The escalating urgency of climate change is reshaping the business landscape across Canada and the United States. As governments implement stricter sustainability regulations, businesses of all sizes face new challenges and opportunities. Navigating this evolving regulatory environment is crucial for staying competitive and compliant.
For now the regulatory focus in North America is on large enterprise but that does not mean small operations will not feel the weight of these new regulatory requirements either directly or through pressure from their regulated customers.
At Tool Zero, we understand the complexities small businesses encounter when addressing climate disclosure requirements. Our software simplifies the process by analyzing invoices to calculate Scope 1, 2, and 3 emissions, enabling businesses to meet regulatory demands with confidence.
In 2022, the federal government announced that Office of the Superintendent of Financial Institutions (OSFI) will require federally regulated financial institutions to publish climate disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework beginning in 2024. In its November 2023 Fall Economic Statement, the government announced a further commitment to expand mandatory climate disclosures.
While the government has yet to determine the substance of the new disclosures, the Canadian Sustainability Standards Board (CSSB) released new proposed standards for companies to report sustainability and climate-related information, based on the ISSB sustainability disclosure standards in March of 2024.
The new proposed Canadian standards include CSDS 1 and CSDS 2, which align with IFRS S1 and S2, respectively, while introducing several “Canadian-specific modifications.” CSDS 1 just like IFRS S1 pertains to “General Requirements for Disclosure of Sustainability-related Financial Information” and CSDS 2 similar to IFRS S2 pertains to “Climate-related Disclosures”
Currently only federally regulated financial institutions are required to make climate disclosures to the financial regulator OSFI.
As of October 9th, 2024 the government declared it is also moving forward with mandating climate-related financial disclosures for large, federally incorporated private companies. The government intends to bring forward amendments to the Canada Business Corporations Act that will require these disclosures. The government will launch a regulatory process to determine the substance of these disclosure requirements and the size of private federal corporations that would be subject to them.
Small and medium sized businesses are currently not required to make disclosures however the government is actively looking for ways to encourage participation and smaller organizations will start to feel pressure from the larger organizations they work with as they seek climate related information from them in order to fulfill their disclosure requirements.
Exact requirements are still being finalized in the CSDS, in the near term regulated organizations are required to make climate disclosures in line with the TCFD which can by broken into 4 categories.
Governance: Information about the board of directors and their overview of climate-related risks and opportunities for a improvements, including the role of senior management in overseeing the organization’s climate strategy.
Strategy: Information on how the company is positioning itself in the transition to a low-carbon economy, including its goals and targets related to climate change.
Risk Management: Information on how the company is managing the risks and opportunities associated with climate change, together with its processes for identifying, assessing, and managing climate risks.
Metrics and Targets: Information on the company’s emissions, energy use, and other relevant metrics, as well as its targets for reducing emissions and improving energy efficiency
OSFI will require federally regulated financial institutions to publish climate disclosures aligned with the TCFD framework beginning in 2024.
The CSSB has proposed setting the effective date for proposed CSDS 1 and 2 as annual reporting periods beginning on or after January 1, 2025.
On March 6, 2024, the US Securities and Exchange Commission (SEC) adopted new rules requiring domestic and foreign public companies to disclose certain climate-related information in their registration statements and periodic reports.
The final rules contain new requirements aimed at improving the consistency, comparability and reliability of climate-related disclosure for investors, such as adding a new subpart 1500 to Regulation S-K, requiring disclosure of information and risks that are likely to impact a company’s business and financial statements. The rules also add a new article 14 to Regulation S-X, requiring climate-related financial statement metrics to be included in a note to audited financial statements.
All domestic and foreign registrants, except for asset-backed issuers, must provide the disclosures. Smaller reporting companies (SRCs), emerging growth companies (EGCs), and non-accelerated filers are exempt from the Scope 1 and Scope 2 GHG emission disclosure requirements but must provide all other disclosures.
The final rule requires registrants to provide quantitative and qualitative disclosures outside the audited financial statements in certain SEC filings as follows:
Green House Gas (GHG) Emissions: Information about Scope 1 and 2 GHG emissions on the basis of metric tons of carbon dioxide equivalent separated by each constituent gas that is individually material.
Governance: Information on how the board of directors and management oversee the assessment and management of climate related risks as well as progress towards climate related targets and transition plans.
Strategy: Information on how climate related risks have affected or are reasonably likely to affect the business strategy.
Risk Management: Information on the process for detecting, evaluating and managing climate related risks.
Targets and Goals: Information about climate related goals such as the scope of activities, the time horizon, the measurement baseline and progress to the goals.
Material Expenditures and Impacts: Information about material expenditures and impacts on financial estimates and assumptions that are a direct result of: mitigation of climate related risks, transition plans, and actions taken to achieve disclosed goals.
The final rule was scheduled to become effective May 28, 2024; however, the SEC has voluntarily stayed the rule's effective date pending judicial review. Depending on when the legal challenges are resolved, the mandatory compliance dates noted below may be retained or delayed.
For a registrant with a calendar year-end, the mandatory compliance dates are as follows:
Large Accelerated Filers
Accelerated Filers
Non accelerated filers, SRCs and EGCs
Large corporations are increasingly integrating sustainability into their core business strategies, driven by regulatory requirements, investor expectations, and consumer demand for environmentally responsible products. To comprehensively address their environmental impact, these corporations are extending their focus to include Scope 3 emissions, which encompass indirect emissions occurring in their supply chains.
Supply Chain Accountability: Companies like Walmart, Apple, and Unilever are holding suppliers accountable for their environmental footprints. They require suppliers to measure, report, and reduce greenhouse gas emissions and other environmental impacts.
Sustainability Goals Alignment: Suppliers are expected to align with the sustainability goals of their corporate clients, such as achieving net-zero emissions by a specific date or adhering to principles like the Science Based Targets initiative (SBTi).
Enhanced Transparency: There's a growing demand for transparency in operations. Suppliers are often required to disclose environmental data publicly, contributing to the overall sustainability reporting of the corporations they serve.
At the heart of Tool Zero's solution is its advanced invoice analysis capability. This feature automates the emissions tracking process by extracting relevant data directly from your invoices. Here's how it works:
Automated Data Extraction: Tool Zero scans and interprets invoice data related to energy consumption, fuel use, travel, and procurement. This includes electricity bills, fuel receipts, supplier invoices, and more.
Comprehensive Emissions Calculation: The platform utilizes established emissions factors to convert your invoice data into precise calculations of Scope 1, 2, and 3 emissions. This ensures that both direct and indirect emissions are accounted for.
Detailed Reporting: Tool Zero generates comprehensive reports that align with international standards such as the Greenhouse Gas Protocol. These reports can be easily shared with stakeholders, regulators, or included in sustainability reports.
Accuracy is critical when it comes to climate disclosure. Errors can lead to non-compliance, reputation damage, or misguided sustainability strategies. Tool Zero enhances accuracy and efficiency through:
Automated Calculations: By eliminating manual data entry, the risk of human error is significantly reduced. Automated calculations ensure consistency and reliability in your emissions data.
Audit Readiness: With accurate and well-documented emissions data, your business is better prepared for audits or reviews by regulatory bodies.
The efficiency gained through automation allows your team to allocate resources to other important areas of the business, improving overall productivity.
We recognize that managing costs is a priority for businesses, especially small and medium-sized enterprises. Tool Zero offers an affordable solution without compromising on quality. Our goal is to make effective emissions management accessible to all businesses, regardless of their size or budget.
The landscape of sustainability regulations is rapidly evolving, presenting both challenges and opportunities for businesses. Proactive compliance not only mitigates risks but also positions your business as a responsible and forward-thinking leader in your industry.
Tool Zero is here to empower small businesses to navigate these changes confidently. By simplifying emissions calculation and reporting, we help you meet climate disclosure requirements and contribute to a sustainable future.
Share On:
