On October 27, 2010, the Canadian Securities Administrators (“CSA”) published CSA Staff Notice 51-333 - Environmental Reporting Guidance (the “Notice”)1 to aid reporting issuers (other than investment funds) in interpreting existing disclosure requirements.

The Notice builds on OSC Staff Notice 51-716 - Environmental Reporting, which had surveyed existing environmental disclosure practices.2 The Notice also draws from environmental disclosure guidance provided by the Canadian Institute of Chartered Accountants (CICA)3 and from a recent climate change disclosure guidance published by the U.S. Securities and Exchange Commission.4

Prior to the Notice, Canadian securities regulators had largely responded to boilerplate environmental disclosure with general requests to enhance disclosure. The Notice, however, provides detailed guidance as well as sample disclosure provisions.

The Notice, and this bulletin, discuss the following aspects of environmental disclosure: materiality, environmental risks and related matters, risk oversight and management, the impact of adoption of IFRS, forward-looking information requirements, and governance.


Issuers are reminded that qualitative, as well as quantitative, factors must be considered in assessing what information is material. They are also reminded that some facts, immaterial in isolation, become material in the aggregate. The Notice further states that matters likely to become increasingly material, such as a prospective expenditure on clean technologies, should be disclosed as soon as possible.

environmental risks and related matters

National Instrument 51-102 - Continuous Disclosure Obligations contains disclosure requirements bearing on environmental risks, trends and uncertainties, environmental liabilities, asset retirement obligations, and financial and operational effects of environmental protection requirements.

environmental risks

Environmental risks can be classified under the following categories: litigation risks, physical risks, regulatory risks, reputational risks, and business model risks. The Notice provides a table of questions that issuers should consider in determining risks under each of the categories.

An issuer’s reliance on raw materials from a hurricane-prone region is an example of an environmental physical risk. Steps being taken to mitigate such risks should also be disclosed. With respect to regulatory risks, disclosure should include the anticipated future cost of compliance. Where a risk is difficult to quantify, additional information on the factual basis underpinning the risk should be disclosed.

Consumers’ response to an environmentally unsustainable product represents a reputational risk. The Notice remarks that such risks could, in turn, affect the issuer’s cost of capital. An example of an environmental risk relating to the business model is the prospect of significantly higher energy costs due to upstream regulation. The Notice seems to suggest that business model opportunities, as well as risks, should be disclosed under Item 5.2 of Form 51-102F2 – Annual Information Form.

trends and uncertainties

Form 51-102F1 - Management’s Discussion & Analysis requires, among other things, the disclosure of material information that may not be reflected in the financial statements and the disclosure of trends that may affect the issuer in the future. In particular, Item 1.4(g) of Form 51-102F1 requires the disclosure of commitments, events, risks or uncertainties that may affect future performance. The Notice suggests that the time horizon of a known trend or uncertainty may be relevant to an issuer’s assessment of its materiality and whether or not the impact is reasonably likely.

environmental liabilities

The Notice classifies liabilities into two categories: those reflected in the issuer’s financial statements and those that are not. With respect to the former category, the Notice describes the critical accounting estimates required pursuant to Item 1.12 of Form 51-102F1. It notes that issuers should disclose the probability of liabilities and consider including sensitivity analyses.  

With respect to the latter category, the Notice acknowledges that the contingent nature of many environmental liabilities renders quantification difficult. To comply with Part 1(a) of Form 51-102F1, issuers should nevertheless provide some disclosure of the probability, magnitude, and timing of such liabilities or potential liabilities.

asset retirement obligations

The Notice defines an asset retirement obligation (“ARO”) to be a requirement to perform certain procedures (e.g., to remediate the site of an abandoned facility), rather than a promise to pay cash. Many AROs will be caught by Item 1.2 of Form 51-102F1, which requires the disclosure of commitments, events or uncertainties that are reasonably likely to affect the issuer’s business. AROs that constitute material long-term obligations will require disclosure and quantification in tabular format pursuant to Item 1.6 of Form 51-102F1. Finally, as the CSA is of the view that AROs are critical accounting estimates, AROs must be disclosed under Item 1.12 of Form 51-102F1.

financial and operational effects of environmental protection requirements

Item 5.1(1)(k) of Form 51-102F2 requires the disclosure of financial and operational effects of environmental protection requirements on the issuer’s capital expenditures, earnings and competitive position in the current financial year and the expected effect in future years. Issuers should disclose quantified compliance costs to the extent possible, anticipated trends in such costs, and their potential impact on financial and operational results.

risk oversight and management

Disclosure of risk oversight and management manifests itself through the disclosure of environmental policies and through corporate governance disclosure.

environmental policies

Item 5.1(4) of Form 51-102F2 requires the issuer to describe the policies and steps taken to implement them. The Notice goes significantly further, suggesting that the issuer should also consider disclosing the impact of the policies on operations, a quantification of the costs associated with the policies, an evaluation of the effectiveness of the policies, and how the policies are monitored and updated.

board mandate and committees

Items 2 and 8 of Form 58-101F1 - Corporate Governance Disclosure require disclosure of how the board and its committees delineate their responsibilities.5 An issuer facing environmental risks should thus describe how the board manages such risks. To the extent the audit committee manages environmental risk, such functions should be described in the charter required by Item 1 of 52-110F1 - Audit Committee Information Required in an AIF. Ultimately, the aim is for the issuer to provide the investor with further insight into the issuer’s risk profile.

impact of adoption of IFRS

Under IFRS, issuers may be required to accrue more environmental liabilities, at higher amounts, and provide more disclosure regarding these liabilities. For example, the definition of a constructive obligation under IFRS is more detailed and arguably more inclusive than that contained under Canadian GAAP. Further, under IFRS, disclosure of provisions and contingent liabilities will be expanded:

Issuers will be required to disclose a provision continuity schedule for each class of provision, disclosing the beginning and ending carrying amounts, additional provisions made in the period, amounts used in the period, unused amounts reversed during the period and changes resulting from the passage of time and any revisions to the discount rate. Issuers will also have to disclose a description of the nature of the obligation, the expected timing of any resulting outflows of economic benefits and an indication of the uncertainties about the amount or timing of those outflows and where necessary, they will have to disclose the major assumptions made concerning future events.6

Finally, amounts to be accrued are subject to different treatment in the two regimes. Under Canadian GAAP, where a number of different outcomes in a range were equally possible, the issuer had the option of applying the low end of the range. Under IFRS, the midpoint must be applied.

forward-looking information requirements

Forward-looking information is defined to be disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking information can include information found on the issuer’s website and in voluntary reports, but does not include oral statements.7 Pursuant to Part 4A.3 of National Instrument 51-102, issuers must identify material forward-looking information as such, caution users that actual results may vary, list risk factors that may cause results to vary, state material factors or assumptions used to develop the forward-looking information, and describe the issuer’s policy for updating it.

governance structures around environmental disclosure

An issuer’s environmental disclosure in continuous disclosure documents is subject to three levels of oversight: review by the audit committee, approval by the board of directors, and certification by the CEO and CFO. Control measures must thus be instituted to ensure the accuracy of environmental disclosure. According to the Notice, issuers should consider whether information about environmental matters is subject to the same governance processes, controls and procedures as financial reporting.


The Notice provides welcome clarity and depth to securities regulators’ prior calls for enhanced environmental disclosure. Issuers should consider the Notice when drafting environmental disclosure, both to ensure compliance and to provide meaningful information to investors. In particular, the Notice’s sample disclosure provisions provide helpful reference points. The CSA has stated that it will continue to monitor disclosure of environmental matters as part of its ongoing continuous disclosure review program.