Part 1 - The Missing Architecture of Rights: How a Conceptual Misstep in Canada’s Sustainability Standards Strategy Risks Undermining Trust, Compliance, and Capital Allocation

Introduction: A Strategic Plan with a Structural Blind Spot

Canada finds itself at an inflection point in the evolution of its sustainability reporting landscape. With global standards accelerating through the ISSB and converging investor expectations around climate, governance, human capital, and nature-related risks, Canada has moved to establish its own national baseline. The Canadian Sustainability Standards Board (CSSB) intends to “regionalize” global frameworks, adapting them for Canadian realities. This is far more than an act of translation or administrative tailoring. It is a constitutional, legal, economic, and political undertaking. The viability, legitimacy, and durability of Canada’s sustainability regime will depend entirely on how well it reflects the actual structures that govern project development, regulatory authority, Indigenous jurisdiction, and investor decision-making in this country.

The CSSB’s 2025–2028 Strategic Plan appears, at first glance, to take this responsibility seriously. The document references UNDRIP and the UNDRIP Act. It asserts a belief that sustainability standard-setting must advance reconciliation. It acknowledges the uniqueness of the Canadian context. It includes a dedicated priority—Priority B—titled “Including Indigenous Peoples in sustainability disclosure standard setting.” It invites Elders, Knowledge Keepers, youth, women, and 2SLGBTQIA+ people into advisory roles. It grounds its work in values that aspire to respect, diversity, and Indigenous inclusion.

Yet beneath this language lies a conceptual misalignment so profound that it changes the trajectory of the entire enterprise.

The plan treats Indigenous Peoples as participants in a process — as voices to be consulted, relationships to be nurtured, and communities to be engaged — rather than as rights-holders whose constitutional authority must structure the very architecture of Canadian sustainability standards.

This is not a nuance or a matter of tone. It is a categorical error with material consequences. By collapsing rights-holders into the same category as “interested and affected parties,” the CSSB risks reproducing the exact forms of exclusion, opacity, and misalignment that global ESG reporting frameworks have been criticized for replicating for more than a decade. And by failing to embed rights-holder materiality into the definitional core of the national standard-setting process, the plan inadvertently exposes Canada’s capital markets to mispriced Indigenous-rights risk, stranded-asset scenarios, project delays, legal exposure, and credibility gaps in public-returning companies’ disclosures.

Regionalization is not about Canadian vocabulary. It is about Canadian law. It is about constitutional rights. It is about the realities of permitting, consultation, Indigenous jurisdiction, cumulative impacts, and social license. Global frameworks were not built to accommodate these realities. That work must happen here.

Treating Indigenous Peoples primarily as stakeholders rather than rights-holders risks establishing a sustainability architecture that is procedurally inclusive but substantively incomplete. And in Canada, the absence of rights in a sustainability framework is never neutral. It is always consequential.

This article examines precisely why.

1. Rights-Holders Are Not Stakeholders: The Foundational Distinction

Any credible sustainability architecture in Canada must begin with the fundamental truth that Indigenous Peoples are not stakeholders in the conventional ESG sense. They are rights-holders — a category with constitutional, legal, and jurisdictional significance that differentiates them entirely from other “interested and affected parties.”

Canadian regulatory systems — whether environmental impact assessment, federal and provincial permitting, land-use planning, wildlife management, or infrastructure approvals — are built around Indigenous rights. These rights are recognized and affirmed in Section 35 of the Constitution Act, 1982. They are reinforced through the UN Declaration on the Rights of Indigenous Peoples (UNDRIP) and its implementation under federal legislation. They shape the Crown’s duty to consult and accommodate. They influence case law across multiple generations, from Sparrow and Delgamuukw to Tsilhqot’in, Mikisew, Clyde River, Chippewas of the Thames, and the rapidly evolving jurisprudence around cumulative impacts and Indigenous-led regulatory regimes.

Placing rights-holders into a broad category of “interested and affected parties” is not simply inaccurate — it erases the analytic distinction that courts, regulators, Indigenous governments, and sophisticated investors must maintain. Rights-holders are not one voice among many. They constitute the central constraint around which Canadian projects are conceived, financed, permitted, assessed, and executed.

When sustainability standards fail to distinguish rights-holder materiality from stakeholder materiality, the outcomes are predictable: risks go unidentified, impacts are misreported, comparability is weakened, assurance becomes unreliable, regulatory trust deteriorates, and projects face greater exposure to challenges that were avoidable. Most critically, investors receive an incomplete picture of Indigenous-rights risk — arguably the most material category of risk in Canada for companies whose operations affect land, water, cultural rights, harvesting rights, or jurisdictional authority.

A sustainability architecture that does not begin with rights is not a Canadian architecture at all.

2. What the CSSB Strategic Plan Gets Right — And Why It Falls Short

To be fair, the CSSB’s plan is not indifferent to Indigenous Peoples. It contains language that expresses goodwill and an earnest desire to avoid past harms. It affirms that sustainability standard-setting must advance reconciliation. It acknowledges Canada’s unique constitutional context. It references Indigenous rights, the UNDRIP Act, and Indigenous governance. It establishes pathways for engagement with Elders, youth, women, and Two-Spirit people. It grounds itself in principles meant to uphold Indigenous rights.

These elements matter. They demonstrate attentiveness. They show that the CSSB understands that a purely technocratic approach to sustainability reporting would be insufficient. They reflect an institutional desire to be inclusive, collaborative, and respectful.

But they do not answer the central question.

Sustainability standard-setting is not an engagement exercise. It is a technical and legally consequential process that defines what companies must disclose, what regulators will rely on, and what investors will use to allocate capital. The plan needed to articulate how Indigenous rights-holder governance would be built into the standards themselves — how materiality thresholds, disclosure constructs, assurance expectations, and accounting boundaries would be centered around rights-holder authority.

Instead, the plan focuses on how Indigenous Peoples will be included in advisory processes, engagement circles, and pathways for input. These are not the wrong questions — but they are not the structural questions that the moment demands.

The difference is not procedural. It is architectural.

3. Why Misalignment with Rights-Holders Destabilizes Canada’s Regulatory Landscape

Canada’s regulatory systems operate under duties that cannot be delegated to a sustainability reporting framework. They must uphold treaty relationships, respect Indigenous jurisdiction, assess cumulative impacts, analyze community-specific effects, and align decisions with both constitutional obligations and evolving case law.

Projects rise or fall based on whether rights-holders support them, whether their jurisdictions are recognized, whether treaty interpretation is respected, whether cumulative impacts are understood, whether Indigenous economic participation is meaningful, and whether FPIC-related governance obligations are met. In many regions, Indigenous-led environmental assessments and data governance regimes provide the primary decision-making lens, not a secondary one.

In this context, a sustainability standard that treats rights-holders as generic community stakeholders is not merely incomplete — it is irrelevant to the decisions that matter. A disclosure regime that does not embed rights-holder oversight and impact definition cannot support credible impact accounting, cannot meaningfully assess materiality at the project or asset level, cannot assure community-level outcomes, and cannot reflect Indigenous-defined impacts on land, water, culture, and livelihoods.

Indigenous rights risk is not a subcategory of social risk. It is a core investment risk that shapes project valuation, cost of capital, regulatory certainty, operational exposure, and long-term corporate reputation.

If regionalization does not embed rights-holder authority, then it is not regionalization at all.

4. Investor Exposure: The Materiality of Indigenous Rights Risk

Institutional investors depend on sustainability information to model jurisdictional exposure, evaluate permitting timelines, assess social license, anticipate operational disruptions, and understand long-term environmental liabilities. In Canada, Indigenous rights risk has become one of the most misunderstood and underreported drivers of corporate performance.

Indigenous rights risk determines whether a project proceeds or is cancelled. It drives multi-year delays. It creates litigation exposure, particularly around water, fisheries, land use, and harvesting rights. It can trigger renegotiation of benefit agreements or the restructuring of project economics. It generates reputational consequences that influence capital flows and stakeholder trust. It shapes cumulative impacts analysis and environmental duty-of-care expectations. In the most critical cases, it determines whether an asset becomes stranded.

If sustainability standards fail to reflect the structure of Indigenous rights — territorial authority, treaty rights, cultural rights, harvesting rights, FPIC obligations, and Indigenous jurisdiction over land and water — investors receive information that is inherently incomplete. Unpriced risk is not eliminated risk; it is concealed risk. And hidden risk is the most dangerous form of investment exposure.

A sustainability standard that obscures Indigenous rights risk is financially irresponsible.

5. The Conceptual Misstep: Inclusion Without Architecture

The core misalignment of the CSSB’s Strategic Plan is revealed most clearly in the phrasing of Priority B: “Including Indigenous Peoples in sustainability disclosure standard setting.” The emphasis on inclusion — rather than on rights-holder governance — signals the problem.

The plan introduces a definition of “Indigenous Peoples” that merges rights-holders, communities, governments, businesses, and leaders into a single umbrella category. This definitional move collapses the very distinction that sustainability standards must elevate. It flattens authority into participation. It implies that rights-holders are a subset of Indigenous voices rather than the constitutional core of the regulatory system.

By embedding Indigenous Peoples in the process without embedding rights-holders in the structure, the CSSB inadvertently replicates one of the most pervasive failures of ESG frameworks: the treatment of Indigenous issues as a social-impact topic instead of a jurisdictional, legal, and material risk category.

This is the conceptual misstep that threatens the entire architecture.

6. The Consequences: A Regime That Cannot Deliver on Its Promise

Regulatory Misalignment

If standards lack rights-holder materiality, regulators cannot rely on them to evaluate cumulative impacts, assess FPIC pathways, understand jurisdictional authority, or support Indigenous-led monitoring. A reporting system that is not designed for rights cannot serve regulators who must design for rights.

Investor Mispricing

Disclosures that treat rights-holder governance as stakeholder engagement fundamentally misstate litigation risk, permitting timelines, political exposure, and stranded-asset potential. Understated risk does not build market confidence — it erodes it.

Strained Indigenous–Crown and Indigenous–Industry Relations

A system that substitutes participation for authority reproduces historical patterns: consultation without jurisdiction, presence without power, relationship-building without shared governance. Trust deteriorates before implementation even begins.

Assurance Failures

Auditors cannot assure against good intentions. They require defined expectations, measurable constructs, consistent accounting boundaries, and structured metrics. A reporting regime that lacks rights-holder-defined metrics is not auditable.

7. What a Rights-Holder-Anchored Architecture Requires

A true Canadian regionalization of global sustainability standards demands a structural, not procedural, integration of Indigenous rights-holder authority. This means embedding rights-holder materiality into the definitional core, including treaty and territorial rights in the materiality map, integrating Indigenous data governance principles such as OCAP® and CARE, and establishing clear distinctions between stakeholder information and rights-holder information.

It means requiring disclosure of how companies operationalize FPIC pathways, document Indigenous economic participation, report on procurement, employment, benefit agreements, and community outcomes, and track Indigenous-led environmental monitoring. It requires Nation-governed data inputs where appropriate and assurance-ready structures that reflect Indigenous oversight.

It requires aligning disclosures with the realities of Canadian regulatory systems — from the Impact Assessment Act to Indigenous-led environmental assessments — ensuring that reporting supports, rather than undermines, the obligations regulators must uphold.

Without this architecture, Canada’s sustainability regime risks becoming technically sophisticated, globally aligned, and operationally irrelevant.

8. Why Canada Cannot Afford to Get This Wrong

Other countries develop jurisdiction-specific sustainability standards to reflect their unique risks — climate exposure in Australia, biodiversity loss in Europe, geopolitical supply chains in the United States. Canada’s defining feature is different: Indigenous rights-holder jurisdictional authority.

If the CSSB fails to anchor its standards in this reality, Canada will experience declining investor confidence, rising risk premiums, increased project delays, contested regulatory processes, reputational damage, limited adoption among Indigenous Nations, and the emergence of parallel Indigenous-governed reporting systems outside the CSSB framework.

Canada has a narrowing window to design a reporting system that supports Indigenous sovereignty, investor certainty, regulatory clarity, corporate credibility, and long-term national stability. Achieving this requires beginning not with process, not with participation, and not with engagement — but with rights.

Rights-holder authority is not a dimension of the Canadian context.

It is the foundation of it.

Conclusion: Reclaiming the Architecture of Sustainability Reporting

Canada’s sustainability standards will not earn legitimacy because they mirror ISSB. They will not gain trust because they host advisory circles. They will not succeed because they incorporate inclusive language or adopt reconciliation as an aspiration. They will succeed only if they are built on a structural recognition of Indigenous rights-holder authority — because that is the defining characteristic of the Canadian landscape and the single most material dimension of sustainability risk for countless sectors.

The CSSB’s Strategic Plan introduces an earnest but consequential misstep: substituting inclusion for structure. This is not a rhetorical shortcoming; it is an architectural flaw. And architecture determines everything that follows.

If Canada is to build a sustainability regime that is credible, durable, auditable, investable, and legitimate, it must anchor its standards not in processes of participation but in the authority of Indigenous rights-holders. Anything less risks producing a system that is polite in language, progressive in aesthetics, and fatally misaligned with the realities that shape Canada’s economy, regulatory processes, and future.

Rights-holders, not stakeholders, must be the structural core of Canadian sustainability reporting.

Without them, there is no architecture at all.