Summary: Environmental, social, and governance (ESG) reporting remains largely voluntary in Canada, but investors, lenders, insurers, customers and supply chain partners are increasingly demanding greater transparency from businesses about how they manage sustainability-related risks. Companies that wait for formal mandates may find themselves underprepared for investor due diligence, procurement requirements, greenwashing scrutiny and future disclosure obligations.
Two recent developments are influencing the demand for thorough ESG reporting: the Canadian Sustainability Disclosure Standards (CSDS) and Bill C-59, also known as the Fall Economic Statement Implementation Act, 2023. These changes shift ESG from a future compliance concern to a current business consideration, especially for firms seeking capital, entering supply chains, or making public sustainability claims.
What is ESG Reporting and Why Does It Matter for Canadian Companies?
ESG reporting is the process of measuring and disclosing how a company manages risks and opportunities beyond traditional financial results. Built around three pillars, it answers a practical question for stakeholders: how does this business operate, manage risk, and create long-term value?
The environmental pillar covers greenhouse gas (GHG) emissions, energy use, waste, and environmental compliance. The social pillar focuses on relationships with employees, customers, suppliers, and communities. The governance pillar covers oversight, ethics, risk management, and accountability.
ESG compliance is no longer a concern reserved for public issuers and large multinational corporations. Middle-market companies are increasingly being demanded to provide ESG information by clients, investors, lenders, insurers, and supply chain partners.
Investors analyze ESG data to assess resilience and long-term value. Lenders evaluate climate and governance risks during financing decisions. Insurers assess exposure to operational, environmental, and reputational risks. Middle-market companies face growing pressure to provide credible ESG data, particularly if they:
- Operate in regulated industries;
- Supply larger companies;
- Seek external funding; or
- Are planning growth, acquisitions, or succession
For middle-market companies in Canada, the practical question is no longer, “What is ESG reporting?” It is, “What ESG information will our stakeholders expect, and are we ready to provide it?”
Canadian Regulatory Landscape: CSDS 1, CSDS 2, and the CSSB
Canada’s sustainability reporting landscape changed significantly in December 2024 with the release of the inaugural Canadian Sustainability Disclosure Standards (CSDS) by the Canadian Sustainability Standards Board (CSSB). The standards are effective, on a voluntary basis, for annual reporting periods beginning on or after January 1, 2025.
The standards comprise two parts. CSDS 1 (General Requirements for Disclosure of Sustainability-related Financial Information) sets out general sustainability disclosures and helps companies explain sustainability-related risks and opportunities that could affect their business prospects. CSDS2 (Climate-related Disclosures) focuses on climate risks, GHG emissions, governance, strategy, risk management, and metrics and targets.
It is worth noting that the CSSB develops the standards, but it does not have the authority to make them mandatory. That authority rests with regulators such as the Canadian Securities Administrators (CSA) and the Office of the Superintendent of Financial Institutions (OSFI).
In April 2025, the CSA paused work on a new mandatory climate-related disclosure rule and on amendments to existing diversity-related disclosure requirements, citing global economic and geopolitical uncertainty. However, this does not mean climate disclosure is irrelevant.
As climate-related risks are now a mainstream business issue, the CSA noted that existing securities legislation still requires issuers to disclose material climate-related risks affecting their business.
This creates the central tension Canadian middle-market companies are navigating today: ESG reporting is voluntary in form but increasingly expected in practice. The CSDS is aligned with the International Sustainability Standards Board (ISSB) global baseline standards — IFRS S1 and IFRS S2 — with Canadian-specific transition reliefs that give companies time to build the right reporting infrastructure before disclosure expectations become more demanding.
Key Timelines: Scope 3, Scenario Analysis, and Transition Relief
CSDS 2 gives companies the time to build climate reporting processes before more complex disclosures are expected. This is a critical context for the broader debate over voluntary versus mandatory ESG reporting in Canada, where many requirements remain voluntary, but stakeholder expectations continue to grow.
A key area is the timeline for Scope 3 emissions reporting in Canada. CSDS 2 provides a three-year transitional relief period for Scope 3 GHG emissions disclosure. Companies applying for CSDS 2 do not need to disclose Scope 3 emissions during their first three annual reporting periods under the standard. That said, many investors are already demanding this data, and companies that begin reporting now will gain a competitive edge.
Scope 3 emissions are indirect value-chain emissions linked to suppliers, transportation, business travel, product use, and end-of-life treatment. They are typically harder to measure than Scope 1 and Scope 2 emissions because they often depend on third-party data.
CSDS 2 also provides three years of transition relief for the quantitative aspects of climate-related scenario analysis. Qualitative scenario analysis is not covered by the same relief and may be expected earlier. Companies may also focus on climate-related disclosures from 2025 through 2026 before expanding to broader sustainability disclosures.
For business owners and chief financial officers (CFOs), these reliefs are a preparation window. Companies that begin improving emissions data, internal processes, and climate-risk analysis now will be better positioned as disclosure expectations sharpen.
Bill C-59 and Greenwashing Risk
As ESG reporting becomes more visible, so does the risk of making unsupported claims. This is where Bill C-59 raises the stakes.
Bill C-59, the Fall Economic Statement Implementation Act, received Royal Assent on June 20, 2024. It amended Canada’s Competition Act and introduced specific provisions aimed at greenwashing. These provisions apply to environmental claims about products, businesses, and business activities. Companies must support environmental claims with adequate and proper substantiation, including, where applicable, internationally recognized methodologies.
The scope is broader than formal ESG reports. It also applies to public-facing statements in marketing materials, websites, investor presentations, proposals, recruitment materials, and sustainability updates. Claims such as “net zero,” “carbon neutral,” “eco-friendly,” “sustainable,” or “low impact” should not be used unless the company has reliable evidence to support them.
Companies face monetary penalties, and as of June 2025, private parties may have gained the ability to bring certain deceptive marketing cases directly before the Competition Tribunal. Beyond financial penalties, unsupported ESG claims can cause reputational damage, stakeholder distrust, and increased scrutiny from regulators, customers, and investors.
For middle-market companies, Bill C-59 is not a reason to avoid ESG reporting. Instead, it is a reason to make ESG reporting more disciplined. A company does not need to overstate its progress to benefit from ESG transparency. In fact, careful, evidence-based reporting can be more credible than broad claims that sound impressive but are difficult to prove.
Most companies focus on ESG frameworks and timelines but underplay the legal liability angle. For middle-market companies, this is exactly where qualified advisory support pays off. The takeaway is straightforward: say what you can support, document the basis for each claim, and make sure sustainability messaging is consistent across all public communications.
7 Key Actions to Bolster ESG Reporting Readiness
Middle-market companies do not need to wait for mandatory ESG reporting rules to start preparing. Acting now helps businesses focus on the issues that matter most, build reliable data, and strengthen governance before disclosure expectations become more demanding.
Aprio recommends the following seven actions:
- Conduct an ESG materiality assessment: An ESG materiality assessment for Canadian companies identifies the ESG issues most relevant to your industry, operations, stakeholders and strategy. This helps business leaders avoid scattered reporting and focus resources on the issues that could have the greatest impact on risk, performance, and long-term value.
- Begin building data-collection processes, especially for GHG emissions: At a minimum, companies should start with Scope 1 and Scope 2 emissions because they are more accessible and easier to control. Collect utility bills, fuel records, facilities data, fleet information, and operational metrics. The goal is not perfection on day one; rather the goal is a repeatable process that can improve over time.
- Prepare for future Scope 3 emissions reporting: Even with three-year transitional relief, companies should begin identifying where Scope 3 data may come from and which suppliers, customers, or activities are most relevant. Early mapping prevents last-minute data gaps when disclosure is required.
- Strengthen governance: ESG reporting is not a single-department function. Finance, operations, legal, compliance, risk management, human resources, procurement, and leadership all have roles to play. Board-level oversight matters because ESG issues affect strategy, capital allocation, risk management, and stakeholder confidence.
- Review public sustainability claims: Audit your website, proposals, marketing materials, policies, and reports to make sure every ESG-related statement is accurate, current, and supported by evidence. This is essential under Bill C-59 and the heightened scrutiny of greenwashing.
- Consider whether voluntary adoption of CSDS makes strategic sense: Not every company needs to adopt the standards immediately, but alignment with CSDS creates a more structured reporting approach, improves comparability, and supports investor and lender confidence. For companies seeking capital, preparing for a transaction, or participating in sophisticated supply chains, voluntary alignment is a competitive advantage.
- Firms should engage qualified advisors where needed: ESG reporting requires decisions about frameworks, data quality, internal controls, emissions boundaries, stakeholder expectations, and disclosure strategy. Professional guidance helps companies avoid common mistakes, prioritize effectively, and build a reporting process aligned with business goals.
Final Thoughts: Prepare Now for Canadian ESG Reporting Requirements
Canadian ESG reporting requirements are entering a new phase. The CSDS framework is in effect, the CSSB has set the technical foundation, and the CSA has signalled that material climate disclosures remain enforceable under existing securities law. Bill C-59 has raised the cost of getting it wrong. Middle-market companies operating in this voluntary-but-expected gray zone can build credible reporting now, before stakeholder pressure or regulatory mandates force a rushed response. The companies that move first will be best positioned to build investor confidence, secure supply chain access, and build long-term resilience.