated.

The IAASB is planning to release this proposed sustainability standard for public comment during the second half of 2023.

For further detail on the planned approach for the standard, please register for our webinar.

How will these developments impact the assurance profession?

Regulatory and standard-setting developments will dictate how your clients report on their sustainability performance and the type of assurance that is required over this information.

Assurance providers must educate themselves on the sustainability reporting and assurance landscape to address evolving client needs.

To help practitioners learn more about sustainability, CPA Canada has developed a variety of resources highlighted on our sustainability assurance resources hub. We have also created a resource page for finding the right service or engagement that will best meet your client’s needs.

Want to be involved in future CPA Canada research on sustainability assurance?

Are you currently involved in providing assurance over sustainability information? Are you interested in being involved in the future work that CPA Canada undertakes related to sustainability assurance? Please email us directly about opportunities to participate in this important research.

Keep the conversation going

Do you have additional questions on how to support your clients' current and future sustainability assurance needs? What are your views regarding the CPA profession's role in sustainability assurance? Please post a comment below or email us directly.


The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.