The rise of sustainability accounting around the world has called greater attention to what we are doing to address this in Canada. The Independent Review Committee on Standard Setting in Canada recently issued a consultation paper calling for the establishment of a Canadian Sustainability Standards Board as well as other changes to the standard setting process in Canada. Here is my response to that consultation paper.
March 31st, 2022
Edward J. Waitzer
Chair, Independent Review Committee on Standard Setting in Canada
c/o 277 Wellington Street West
Toronto ON M5V 3H2
Dear Mr. Waitzer,
I appreciate the opportunity to respond to the consultation paper recently issued by the Independent Review Committee. I am an Assistant Professor, Accounting at the Sprott School of Business at Carleton University and have studied the field of social and environmental (sustainability) accounting for the last decade. I made a deliberate decision to pursue this field in my doctoral studies as I am passionate about its use and potential. I have had the opportunity to have my related work published in Sustainability Accounting, Policy and Management Journal (SAMPJ), Advances in Environmental Accounting and Management and the British Journal of Management. I am also on the editorial advisory board at SAMPJ. While I am writing today on my university’s letterhead, I am responding to the consultation paper as an individual academic as I did not engage with the wider university to solicit their views; my views are my own.
As a sustainability accounting scholar, my comments will primarily focus on the issues related to my area of expertise. The review committee poses a series of what I see as connected ideas: the public interest (Q2), the integration of Canada’s diverse populations including the unique rights of and responsibilities to, Indigenous Peoples (Q3, Q10, Q11) and the creation of a potential Canadian Sustainability Standards Board (CSSB) (Q4, Q11, Q15). To establish a sustainability standard-setting process that effectively addresses the evolving public interest, equity, diversity and inclusion (EDI) and Indigenous rights and perspectives, I see room for a more broad and inclusive approach to standard-setting for sustainability in Canada. To address these areas, I am entirely supportive of a process to set sustainability standards that includes CSSB representation and consultation from these diverse groups and representation in the standards themselves. The sustainability standards will likely best address these issues directly from both a financial materiality and an impact perspective (so called double materiality). In doing so, a wider perspective of public interest will naturally be addressed by broadening the underlying definition of who’s interests are served. In this way, we can ensure that an established CSSB is simultaneously considering evolving definitions of the public interest and is inclusive of more diverse views.
The specific standards to meet these objectives would of course be established by the CSSB itself, but the people around the table, the consultation processes undertaken and the objectives it seeks to achieve, will be important guides to choosing these standards. It is unlikely that the ISSB, or any other individual sustainability standard-setter will, at the current time, be able to provide standards to meet all of these objectives. However, the CSSB can contribute to the international standard-setting process by leading the way on the creation of made-in-Canada approaches. By engaging with the ISSB, GRI and other international efforts on sustainability standard setting (e.g., European Financial Reporting Advisory Group (EFRAG)), the Canadian perspective can inform and contribute to the international sustainability standard-setting processes around such critical areas as the public interest, EDI, and Indigenous perspectives.
Prior to addressing the above-noted questions individually, I recommend that the committee continue to engage with academics in this space in particular. The evolving work in sustainability standard-setting can leverage more than 50 years of social and environmental accounting research; engaging with academics who have years, if not decades, working in this space would help to ensure that mistakes of the past are not repeated. The committee should also engage with other standard-setting groups around the world to learn from their processes; for example, EFRAG has explicitly stated they are willing to co-create/share learnings, etc. to facilitate sustainability reporting around the world. Recommendations going forward should leverage qualified expertise to ensure the best possible outcomes for Canadians.
I will address the three themes I identified above along with the review committee’s question on funding (Q8). To facilitate ease of comparison in your review process, I will address these in the order they appear in the review document.
Q2 - Defining the public interest
I commend the committee for opening the discussion on the public interest as this can serve as a re-imagining, and a realignment, of the public interest for today and tomorrow; this will better serve society and the profession as a whole if it is more inclusive in its re-definition. The reason the public interest is so important is that it provides a beacon, a goalpost to shape decision-making. When choices must inevitably be made, a clear and well-defined goal of serving the public interest will help shape and anchor those decisions. The issue of the public interest is one that, in my opinion, underpins the future of accounting. However, there is currently a misalignment. If we were to ask members of the general public what they thought the public interest was, or who it was to serve, I doubt we would hear solely investors/bankers but this seems to be precisely how it has been defined in the past.
The committee references a ‘common public interest framework’ but it is unclear what this implies. Thought should be given to whether this means that one definition of public interest would apply to all areas of reporting and auditing or whether different aspects are meant to serve different ‘publics’. I am of the opinion that the public interest cannot be defined so narrowly as in the past and as it has applied to financial reporting when accounting is evolving to include a much broader range than considered in these narrow definitions. The definitions referenced in the consultation paper (e.g., AASOC, The Monitoring Group, IFRS) are predominantly financial focused serving financial markets. One has to ask – is this the public interest society feels should be served by sustainability reporting?
The current definitions reflect a very narrow definition of who the public is and what their interests are. Given the growing lack of trust in business and loss of social license to operate, I do not believe we are serving the public interest by focusing solely/exclusively/predominantly on financial markets. Taking a step back, it is advisable to understand ongoing trends and interest in sustainability. Why are people so interested? One reason is likely to hold organizations to account. Urgent, pressing, existential crises are unfolding before our eyes and society wants/needs to hold organizations to account. From the climate crisis to rising inequality, people are concerned, society is concerned, I am concerned. People are looking for ways they can act to change the world we are living in. We’ve seen a dramatic rise in Sustainable Responsible Investing (SRI) growing from $8.72 trillion in 2016 (The Forum for Sustainable and Responsible Investment (USSIF), 2017) to $17.2 trillion at the end of 2019 (USSIF, 2020). It is likely that these investments are, at least in part, due to people attempting to align their values with their investments. Marc Carney’s recent success in putting together a coalition of $130 trillion in partners (Reuters, 2021) shows the level of interest in sustainable finance. To mobilize the immense amount of funds towards positive societal impact, it will take solid sustainability accounting information and specifically, information that is impact (double materiality) focused.
The committee should also consider Canadian legal requirements (e.g., CBCA) and recent court rulings (e.g., BCE Inc. v. 1976 Debentureholders, 2008) and how this affects the information that is needed for firms. What role do accounting standards have to play in helping firms meet their legal obligations (e.g., consideration of a variety of stakeholders like the environment as per the CBCA)? I would argue that as firms’ obligations have evolved, so too must the accounting information that serves its stakeholders; this is further evidence (in law) of the broadening of the public interest.
The committee should consider its definitions for who the public is, consider wide consultations to gain a broad understanding on who comprises this public, and determine what their interests are in the Canadian context. Getting this definition right is critical as any structure or standards that proceed will flow from how the public interest is defined. This is interconnected with who is represented in the standards as well as how sustainability is defined (and who it serves).
Q3 - Diversity, equity and inclusion and Indigenous rights & Q10 – inclusion of Indigenous voices
This is an important consideration that intersects with the first issue outlined regarding the definition of the public interest. Diverse and Indigenous perspectives are not generally represented in the standards currently. Serious consultation that includes Indigenous world views and perspectives should form an active role in any standards that impact Indigenous people. We would all benefit from co-creating sustainability standards that include Indigenous voices and perspectives in Canada. This could include for example, seven-generation thinking (e.g., Indigenous Corporate Training, 2020) to help shift the focus of sustainability standards to the long-term. To ensure room for this type of thinking, we must go beyond financial materiality.
The committee asks a series of questions around EDI with a particular focus, in the Canadian context, on how best to reflect the unique rights of, and responsibilities to, Indigenous Peoples. In considering these important factors in the context of standard-setting in Canada, it will be critical to ensure the sought-after diversity is fully reflected in both the composition of a potential CSSB, its consultation processes and in the standards that are set.
Q4 - Canadian Sustainability Standards Board & Q11 - CSSB structure, composition and specific competencies needed
I wholeheartedly agree that the Canadian perspective is necessary to adopt, create or adapt international standards for the Canadian context. The consultation paper seems to take the position that the ISSB is the ‘standard’ but this is not a position that many in my field agree with. I am pleased to see the recent announcement (GRI, 2022) that the ISSB and the GRI will work together to achieve a more holistic approach to sustainability reporting internationally. I would encourage the review committee to embrace these, and other developments, in the creation of the CSSB to ensure that Canadians get sustainability reporting that is meaningful to them.
Whether a separate board is needed should be investigated. What other options exist? What has been considered? The EFRAG – two pillar approach? Eventual harmonization? Closely work together with the financial standard-setter? Or one standard-setting board with sub-committees for various focuses? The implementation of a CSSB should be considered alongside our current accounting standard-setting processes and care should be taken to ensure alignment and collaboration so it is not perceived as a ‘tack-on’.
There is conflation in the document of the terms ‘sustainability’ and ‘ESG’ but there is growing agreement that these are not the same. Sustainability is arguably a planetary concept while ESG generally refers to firm level risks and corresponding effects on the financial value of the firm. The ISSB is clearly focused on enterprise value (so called single materiality). A Canadian perspective may wish to include double materiality as Europe is doing. The recent announcement of an MOU between the ISSB and the GRI to work together is another hopeful indicator in this (double materiality) direction. Investors themselves are increasingly investing in impact funds looking to make a difference in the world – information that reflects only the risks a firm faces in relation to its financial performance will not serve even this investor market.
In terms of the structure and composition of a potential CSSB, this also ties to the previous questions about diversity. Care should be taken to ensure that the CSSB has diverse representation that reflects Canada including Indigenous, LGBTQ2S+, gender diversity, representation from a variety of geographies, etc. Academics also have an important role to play on a potential CSSB. Scholars can connect a wealth of history in social and environmental accounting as well as current research ongoing in this area to inform sustainability standard setting and should be included on the board as well.
Q8 - Funding changes & Q15 – fostering timeliness with robust stakeholder involvement in sustainability standard setting
Advantages and disadvantages to any funding changes should be clearly laid out. With changes in funding come different issues. Reliance on government funding for example may be subject to change should future governments not ‘like’ the standard-setting direction. As we’ve seen with recent events in the U.S., new leaders may not ‘believe’ in sustainability issues and work to reduce funding leaving a CSSB at risk. Any changes should clearly evaluate the influence on the standard-setting process (real or perceived).
One of the most efficient ways to foster timeliness is to provide more resources. As above, more resources need to come from somewhere and therefore, funding, timeliness and influence are interconnected. Any funding changes must balance providing the necessary (stable) resources to increase timeliness while protecting against real or perceived influence over the standard-setting process.
Q20. Are there any other matters the Committee should consider as part of its review?
One of the areas not clearly addressed in the consultation paper is on the role of data in standard-setting. One of the priorities EFRAG has addressed is employing a data-first approach. Canada should actively consider how data plays a role in sustainability accounting and not treat this as an afterthought. With many technological evolutions happening (artificial intelligence, blockchain, etc.), Canada’s standard-setting approaches should include consideration of these changes and how they will affect the creation and application of standards in Canada.
To summarize my comments, it is my firm belief that the establishment of a sustainability accounting standard-setter in Canada is a necessity. I also believe that any CSSB should employ a double-materiality perspective to meet the needs of a variety of stakeholders. This perspective is the only way, in my opinion, to achieve the inclusion of diverse voices, including Indigenous perspectives, that the review committee states is its intention. It is also imperative that the creation of sustainability standards in Canada leverage the significant academic research in social and environmental accounting and engage with the academics who have a wealth of knowledge in this space. Any funding changes should consider the long-term stability of the source as well as any (real or perceived) influence new funding sources would have. Finally, and to bring the letter back to my first point, how the public interest is defined will form the foundation of these efforts going forward. Broadening this definition will guide the work of the CSSB and tie together the stated concerns of the review committee around EDI and Indigenous perspectives.
I thank the committee for all their hard work to date and their work to come synthesizing and making recommendations on the future of standard-setting in Canada.
Leanne Keddie (she/her), MBA, CPA, CMA, Ph.D Assistant Professor, Accounting
Sprott School of Business at Carleton University
Director, Alterna Social Ventures Institute
Appendix – References
BCE Inc. v. 1976 Debentureholders. (2008). Supreme Court of Canada 69. Retrieved from https://www.lexisnexis.ca/documents/2008scc69.pdf
GRI. (March 24th, 2022). ‘IFRS Foundation and GRI to align capital market and multi-stakeholder standards’. Retrieved from https://www.globalreporting.org/about-gri/news-center/ifrs-foundation-and-gri-to-align-capital-market-and-multi-stakeholder-standards/.
Indigenous Corporate Training. (2020). ‘What is the Seventh Generation Principle?’ Retrieved from https://www.ictinc.ca/blog/seventh-generation-principle.
Reuters. (Nov. 3, 2021). ‘COP26 coalition worth $130 trillion vows to put climate at heart of finance’. https://www.reuters.com/business/cop/wrapup-politicians-exit-cop26-130tn-worth-financiers-take-stage-2021-11-03/.
The Forum for Sustainable and Responsible Investment (USSIF). (2017). Sustainable and Impact
Investing in the United States Overview. [Web page]. Retrieved from
USSIF, 2020. Sustainable and Impact Investing Overview. [Web page]. Retrieved from