Get up to speed on recent sustainability developments

In this blog, we will cover updates on:

• CPA Canada’s newly released webinars on sustainability reporting and assurance 
• The International Sustainability Standards Board’s (ISSB’s) Sustainability Disclosure Standards and other sustainability reporting developments, including the establishment of the Canadian Sustainability Standards Board (CSSB)
• Developments in Canada and globally related to sustainability assurance, including relevant regulatory updates and assurance options available today
• The International Auditing and Assurance Standards Board’s (IAASB’s) and the Auditing and Assurance Standards Board’s (AASB’s) newly proposed sustainability assurance standards, as well as applicable timelines and outreach activities 

NEWLY RELEASED CPA CANADA SUSTAINABILITY WEBINARS

Looking to dive deeper into the rapidly evolving sustainability landscape? Follow this link to our newly released two-part webinar to hear more about developments in sustainability reporting and assurance standards and regulatory requirements, and the implications and opportunities for CPAs.

Continue reading for a high-level overview of some of the topics we cover in our webinars. 

ISSB ISSUES INAUGURAL GLOBAL SUSTAINABILITY DISCLOURE STANDARDS  

On June 26, 2023, the International Financial Reporting Standards (IFRS) Foundation’s ISSB issued its first two IFRS Sustainability Disclosure Standards (Standards):

• IFRS S1: General Requirements for Disclosure of Sustainability-Related Financial Information 
• IFRS S2: Climate-related Disclosures

In case you missed it, you can watch a recording of the live broadcast in English from the New York Stock Exchange launch summit for the ISSB Standards. Stakeholders from the ISSB and other panelists discuss the significance of the new Standards in creating a global baseline of high-quality sustainability information for investors in North America and around the world.

What’s next for the ISSB?

Now that IFRS S1 and IFRS S2 are issued, the ISSB will work with jurisdictions and companies to support adoption. The first step will be supporting companies that apply the Standards by launching capacity-building initiatives, such as the Partnership Framework for Capacity Building, to support effective implementation.

The Partnership Framework for Capacity Building was launched at COP27 in Sharm El-Sheikh with support from around 30 partner organizations, including CPA Canada. Through this partnership, we are working on additional resources that will be published in coming months on our main sustainability resource page.   

What is the CSSB’s role?

Canada has also been working hard to establish its own board - the Canadian Sustainability Standards Board, or the CSSB. The CSSB became operational in June 2023 to work in lockstep with the ISSB to support the uptake of ISSB Standards in Canada, highlighting key issues for the Canadian marketplace, and facilitating interoperability between ISSB Standards and any forthcoming CSSB standards. For more information, you can visit the CSSB’s website.

Will the IFRS Sustainability Disclosure Standards be mandatory in Canada?

The Canadian Securities Administrators (CSA) determine reporting requirements for Canadian reporting issuers. On July 5, 2023, the CSA issued a statement indicating that CSA staff intend to conduct further consultations to adopt disclosure standards based on ISSB standards, with modifications considered necessary and appropriate in the Canadian context, and that a further market update from the CSA will follow in the coming months.

Also in July 2023, a significant announcement came from the International Organization of Securities Commissions (IOSCO), with their endorsement of the ISSB’s IFRS S1 and S2. IOSCO members regulate more than 95% of the world’s financial markets. This endorsement could be a major catalyst for various jurisdictions to consider the ISSB Standards within the context of their own jurisdictional requirements.

Where can I learn more?

For more details on recent sustainability reporting developments, register for the first webinar in our two-part offering. This webinar, Understanding the Sustainability Landscape, will provide you with foundational knowledge related to the sustainability ecosystem and offers details on IFRS S1 and S2 directly from the ISSB’s staff.

You can also bookmark CPA Canada’s sustainability reporting updates webpage to follow along with Canadian and global sustainability reporting developments as they occur.

SUSTAINABILITY ASSURANCE LANDSCAPE

There’s been a powerful drive towards high-quality sustainability reporting standards, with the outcome being the issuance of the inaugural ISSB Standards. Now it’s time to focus momentum on the assurance of this reported information. Similar to assurance over financial statements, third-party assurance over sustainability information can increase credibility of an entity’s disclosures and improve stakeholder confidence. This step is key to ensuring sustainability information is as consistent, comparable, and trusted as financial information that is subject to assurance.

Is assurance over sustainability-related information required?

The authority to require entities under their purview to obtain assurance on sustainability-related information is within the remit of securities regulators. Several jurisdictions, such as the EU, have already implemented mandatory assurance requirements over sustainability-related information. Here in Canada, assurance over sustainability information is currently voluntary. However, the CSA is consulting on whether some form of assurance on greenhouse gas emissions reporting should be required.

Who is providing assurance over sustainability-related information?

Sustainability assurance engagements are being performed by practitioners who are professional accountants (CPAs) and other service providers (non-CPAs). When applying assurance standards on sustainability information issued by the IAASB or AASB, practitioners must adhere to the relevant ethical, independence and quality management requirements.

As the reporting ecosystem evolves, sustainability and financial information is expected to be increasingly integrated – in fact, often drawing from the same systems and processes, subject to internal controls, and with oversight by those charged with governance. Assurance over sustainability information and financial statements will need to be of the same high-quality. Assurance skills obtained via experience in financial statement audits are transferable and highly valuable in sustainability assurance engagements, positioning the CPA profession to address these evolving client needs.

What sustainability assurance engagement options exist for practitioners?

Practitioners have several options for the types of engagements that they can perform over sustainability information, with varying levels of assurance. While a readiness assessment and agreed-upon procedures engagement provide no assurance, there are also options to perform limited and reasonable assurance engagements. Results from this global benchmarking study indicate that currently, the majority of assurance engagement being performed are limited assurance engagements. Check out this alert to learn about the details of each engagement and see an illustration of the key differences between the types of engagements available.

There are several considerations in determining the type of engagement that will best meet the needs of the user (which could include management, shareholders, etc.). The nature of the engagement drives the level of assurance, the work effort, the extent of procedures performed and the cost of the engagement. 

What sustainability assurance standards are currently being used?

Currently, the most common standard being used by practitioners in Canada is Canadian Standard on Assurance Engagements (CSAE) 3000, which was adopted from the International Standard on Assurance Engagements (ISAE) 3000 (Revised), with some Canadian amendments. CSAE 3000 provides requirements and guidance for attestation engagements, other than audits or reviews of historical financial information. To learn more, you can look to the IAASB’s non-authoritative guidance on applying ISAE 3000 (Revised) to sustainability and other extended external reporting assurance engagements, as well as the document that the AASB published to support Canadian practitioners’ use of the IAASB’s guidance.

CSAE 3000 remains fit for purpose in the interim. However, the new standard with specificity for sustainability assurance, discussed in the next section of this blog, will better meet current and future practitioner needs. For insights on challenges faced by practitioners in delivering sustainability assurance using the current standards, check out the Associated of Chartered Certified Accountant’s recent report, Sustainability Assurance – Rising to the Challenge.

SUSTAINABILITY ASSURANCE STANDARD SETTING

What’s the latest from the IAASB and AASB?

A lot has happened since we shared an update on the IAASB’s sustainability assurance standard setting activities in the October 2022 Audit Quality Blog. In August 2023, the IAASB published the proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements, for public exposure and consultation.

The AASB approved a project to adopt ISSA 5000 concurrently in Canada as Canadian Standard on Sustainability Assurance (CSSA) 5000, General Requirements for Sustainability Assurance Engagements. Following the IAASB’s timelines, the Exposure Draft-CSSA 5000 (ED-CSSA 5000) was also approved in August by the Canadian Board. ED-CSSA 5000 will be published in a phased-approach, with the publication of the requirements and Canadian Highlights Summary in early September 2023 and the rest of the documents (including application material and the IAASB’s Explanatory Memorandum) by the end of September 2023.

What timelines do I need to be aware of?

The AASB’s formal outreach period, supported by CPA Canada, is happening from September to November 2023. The deadline to respond to ED-CSSA 5000 is November 6, 2023.

The IAASB is accepting feedback on ISSA 5000 until December 1, 2023, with plans to issue the final standard in September 2024.

How can I share my views on ED-CSSA 5000 with the AASB?

• Participate in a virtual roundtable discussion in English on October 16, 2023, or in French on October 18, 2023
• Complete an online survey, available on the AASB’s project page (link below) on October 5, 2023
• Answer the relevant questions in ED-CSSA 5000 by writing and submitting a response letter before November 6, 2023

Visit the AASB’s sustainability assurance project page for more details on the above outreach activities. 

Where can I learn more?

Register for the second webinar in our two-part offering, titled Assurance on Sustainability. In addition to diving deeper into relevant sustainability assurance developments, this webinar will feature a speaker from the AASB’s staff who will speak to the project background and key concepts in the proposed sustainability assurance standard.

Also, check out our sustainability assurance resources webpage to find more resources and deepen your understanding to address evolving client needs.

KEEP THE CONVERSATION GOING

CPA Canada is planning to submit a formal response to the IAASB on ED-ISSA 5000. With the final issuance of the sustainability assurance standard set to occur in September 2024, we’re also thinking about non-authoritative guidance needed to support practitioners with the application of the new standard. Feel free to share your thoughts on what sustainability assurance resources are needed to help you and your practice today and into the future. 

Disclaimer

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