BY CATHERINE BROWNLEE,
PRESIDENT OF ALBERTA ENTERPRISE GROUP (AEG), CALGARY AND EDMONTON CHAPTERS

On December 18, 2024, the Canadian Sustainability Standards Board (CSSB) introduced the Canadian Sustainability Disclosure Standards (CSDS 1 and 2). Adoption by Canadian securities exchanges is expected, making compliance mandatory for public companies.

While publicly traded companies are the initial targets of compliance, small and medium-sized enterprises (SMEs) should not assume they are exempt. In fact, SMEs will inevitably be pulled into this evolving regulatory landscape as part of the broader supply chain, and those who take a proactive approach now will find themselves better posi­tioned to meet customer expectations and regulatory demands.

At first glance, the CSDS requirements may seem like an issue for large corporations, but the reality is that SMEs will feel the effects sooner than later. As sustainability reporting becomes mandatory for listed companies, their suppliers will be required to provide relevant data to ensure compliance. Companies engaged in manufacturing, agriculture and energy supply chains should particularly take note, as these sec­tors are under heightened scrutiny due to their environmental impact.

One of the biggest concerns for SMEs is the financial burden associated with compliance. While SMEs will likely face lower costs than large cor­porations, they will still need to invest in initial data collection, establishing governance processes and eventually emissions tracking to align with their larger partners. One major concern raised in consultations and by Alberta Enterprise Group members was the lack of legal protections for for­ward-looking sustainability disclosures. Businesses making climate-related projections could face legal and financial risks if actual outcomes differ.

Unlike financial statements, which have legal safeguards for for­ward-looking information, sustainability disclosures lack equivalent protections in Canada. Implementing Safe Harbour Provisions – sim­ilar to those in the U.S. – would shield businesses making good-faith estimates, encouraging transparency without fear of liability.

Rather than seeing sustainability reporting as a burden, SMEs can lever­age it as a competitive advantage. Early adoption of CSDS-aligned practices can position them as preferred suppliers for larger corpora­tions and improve relationships with investors focused on sustainability.

To get ahead of these changes, SMEs should focus on early action items:

• Assess Current Practices – Evaluate existing sustainability initiatives and identify gaps.
• Develop a Governance Framework – Establish oversight structures and assign responsibilities.
• Create a Reporting Plan – Outline key sustainability metrics and data collection processes.
• Set Up Internal Processes – Implement tracking systems for energy use, emissions and compliance.
• Engage with Key Stakeholders – Work with suppliers and customers to understand reporting expectations.
• Work with Exchanges – Clarify compliance requirements and legal protections for forward-looking disclosures.

The Canadian Sustainability Disclosure Standards mark a fundamental shift in business operations. SMEs that adapt early may gain a compet­itive edge, while those that delay risk falling behind. Rather than seeing compliance as a burden, SMEs can use it to secure preferred supplier status, attract investment and streamline operations. Taking action now will position businesses for success in a sustainability-driven economy.