Upcoming requirements for climate risk analysis are set to impact large companies, but taking action now with six strategic steps can help manage compliance costs and position your company for success.
On October 9, 2024, the Government of Canada announced its intention to enact legislation mandating large, federally incorporated private companies to disclose climate-related financial information. No-regrets moves can be taken now to mitigate compliance costs.
This regulatory shift aims to enhance transparency and accountability in corporate climate-related practices, aligning with global trends towards sustainable finance.
Key Aspects of the Proposed Legislation
Canada will amend the Canada Business Corporations Act to require large private companies to disclose how climate change impacts their operations, financial performance, and future prospects.
A summary of the amendment is outlined below:
- Scope and Applicability: The legislation targets large, federally incorporated private companies, defined by specific financial and operational criteria, yet to be finalized.
- Disclosure Requirements: Companies must report on climate-related risks and opportunities, governance structures, strategies, risk management, and metrics following the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.
- Reporting Framework: Disclosures must be integrated into annual financial reports, ensuring consistency and comparability across industries.
- Compliance Timeline: A phased implementation approach is expected, providing companies with a transition period to adapt to the new requirements.
Implications for Canadian Companies
This legislative move continues the federal push towards increased climate-related financial disclosures in corporate governance and risk management. Companies will need to provide comparable investor-quality data to demonstrate how climate-related risk analysis and greenhouse gas (GHG) emissions data is informing corporate strategy, governance, risk management, and respective metrics. For many companies, new processes must be established to ensure new data and climate-related risk analysis is recorded and completed correctly.
Early Action to Mitigate Costs of Last-Minute Compliance
Measuring climate-related risk and indirect GHG emissions is complex and time consuming, often requiring a multi-year effort to incrementally increase the quality of data and analysis. Beginning no-regrets moves early on can help companies prepare for and overcome those initial challenges and contribute to decreasing the friction and costs of last-minute compliance.
These six steps can help set you up for success:
- Conduct a Gap Analysis: Assess current climate-related disclosure capabilities against the TCFD recommendations to identify gaps that would benefit from improvement.
- Enhance Data Collection and Reporting Systems: Understand data requirements, especially when conducting climate-related risk scenario analysis and measuring GHG emissions.
- Train and Educate Staff: Equip key personnel with the technical expertise needed for climate-related risk assessment through training and fostering leadership, along with a broad understanding of legislative requirements.
- Engage Stakeholders: Communicate with investors, customers, and other stakeholders about the company’s emerging approach to climate-related risk management and sustainability practices to gather feedback and strengthen stakeholder engagement and buy-in.
- Strengthen Governance Structures: Ensure that climate-related risks and opportunities are integrated into corporate governance frameworks with clear oversight from the board and senior management.
- Monitor Regulatory Developments: Stay informed about the legislation’s progress and any additional guidance or amendments that may be issued by regulatory authorities.
Taking these steps will equip corporate management with the tools needed to develop an emergent climate-related risk strategy that supports broader corporate disclosures required by the legislation.
Questions? We’re here to help
The upcoming disclosure legislation marks a significant move toward greater transparency of financially relevant climate-related risks in corporate reporting. EHS Support is prepared to help your company take proactive steps to mitigate compliance friction and strategically manage risks and opportunities in the face of climate change.
For further guidance and support in navigating these changes, please do not hesitate to contact our Sustainability and Climate Change team at bruce.martin@ehs-support.com.
