CSDS 1 and CSDS 2 Explained: Canada's Sustainability Disclosure Standards and the Road to Mandatory Reporting

CSDS 1 and CSDS 2 are Canada's sustainability disclosure standards, the Canadian versions of IFRS S1 and IFRS S2, effective for annual periods beginning on or after 1 January 2025, but only on a voluntary basis.¹ Whether they touch your company today depends less on the standards themselves than on who regulates you, who lends to you and who buys from you.

Canada's disclosure landscape in mid-2026 is a patchwork with a clear direction of travel. The Canadian Sustainability Standards Board (CSSB) has published the standards but cannot compel anyone to use them; the Canadian Securities Administrators (CSA) paused work on a mandatory climate rule in April 2025.⁵ Meanwhile OSFI's Guideline B-15 already binds federally regulated banks and insurers,⁷ and exporters are fielding EU and customer-driven data requests regardless of what Ottawa or the provinces do.

For reporting, finance and sustainability teams the practical questions are: what applies to us today, what will apply when the voluntary phase ends, and what should we do meanwhile? This guide answers them from primary sources, CSSB, CSA and OSFI, current to July 2026.

Who faces what? Canada's climate disclosure obligations in July 2026

Before going standard-by-standard, see the whole board. Different entities face very different obligations, and conflating them is the most common error in board papers.

The takeaway: "Is climate disclosure mandatory in Canada?" has no single answer, it depends on your row of this table.

What do CSDS 1 and CSDS 2 actually require?

The CSSB issued its two inaugural standards on 18 December 2024. CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS 2, Climate-related Disclosures, are modelled directly on IFRS S1 and IFRS S2 from the International Sustainability Standards Board (ISSB).¹ The CSSB preserved the global baseline deliberately, so that a CSDS-compliant report is, in substance, an ISSB-compliant report.^2,13

CSDS 1: the general architecture

CSDS 1 sets the frame. It requires an entity to disclose material information about the sustainability-related risks and opportunities that could reasonably be expected to affect its cash flows, access to finance or cost of capital over the short, medium and long term. Materiality is defined by reference to the primary users of general purpose financial reports, investors, lenders and creditors, not the broader "double materiality" audience of the EU's CSRD.

Disclosures must sit within the entity's general purpose financial reporting, use data and assumptions consistent with the financial statements, and follow the four-pillar architecture inherited from the TCFD: governance, strategy, risk management, and metrics and targets. The same architecture underpins IFRS S1/S2 and OSFI B-15, so work done for one framework is largely reusable across the others.

CSDS 2: the climate standard

CSDS 2 applies the same architecture specifically to climate, covering both physical and transition risks. Its headline requirements:

• Governance: the board's oversight of climate-related risks and opportunities, and management's role in assessing and managing them.
• Strategy: how climate risks and opportunities affect business model, strategy and financial planning, including a description of climate resilience assessed using climate scenario analysis.
• Risk management: the processes used to identify, assess, prioritise and monitor climate risks, and how they integrate with enterprise risk management.
• Metrics and targets: Scope 1, Scope 2 and, after the transition relief, Scope 3 greenhouse gas emissions measured in accordance with the GHG Protocol, plus industry-based metrics, internal carbon prices where used, and progress against any climate targets.

The practical takeaway: a bank subsidiary preparing B-15 disclosures, a parent aligning to CSDS and a group entity answering an ISSB questionnaire are assembling the same evidence.

How do CSDS 1 and CSDS 2 differ from IFRS S1 and S2?

The requirements are the same; the runway is longer. The CSSB deliberately avoided changing the substance of the ISSB baseline, a company complying with CSDS can assert consistency with ISSB standards once reliefs expire, and instead adapted the transition timeline for the Canadian market.^2,3

Two points deserve emphasis. First, the Scope 3 relief was itself extended during standard-setting: the CSSB's exposure draft proposed two years, and stakeholder feedback pushed the final standard to three.² Second, the scenario analysis relief is narrower than often reported, it covers only the quantitative aspects. A qualitative, narrative scenario assessment is required from year one.

The relief clock starts when you do. Because each relief runs from the first annual period of application, a later adopter keeps the full runway, which makes the arithmetic of a first report easy to plan:

By the same logic the FY2026 adopter adds non-climate topics from FY2028 and quantitative scenario analysis from FY2029; a 1 January 2025 adopter reaches Scope 3 in FY2028.

One area still in flux: in April 2025 the ISSB proposed targeted amendments to IFRS S2 to ease application, including reliefs relating to financed emissions and the use of GICS classification, and the CSSB has consulted on mirroring them in CSDS 2.^10,11 Check the CSSB's site for the final amended text before locking in Scope 3 methodology documentation.

Are CSDS mandatory in Canada? The CSA's pause, explained

CSDS 1 and CSDS 2 have no force of law by themselves. The CSSB is a standard-setter, not a regulator; its standards bind only when a legislator or regulator adopts them.^3,12 For public companies, that regulator would be the CSA, and its mandatory climate project, which began with proposed National Instrument 51-107 in October 2021, is now on hold.^5,6

The CSA's stated rationale was to support Canadian markets and issuers "amid uncertainty in the global economic market" and to prioritise competitiveness, widely read alongside the parallel retreat of the SEC's climate rule in the United States.^5,6 Three things in the announcement matter for planning:

• The pause is a pause, not a repeal. The CSA said it will continue to monitor domestic and international developments, with plans to finalise the projects "in future years."⁵
• Existing obligations remain. Material climate-related risks must still be disclosed under existing continuous disclosure requirements. There is no disclosure holiday for issuers with financially material climate exposure.⁵
• Greenwashing enforcement continues. The CSA explicitly flagged that it will keep addressing misleading disclosures, so voluntary claims made outside a rigorous framework carry real regulatory risk.⁵

What would a future Canadian mandate look like?

When securities regulators return to rulemaking, the destination is not a mystery. The CSSB was created precisely to give regulators an incorporation-ready Canadian baseline, and law-firm commentary has consistently framed CSDS as the template for eventual mandatory rules.¹² The likely shape, based on the CSA's 2021 proposal: phased application starting with larger issuers, ISSB/CSDS-aligned content, and reliefs mirroring the CSDS transition provisions.

The strategic point: the content of a future mandate is already published. The only open variables are timing and scope, an argument for building capability now at a measured pace rather than under a compliance deadline.

What does OSFI Guideline B-15 require, and by when?

While securities rulemaking paused, prudential regulation did not. OSFI's Guideline B-15, Climate Risk Management, applies to all federally regulated financial institutions (FRFIs) except foreign bank branches, banks, insurers, and trust and loan companies.⁷ It is a supervisory expectation, which in practice means binding: OSFI assesses institutions against it.

B-15 has two halves. The risk-management half requires board and senior-management accountability for climate risk, integration of climate into strategy and enterprise risk frameworks, development of a climate transition plan, and climate scenario analysis across physical and transition risks over short, medium and long horizons.⁷ The disclosure half requires public climate disclosures aligned with the ISSB's four-pillar architecture, updated in 2024 to align Annex 2-2 with IFRS S2, including consideration of all 15 Scope 3 categories with particular emphasis on Category 15 (investments, i.e. financed emissions), and location-based Scope 2 reporting.⁹

OSFI's 20 February 2025 letter aligned the B-15 timeline with the final CSSB standards; disclosures are due within 180 days of fiscal year-end, phased as follows:^7,8

Note the knock-on effect. A bank cannot compute financed emissions for fiscal 2028 without counterparty data gathered well before then. The Partnership for Carbon Accounting Financials (PCAF) methodology most Canadian institutions use scores reported, verified counterparty emissions above estimates, which is why mid-market borrowers are already receiving emissions questionnaires from their lenders. For them, the "voluntary" era is voluntary in name only.

Who should adopt CSDS now, and why move before the mandate?

Voluntary adoption is not for everyone. But four groups have a clear-eyed business case for a CSDS-aligned report in the next cycle:

• Issuers courting institutional capital. Global asset managers evaluate Canadian holdings against the same ISSB baseline they apply in the UK, Japan, Australia and other adopting jurisdictions. A CSDS report slots directly into those screens; a bespoke sustainability PDF does not.
• Borrowers and investees of FRFIs. Banks and insurers need PCAF-grade portfolio data before fiscal 2028. A defensible Scope 1 and 2 inventory (and, in time, Scope 3) improves your data-quality score, simplifies credit conversations and pre-empts increasingly pointed questionnaires.
• Exporters and supply-chain participants. EU customers subject to CSRD, and large reporters tackling their own Scope 3 data, are pushing structured requests down the value chain. ISSB-aligned data answers most of them once, instead of ad hoc answers many times.
• Future-mandate candidates. Any issuer plausibly in the first phase of a revived CSA rule. Building governance, data pipelines and scenario capability across two or three voluntary cycles is cheaper and safer than compressing it into one compliance year, and since the relief clock runs from first application, the reliefs reward starting now.

There is also a defensive reason: with greenwashing squarely on the CSA's enforcement agenda,⁵ anchoring public claims to a recognised standard with an auditable evidence trail is materially safer than free-form sustainability marketing.

Scenario analysis and Scope 3: the two hard parts, honestly assessed

What does climate scenario analysis require in year one?

Under CSDS 2, an entity must assess its climate resilience using scenario analysis from its first reporting period, the three-year relief covers only the quantitative aspects.² A credible first-year qualitative analysis means selecting at least two plausible scenarios (typically one orderly-transition and one hot-house pathway, drawing on public references such as the NGFS scenarios), mapping material exposures against each, and narrating the strategic implications and management responses.

FRFIs face firmer expectations: B-15 requires scenario analysis as a risk-management practice across short-, medium- and long-term horizons, informing strategy and risk appetite.⁷ For non-FRFIs, the pragmatic sequencing is qualitative-first, quantifying the highest-materiality exposures in years two and three so the quantitative requirement lands on a running start.

How demanding is Scope 3, really?

Scope 3 is where most first-time reporters underestimate effort. CSDS 2 (following IFRS S2) requires all 15 GHG Protocol Scope 3 categories to be considered, with disclosure of material categories, purchased goods and services, upstream transport, business travel, use of sold products, investments, and so on. The three-year relief buys time, but the data plumbing, supplier data requests, spend-based estimation models, activity data capture, typically takes two annual cycles to mature from spend-based estimates to supplier-specific data. Financial institutions carry the additional PCAF layer for Category 15.

Starting the inventory in the relief window at estimate grade, then upgrading data quality year over year, is the pattern that works; attempting a complete, high-quality Scope 3 inventory in a single year before a deadline is the pattern that fails.

How should you plan a first voluntary CSDS report? A pragmatic roadmap

For a mid-market issuer or private company targeting a first report for fiscal 2026 or 2027, a realistic sequence:

• Quarter 1, scope and gap assessment. Confirm the reporting entity (it must match the financial statements), run a climate materiality assessment, and map existing disclosures and data against CSDS 2. Decide explicitly which reliefs you are using, and document that decision.
• Quarter 2, governance and data foundations. Assign board oversight and management accountability, the governance pillar is largely organisational, and it is examinable. Stand up Scope 1 and 2 GHG accounting with documented boundaries, emission factors and methods, and open the evidence register on day one: retrofitting an audit trail costs far more than building one.
• Quarter 3, strategy, risk and scenarios. Integrate climate into the risk register, draft the strategy narrative including financial effects (qualitative where quantification isn't yet reasonable), and run the first qualitative scenario analysis with management workshops.
• Quarter 4, draft, challenge, publish. Assemble the four-pillar report, run internal challenge and legal review (remember the greenwashing exposure), obtain board approval, and publish with the annual reporting package. Log every figure's source for next year's comparatives.
• Years two and three, upgrade under relief cover. Add comparatives, begin the Scope 3 inventory at estimate grade, pilot quantitative scenario work on the top exposures, and extend to non-climate topics before the CSDS 1 relief expires.

Tooling determines how much of this is grind versus process. Purpose-built platforms such as EcoLedger cover the four pillars, Scope 1–3 GHG accounting across all 15 Scope 3 categories, scenario analysis, PCAF financed emissions and an evidence register behind every number. And because CSDS mirrors the ISSB baseline, ISSB-aligned software is CSDS-aligned software.

Frequently asked questions

Are CSDS 1 and CSDS 2 mandatory in Canada?

No. They apply to annual periods beginning on or after 1 January 2025 on a voluntary basis, and bind only if a legislator or regulator adopts them.¹ The CSA paused its mandatory climate rulemaking in April 2025, but material climate risks must still be disclosed under existing securities law, and OSFI Guideline B-15 is binding on federally regulated financial institutions.^5,7

What is the difference between CSDS 1/2 and IFRS S1/S2?

The requirements are substantively identical; the differences are timing. CSDS extends the climate-first relief to two annual periods (versus one), extends Scope 3 relief to three annual periods (versus one), and adds a three-year relief from quantitative scenario analysis that IFRS S2 does not offer.^2,3

When does Scope 3 reporting become required under CSDS 2?

After the first three annual reporting periods of application, fiscal 2028 for a calendar-year company that adopts for fiscal 2025, or fiscal 2029 for a fiscal 2026 adopter.³ FRFIs under OSFI B-15 must disclose on-balance-sheet financed emissions from fiscal 2028 and off-balance-sheet AUM emissions from fiscal 2029.⁸

What does OSFI Guideline B-15 require?

Board-level climate governance, integration of climate into strategy and risk management, a climate transition plan, climate scenario analysis, and public ISSB-aligned climate disclosures within 180 days of fiscal year-end.⁷ D-SIBs and internationally active insurance groups began disclosing for fiscal 2024; smaller institutions followed for fiscal 2025.⁸

Did the CSA cancel mandatory climate disclosure in Canada?

Not cancelled, paused. On 23 April 2025 the CSA paused work on the rule that began as proposed NI 51-107, saying it will monitor developments and revisit the project in future years.^5,6 Existing disclosure obligations and anti-greenwashing enforcement continue.

Who should voluntarily adopt CSDS now?

Issuers courting institutional capital, borrowers and investees of banks facing PCAF financed-emissions deadlines, exporters receiving CSRD-driven or customer data requests, and any company likely to be captured by a future CSA mandate that would rather build capability over two or three voluntary cycles than one compliance year.

Does a first CSDS report need external assurance?

No. CSDS 1 and CSDS 2 do not require external assurance, and no Canadian regulator currently mandates it for voluntary reports. Because users discount unassured data, building an assurance-ready evidence trail from the first report preserves the option of limited assurance without the upfront cost.

References

1. CSSB / FRAS Canada, "Canadian Sustainability Disclosure Standards (CSDS 1 and CSDS 2): Now Available," 18 December 2024, accessed July 2026.
2. Blakes, "Canadian Sustainability Standards Board Publishes Inaugural Sustainability Disclosure Standards," 2024, accessed July 2026.
3. IFRS Foundation, "Jurisdiction snapshot: Canada, progress towards ISSB Standards," updated 12 June 2025 (PDF), accessed July 2026.
4. KPMG in Canada, "CSSB sustainability reporting", accessed July 2026.
5. MLT Aikins, "CSA pauses work on development of climate-related disclosure requirements and amendments to existing diversity-related disclosure requirements," May 2025, accessed July 2026.
6. Torys LLP, "CSA's climate disclosure rule on hold: an update on climate disclosure in Canada and the U.S.," April 2025, accessed July 2026.
7. OSFI, "Guideline B-15: Climate Risk Management", accessed July 2026.
8. OSFI, "Letter to Industry, We are updating Guideline B-15 for the final CSSB standards," 20 February 2025, accessed July 2026.
9. McCarthy Tétrault, "OSFI Updates Guideline for Federal Financial Institutions on Climate Risk Management and Disclosure," 2024, accessed July 2026.
10. IFRS Foundation, "ISSB publishes Exposure Draft proposing targeted amendments to IFRS S2 to ease application for companies," April 2025, accessed July 2026.
11. CSSB, "Exposure Draft, Proposed Amendments to CSDS 2: Amendments to Greenhouse Gas Emissions Disclosures" (PDF), accessed July 2026.
12. McMillan LLP, "CSSB Releases Final Canadian Sustainability Disclosure Standards: Mandatory Disclosure Rules are on the Horizon," 2025, accessed July 2026.
13. PwC Canada, "Canada's sustainability disclosure standards: what you need to know about the CSDS", accessed July 2026.