ESG Reporting Requirements What Does it Mean for Irish Businesses and Organisations?
In the past three years, ESG initiatives have become a higher priority for businesses. The pandemic, turmoil in Ukraine, stricter regulatory controls, and the obvious effects of climate change have all contributed to the heightened level of urgency surrounding this issue.
While ESG is still a relatively recent topic, businesses and organisations are feeling immense pressure from both national and international entities to improve.
The Climate Action and Low Carbon Development (Amendment) Act (“Climate Act”) was signed into law in July 2021. It commits Ireland to reach specific targets to reduce its greenhouse gas emissions by 2030 and 2050 and provides a framework to reach those targets. The Climate Act significantly amends and strengthens the earlier acts by committing Ireland to achieve net zero emissions by 2050.
What to do about Greenwashing?
Greenwashing undermines the credibility and effectiveness of ESG reporting, making it difficult for investors, consumers, and other stakeholders to assess the true sustainability performance of a company. By introducing more rigorous and standardised reporting requirements under the CSRD, the European Commission aims to promote greater transparency and accountability in corporate sustainability reporting and reduce the risk of greenwashing.
The CSRD (Corporate Sustainability Reporting Directive) is a proposed legislative measure by the European Commission to improve the quality, comparability, and relevance of sustainability reporting by companies in the EU. One of the main objectives of the CSRD is to address the problem of greenwashing, which occurs when companies make false or misleading claims about their environmental, social, and governance (ESG) performance in order to improve their reputation or gain a competitive advantage.
The CSRD has a much-expanded scope and will apply to all large companies and all companies listed on regulated markets (except listed micro-enterprises). Organisations must not only disclose how sustainability issues impact the company but also how the company impacts society and the environment.
The European Commission’s Action Plan for Financing Sustainable Growth directly targets ‘Strengthening sustainability disclosures and accounting for rule-making’ as one of 10 key focus areas. In tandem with the trend towards mandatory ESG reporting, more and more companies are choosing to disclose ESG information to satisfy stakeholder demands voluntarily.
The CSRD obliges companies within the scope to report against common EU reporting standards adopted by the Commission as delegated acts. Companies are likely to start reporting in 2024, based on FY2023 information.
Please see the below table on the factors Companies will need to consider concerning ESG reporting requirements.
The Bottom Line?
On of the key purposes of the CSRD is to curb ‘greenwashing,’ which is an attempt by a company or organisation to mislead the public about its level of positive ESG impact.
Mandating standardised reporting provides for increased comparability in the public domain. This means that organisations can be held accountable by their stakeholders and, in turn, is likely to play a role in procurement processes.
Assessing the impact of climate change and broader ESG impacts on a company’s bottom line has become the remit of the International Financial Reporting Standards (IFRS) Foundation under its recently launched International Sustainability Standards Board (ISSB).
For further information, please get in touch with any member of our ESG team Brendan Ringrose, Cathy McFadden, Rory McDonald and Hannah Judge.