Gemma Donnelly-Cox, Mary-Lee Rhodes, Benn Hogan and Mary Lawlor make the business case for corporate human rights reporting and outline critical issues for businesses to consider.Businesses can impact human rights in every context in which they operate. These impacts can be positive: delivering employment, infrastructure and furthering development. They can also be negative, bringing risks, including forced and child labour, pollution and corruption.Since 1 January 2017, all companies in Ireland to which the Non-Financial Reporting Directive (NFRD) applies have been required to disclose information relating to respect for human rights, including human rights risks and due diligence processes. Over the same period, there has been an increased interest among investment managers, most notably in Europe, in the human rights performance of companies. Furthermore, mandatory human rights due diligence is coming down the tracks. On 29 April, the European Commissioner for Justice, Didier Reynders, announced his intention to bring forward a legislative proposal in 2021 on mandatory human rights and environmental due diligence.It would seem to be in the clear interest of companies to have a human rights policy and to undertake human rights reporting. Richard Karmel, Global Business and Human Rights Partner at Mazars UK, makes this case in saying (in correspondence with the authors): “Reporting on human rights isn’t a compliance area; it is about being authentic and meaningful in disclosing not only the actions that you have taken to address your greatest risk areas (salient risks) but also reporting on how you know this information. Companies shouldn’t view addressing human rights as an internal cost for external benefit; there is huge internal benefit – greater productivity, improved quality of supplies, less staff turnover and absenteeism, and the attraction of new recruits, for example. This is not a cost area, but one of investment and companies are very good at monitoring their return on investment.”However, when we looked at human rights reporting by Irish companies, we found a significant information gap. Very few of the companies we studied in Ireland include human rights performance in the policy statements or company reports they publish, including those prepared under the NFRD. This may be due in part to the limited guidance within the Directive on how companies should report on human rights, including due diligence.We consider here some of the factors driving human rights reporting, what is required in such reporting, and what it looks like when companies do it well.The UN Guiding Principles and the Irish national planIn December 2011, the United Nations Human Rights Council unanimously adopted the Guiding Principles on Business and Human Rights (UNGPs). These principles were the first agreed statement by UN member states following 40 years of attempts to clarify the relationship between business and human rights. Embedded in the UNGPs is the three-pillar ‘Protect, Respect and Remedy Framework’, which sets out the duties of states to protect human rights, and the responsibilities of businesses to respect human rights and remedy failures. At a national level, a range of laws and ‘national action plans’ (NAPs) were created by member states seeking to embed these principles in company law and practice.Ireland’s NAP, published in 2017, recognises the need to, among other things, “encourage” companies to “develop human rights-focused policies and reporting initiatives”, “conduct appropriate human rights due diligence” and to consider a range of matters regarding access to remedy. An implementation group involving a wide range of stakeholders was established by the Department of Foreign Affairs and Trade to progress the NAP and a baseline assessment of the Irish legislative and regulatory framework was produced.The Corporate Human Rights Benchmark and Irish company performanceIn 2019, the Trinity Centre for Social Innovation published Irish Business and Human Rights: Benchmarking Compliance with the UN Guiding Principles. Mark Kennedy, Managing Partner at Mazars Ireland, has described the report as “a first and important assessment of how companies are dealing with what is a vitally important business issue”. We reported on the results of our pilot study in which we applied the benchmarking methodology developed by the UK-based Corporate Human Rights Benchmark (CHRB). The CHRB conducts an annual assessment of 200 of the world’s largest publicly traded companies on a set of human rights indicators. The indicators consider:Commitments: what commitments does a company make to respect human rights, engage with stakeholders and remedy shortcomings?Responsibility, resources, and due diligence: what steps does a company take to embed responsibility and resources for day-to-day human rights, and to establish a due diligence process that encompasses:identifying human rights risks; assessing them; taking appropriate action on the assessed risks; and tracking what happens after action by monitoring and evaluating their effectiveness?Grievance mechanisms, remedy and learning: what grievance mechanisms are established for staff and external stakeholders? How are adverse impacts remedied, and how are the lessons learned incorporated?Our report applied these indicators to analyse human rights policies and reporting in 22 Irish companies that have international operations. Our source materials for the study were the companies’ publicly available information, as listed in Figure 1.We found that, by and large, the Irish companies in our study are not reporting fully or systematically, and therefore are failing to make their human rights performance visible. No company disclosed a human rights due diligence process, and no company had a publicly reported formal commitment to remedy adverse impacts caused by it to individuals, workers or communities.Where companies are reporting, what does an ‘exemplar’ look like? Adidas AG was ranked first in the 2019 global CHRB (see corporatebenchmark.org). Bill Anderson, Vice President, Global Social and Environmental Affairs at Adidas notes (in correspondence with the authors) that excellence requires transparency about human rights failures as well as successes: “John Ruggie, the author of the UNGP, offered a simple but powerful message to business: in order to meet societal expectations, businesses must both know, and show, that they are respecting human rights. Building policies and due diligence systems on human rights is only half the journey. If a company is to be accountable for its actions and decisions, it must strive for transparency. This can start with small steps, the publication of a statement and a commitment to uphold rights and in time, lead to more dedicated reporting measures on issues and remedies. It is always easy to present the good one is doing, but much harder to account for the negative impacts a company’s operations may have on people’s lives.”Human rights reporting is here to stayWhile few companies in our sample of 20 Irish companies reported systematically on human rights, and despite an apparent lack of awareness among them of the UNGP, and a lack of explicit compliance, our view is that awareness of the requirement to report is slowly gaining strength in Ireland. It makes business sense to know how to report and how to address areas that indicate less than ideal human rights performance.Companies reporting under the NFRD are likely to face a shifting environment in the coming years. The European Commission is currently conducting a review of the NFRD, with a proposal expected in Q4 of this year. As mentioned above, the EU is committed to bringing forward legislation on mandatory human rights and environmental due diligence in 2021.Companies that get the basics right now by implementing policies and due diligence to prevent human rights abuses, instigating appropriate systems to remedy harms caused, and communicating their actions through non-financial reporting mechanisms will be well-placed to respond to this evolving regulatory landscape.We continue to benchmark Irish companies and in autumn 2020, will report on an expanded sample. We hope that benchmarking in Ireland will contribute to the impetus for improved corporate human rights reporting. Richard Karmel shares this view, noting that benchmarking “has an important role to play in the world of human rights reporting; after all, few companies want to be seen in the bottom quartile. Naturally, human rights benchmarks should stimulate a race to the top and ultimately encourage better treatment by business of those who are most vulnerable in our supply chains.”Gemma Donnelly-Cox, Mary-Lee Rhodes, Benn Hogan and Mary Lawlor represent the Centre for Social Innovation at Trinity Business School.

  A4S (Accounting for Sustainability) has launched a new guide for finance professionals on Management Information. The guide has been created to support finance professionals to develop and integrate the information needed to respond to social and environmental risk and opportunity into core management information processes. Integrating environmental and social considerations into management information processes can: Capture what’s important to stakeholders Provide insight to decision makers Safeguard and enhance financial performance for the present and the future The guide sets out practical steps that finance teams can take to develop an effective management information framework, build a robust control environment and produce insightful management reporting. It also contains illustrative examples to bring the guidance to life and show the benefits to different types of companies. “We are broadening the definition of what good management information is to capture the things that are important to stakeholders. By going beyond the traditional financial metrics, we will also safeguard and enhance our financials.” Clifford Abrahams, Chief Financial Officer, ABN AMRO "This guide provides lots of practical advice and should prove an invaluable resource to anyone who wants to help their organization provide the right information at the right time to the decision makers." Roger Seabrook, Vice President, Finance, Marketing and Sustainability, Unilever A4S is Prince Charles’ Accounting for Sustainability Project and was established in 2004 with the aim of promoting sustainable decision-making in business. On February 25, 2020, Chartered Accountants Ireland today became a signatory, along with 13 other accounting bodies worldwide to a call to action on climate change issued by A4S.     

The Corporate Insolvency and Governance Act 2020 (the ‘Act’) received Royal Assent on 25 June 2020. It makes some significant changes to UK insolvency legislation and provides for new measures for companies in financial difficulty due to the economic impact of COVID-19. The Act also makes temporary changes to law relating to the governance and regulation of companies and other entities. This article highlights some of the key changes affecting corporate governance of an entity.  A summary of the key corporate governance aspects of the Act is also available here. The measures introduced in the Act were welcomed by Chartered Accountants Ireland who believe they will provide some confidence to struggling, but viable, businesses as they cope with the array of challenges presented by the Covid-19 pandemic crisis. Speed and impact were of the essence and the UK House of Commons, Department for Business, Energy and Industrial Strategy (BEIS) and the Insolvency Service must be commended on giving this emergency legislation priority. Some of the key changes affecting corporate governance are highlighted as follows: 1. Filing deadlines Missing a deadline for filing prescribed documents with Companies House automatically results in financial penalties and, in some cases, can result in criminal sanctions for the directors or the company being struck off the register of companies. However, the Act officially legislates for temporary extensions of these deadlines and enables the Secretary of State to make further extensions if necessary. The extended period for filing prescribed documents, including updates to the People with Significant Control (PSC) register in relation to beneficial ownership, must not exceed: 42* days, in a case where the existing period is 21 days or fewer, and 12* months, in a case where the existing period is 3, 6 or 9 months. Companies House website states that eligible companies do not need to apply for an extension and that they will update their filing deadline automatically. 2. Annual General Meetings (AGMs): Where companies are required to hold general meetings between 26 March 2020 and 30 September 2020*, they will have greater flexibility in how they hold such meetings, irrespective of the provisions of their company’s constitution and the Companies Act 2006. Companies that were due to hold their AGM within this period can delay it until 30 September 2020, without being in breach of Companies Act 2006 or the company’s constitution. To afford companies greater flexibility in how they hold their AGMs, while also conscious of the varying information and communication technology (ICT) capabilities, the Act includes temporary measures that: Removes obligation for meeting to be held at any particular place. Removes obligation for a quorum of those participating in the meeting to be together at the same place. Removes the right of a member/shareholder to attend in person, participate other than by voting, or to vote by particular means. Enables the meeting to be held, and any votes to be cast, by electronic means or any other means. 3. Wrongful trading: The Act temporarily suspend parts of insolvency law to support directors to continue trading through to 30 September 2020* without the threat of personal liability for wrongful trading and to protect companies from creditor action. It requires the High Court to assume that a director, in making any contribution that it is proper for a person to make, is not responsible for any worsening of the financial position of the company, or its creditors, that occurs during the period from 1 March 2020 to 30 September 2020*. It should be noted that this measure does not in any way excuse a Director from the offence of fraudulent trading (S993, Companies Act 2006) nor any other wrongdoing. Directors, whether organisation is in distress or not, are expected to exercise appropriate risk management and required to make decisions that promote the success of the company. In doing so, S172, Companies Act 2006 requires Directors to have regard to a wide range of factors including: the long-term consequence of decisions as well as the interests of the employees; the relationships with suppliers and customers; the impact of the decision on community and environment; the desirability of maintaining a reputation for high standards of business conduct; the need to act fairly as between members of the company, as well as introducing wider corporate social responsibility into a director’s decision-making process. Chartered Accountants Ireland jointly hosted a webinar on 30 June 2020 where we heard from key speakers Nick Bates (Head of corporate transparency, BEIS), Peter Swabey (Policy and Research Director, Chartered Governance Institute) and Mike Metcalf (Chair of ICAEW Company Law Panel and Partner, KPMG). The event can be viewed here. Níall Fitzgerald FCA Head of Ethics and Governance, Chartered Accountants Ireland * The Corporate Insolvency and Governance Act 2020 enables further changes to duration of certain temporary provisions to be made either by regulation or the Secretary of State.

Entries open until 11 September 2020 The Good Governance Awards recognises and encourages adherence to good governance by charities and other non-profit organisations in Ireland. The 2020 Awards are now open for entries for both the Annual Report Award and the Governance Initiative Award on www.goodgovernanceawards.ie Institute involvement The Institute are proudly supporting the awards for the third year. It is important to recognise good governance and more importantly to recognise the people that are responsible for putting it into practice. Members of our profession are held in high regard by charity and non-profit organisations and many are involved in the sector by direct employment, volunteering, accepting trustee appointments, acting as advisors, accountants, or auditors. Two Award Types Annual Reports: This award recognises annual reports that effectively tell the story of the non-profits its activities, impact, finances and demonstrates adherence to good governance practice.   Governance Improvement Initiative: This award recognises initiatives that have been taken in the last 12 months to improve the quality of the non-profit’s governance. Four great reasons to enter Open for non-profits of all sizes: There are six entry categories ranging from small (annual turnover of less than €50,000) to the very large (turnover of over €15 million).The push this year is for getting smaller non-profits involved Entries reviewed by a first class assessment and judging panel: There is a panel of over 60 assessors and judges and seven accountancy firms who bring great expertise and experience who will review each entry and provide valuable feedback and insight to assist in enhancing each submitting organisation’s governance Organisation reputation is enhanced with stakeholders: Entering the Good Governance Awards demonstrates commitment to adhering to good governance practice and transparency. It also shows willingness to be assessed and receive feedback on how governance can be enhanced Boost team morale and gain valuable PR opportunities: Being shortlisted for a Good Governance Award recognises hard work to adhere to good governance practice. Winning an award boosts credibility and increases awareness of the organisation which can help convince even more people that it is a cause worth supporting. New award category for 2020: very small non profits In this year's Good Governance Awards, there is a new entry category for very small non-profits (annual turnover less than €50,000). As an added incentive to encourage smaller non-profits to enter for the Annual Report award, thanks to the Community Foundation of Ireland, those shortlisted in this category will receive €1,000 with the overall winner receiving an additional €1,000. For more details, see www.goodgovernance.ie Institute supports and services for those involved in the Charity/Non-profit sector (‘the Sector’) The following are examples of key supports and services the Institute have in place for members: Dedicated Charities and Non-profit members group (ROI), co-chaired by Paula Nyland FCA and Tony Ward FCA – See page 50 of 2019 Annual Report) Dedicated Charities and Non-profit members group (NI), chaired by Dr Rosemary Peters Gallagher OBE – See page 23 of 2019 Ulster Society Annual Report) Concise Guide of Ethics and Governance for the charity and not-for-profit sector Northern Ireland: Notification facility for Charities/Non-profit boards seeking expressions of interest from Chartered Accountants to join their board. Click for list of contacts Procedures for Quality Audit for Charities – ROI Procedures for Quality Audit for Charities – NI Online courses relevant to Charity and non-profit sector (click and search) e.g. Auditing and Accounting for Charities – ROI Also, events run by District Societies (Western, Cork, Ulster, Mid West, North West, Leinster, London, Australia, United States) Northern Ireland:  Organise webinars on relevant topics for sector (click and search) Technical representations to standard setters, government and regulators on matters also affecting the Sector, based on inhouse technical research and expert input from members technical committees Technical Releases and Technical Alerts providing additional information on technical matters also affecting the Sector Dedicated Governance Resource Centre an Ethics Resource Centre containing updates and other resources on matters also relevant to the Sector Níall Fitzgerald - Head of Ethics and Governance      

In his latest short interview for the Governance Webcast Series, Níall Fitzgerald talks to CEO of Irish Residential Properties REIT Plc, Margaret Sweeney FCA, and discusses: The future of the Irish residential property market The impact of the Covid-19 crisis on how we work and board decision-making Perspectives on sustainability and the socially responsible measures organisations are taking.    

The latest edition of EY's Renewable Energy Country Attractiveness Index (RECAI) considers the potential impact of the COVID-19 pandemic and looks at the resilience of countries in the index. It sees COVID-19 having a short to mid-term impact, but the long-term drivers for investment in renewables remain strong, making the sector a safer haven for investment.   Ireland is now 12th out of 40 countries in the latest Renewable Energy Country Attractiveness index, which ranks the top 40 countries in the world on the attractiveness of their renewable energy investment and deployment opportunities to those investing in renewable energy activity and projects. The EY report highlights how climate change and other environmental, social and governance (ESG) issues are being increasingly recognised as key determinants of a company’s future value creation potential. Institutional investors are demanding that businesses not only deliver financial performance, but also show how they make a positive contribution to society. As a result, companies are having to re-evaluate their corporate strategies to curb their emissions, enhance their governance, and improve their climate-related disclosures. This has resulted in institutional investors increasing the capital they are allocating to renewable energy infrastructure as a means to hedge their climate exposure, according to EY's analysis. As Anthony O'Rouke,  EY Ireland Government and Infrastructure Advisory Director, says: "Investors are looking for reassurance that companies understand this link between the non-financial performance of the business and the successful delivery of the business strategy.” EY anticipates a growth in Ireland’s renewable energy capacity by 30% over the next three years. This will contribute to Ireland’s efforts to reach its 70% renewable energy target by 2030 across the solar and onshore/offshore wind sectors.  Despite the global slowdown caused by COVID-19, the renewable energy sector is expected to bounce back quickly as the long-term drivers for investment remain strong, according to the 55th EY Renewable Energy Country Attractiveness Index (RECAI).  Ireland’s strong performance this year is also attributed to the significant 46% reduction in the use of coal and oil in generating power since 2015. Read the full report here: ey.com/recai

Building a culture of inclusion and belonging is now more important than ever. Rachel Power shares her insights from PwC’s experience thus far. Not that long ago, we were all clear on our plans. Our strategies were set, with events and meetings scheduled in the diversity and inclusion calendar for the year ahead. All the behaviours and operating norms we took for granted changed in what seemed like the flick of a switch. COVID-19 has led to new terms in the diversity and inclusion (D&I) world, which we would not have understood just a few months ago. The main one at the heart of PwC’s strategy is ‘inclusive distancing’ – how can we all be more inclusive while maintaining a distance that is outside the norm. Another element that is core to our current D&I work is just how little has changed. While our medium may differ, the core elements of our strategy remain the same around inclusion, wellness and flexibility and focusing on tools and training for the future. Our long-standing D&I values have helped us navigate through this crisis, and this was supported in no small part by our investment in technology.  More important than ever Several items already high on our strategic agenda have helped us navigate and transition relatively seamlessly into this new remote working world, in which building on our culture of inclusion and belonging is more important than ever. Our D&I focus was on three areas before the arrival of COVID-19, and all three ring true during this time: Nurturing an environment of inclusion and belonging; Living our values, putting wellness and flexibility at the core; and Leveraging tools and training for the future. We set these objectives before the pandemic, but they are still as relevant now as ever. Transforming our workforce and the way we work requires us to have diverse, talented people from different backgrounds; people who have different experiences and who bring innovation, creativity, and fresh perspectives. No one size fits all This new era of working remotely – or smart working, as we call it – brings challenges that can present in different ways for our diverse team. We are all different, with distinct personal circumstances, and deal with problems in unique ways. Some people are balancing work and caring for their family; others may be away from their family and friends. Some have family on the front line, relatives who have been sick, or family members who may not be well. A one-size approach certainly does not fit all. While many of us worked flexibly before the crisis, our approach to flexibility has been taken to a new level. Arrangements that worked in the past are in many cases no longer viable, as many of our people now balance many things including work. The new world of flexible working may, therefore, involve doing some work very early and then taking a couple of hours during the day for caring responsibilities or exercise, before returning to work later. It is all about balance and finding ways to make it work. Again, this comes back to having inclusive and values-based leaders and ensuring that the right conversations happen so that the solutions work for everyone. Focus on wellbeing Focusing on the wellbeing of our people, particularly to support those struggling with a diverse range of circumstances, has been at the top of our priority list at PwC. Through our Be Well, Work Well programme, we provide a variety of supports including one-to-one psychologist sessions, parenting, nutrition and fitness classes, and we continue to host regular wellbeing seminars. Communicating regularly with our people, and in different ways, has been vital. From transforming our intranet into a ‘smart hub for smart working’ to regular emails, leadership briefings and FAQs, we continue to foster a culture of inclusion. There is undoubtedly more to do as the end to this pandemic is far from sight. However, our values, strategic direction, and technology will help steer us through this and ultimately strengthen D&I throughout our firm and beyond. Rachel Power is Diversity & Inclusion Senior Manager at PwC Ireland.

Caroline Pope considers the UN’s Sustainable Development Goals and their relevance as a framework to rebuild resilient companies as the economy emerges from the COVID-19 crisis. At present, the full impact of COVID-19 on the Irish and global economy is not yet clear. However, the ability of society to work together towards a common goal has been recognised and should form part of the recovery. In 2015, the United Nations Sustainable Development Goals (UN SDGs) were adopted by all member states. Their purpose is to coordinate efforts to improve human lives, protect the environment, and ensure the sustainable development of our societies. Sustainability may not be the most obvious lens through which one should assess the abnormal events of recent months. Yet trends are emerging, which may make business leaders think more deeply about sustainability in the context of their organisations. Below, we outline three of these factors. The UN SDGs drive increased resilience. There is growing evidence that businesses that have already aligned their strategy with the UN SDGs are more resilient to an economic shock. The UN SDGs are not going away. The future business landscape is uncertain, but increasing evidence points to an operating environment that favours businesses that align with the principles of sustainability. A business strategy aligned with the UN SDGs can create value. Aligning a business strategy with the UN SDGs may seem like a daunting process, but there are well-understood methodologies that can be applied. The UN SDGs drive increased resilience  Businesses that align their core strategy with the UN SDGs (also known as ‘sustainable businesses’) take a broader, stakeholder-based view of their activities. As a result, these businesses tend to demonstrate a deeper understanding of oft-overlooked or under-valued areas of their companies, such as supply chains, and their degree of interconnectedness with society in general. This broader understanding, which is the result of UN SDG alignment, can position them to respond more rapidly to the threats that COVID-19 represents to their stakeholders. In particular, supply chains are coming under increasing pressure due to the global nature of COVID-19, combined with the increasingly international scope of business. The advice from supply chain experts such as Richard Wilding OBE, Professor of Supply Chain Strategy at Cranfield University, is to “urgently review their supply chain to find out how exposed they are… it’s still common for businesses to just deal with a central HQ of a supplier and not know what route the supplies they need are taking”. Full alignment with UN SDG 10, Reduced Inequalities, will drive businesses towards total supply chain transparency; they will know each factory where their inputs are processed and all the intermediate steps along the way. These businesses are in a much better position than those rushing to uncover their true supply chain risks amid a crisis. This seemingly serendipitous point illustrates a key feature of SDG alignment: it is consistent with well-managed operations. Alignment with SDGs has also made companies more resilient. For example, there has been a paradigm shift for many businesses since COVID-19 emerged as they have sought to facilitate organisation-wide remote-working to prevent activity grinding to a halt. Contrast this with sustainable businesses such as Vodafone who, in recent years, saw remote working as a means of advancing Goal 5, Gender Equality, and have already invested in the infrastructure to facilitate this. Finally, sustainable businesses enjoyed a higher degree of investor confidence before the economy shut down and seem to continue to enjoy a higher degree of investor confidence as the shut-down continues. Figures published by Funds Europe suggest that values of European sustainable funds dropped by 10.6%, compared with the “overall European fund universe” which declined by 16.2%. Robeco, the global asset manager, has also found a positive relationship between lower credit risk and sector alignment with SDGs. The RobecoSAM Global SDG Credits strategy outperformed the Bloomberg Barclays Global Aggregate Corporate Index by +90 basis points in March of this year. To compound these data points, the UN Principles for Responsible Investment (UN PRI) membership group recommends that all signatories (which represents $86.3 trillion in assets under management) support sustainable companies through the crisis in the interest of public health and long-term economic performance, even if that limits short-term returns. The UN SDGs are not going away The existential threat of COVID-19 has brought into sharp focus other threats of a similar scale, such as climate change and social inequality. The global response to COVID-19 has shown that there is a willingness to embrace long-term changes and drive towards a common goal. This sense of spirit will likely fade as the crisis abates, but it is unlikely to disappear totally. Companies that genuinely embedded purpose before March 2020 are likely to experience favourable trade winds from an upturn due to the opportunity for reflection (and social media opinions) by customers and employees during the lockdown. As societies get over the initial shock of the pandemic and the focus shifts from lockdown to restart, the critical question is how to put the economy and society on a trajectory that lasts. There is a growing consensus in Europe, for example, that the required economic stimulus will have a green hue. In April, the Government of Ireland indicated that it fully supports the EU Green Deal proposed as the central tenet of an economic recovery plan, aligning with 16 other member states. The EU Green Deal provides a roadmap towards a clean, circular economy, restoring biodiversity and cutting pollution. The proposed EU direction of travel is very much aligned with the UN SDGs and this political environment should create an opportunity for businesses that choose to swim with the current. Investors, such as Blackrock, have signalled that regardless of the COVID-19 pandemic, they still expect companies to continue with their ESG (environmental, social and governance) targets. Blackrock has pledged to vote against the directors and boards of companies that fail to meet its expectations to manage environmental risk in 2020 and called for companies to report in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework. The asset manager expects companies to publicly report how sustainability risks and opportunities are integrated into business strategy. In an Irish context, the UN SDG Index report, released in 2019, shows significant challenges to Ireland meeting several key metrics, including SDG 12 (Responsible Consumption and Production), SDG 13 (Climate Action) and SDG 17 (Partnerships). This is due in part to an absence of information, but also reflects our known challenges on climate action. This was a negative result for Ireland, and there will likely be an emphasis from the Government on these three SDGs as part of the recovery package. While we are all preparing for a change in dialogue and a focus on climate action once the new government is formed, SDG 12 (which focuses on responsible consumption and production) presents a similarly large opportunity. In particular, companies that have already implemented a more circular model for resource management and waste streams are benefiting from a first-mover advantage in the circular economy. A business strategy aligned to the SDGs can create value  Given the significant opportunities and risks associated with the UN SDGs, companies that excel at identifying and incorporating these issues into their strategy enjoy a competitive advantage in the marketplace and among institutional investors. It is increasingly clear that sustainability and return on investment are connected. To help boards understand and shape the total impact of a company’s strategy and operations externally – on the environment, the company’s consumers and employees, the communities in which it operates, and other stakeholders – and internally on the company’s performance, I suggest a five-part framework (refer to Table 2). This framework for board oversight recognises that creating long-term value increasingly requires companies to understand the impact of their strategies on key stakeholders – investors, employees, customers, and communities – as well as on the natural resources and supply chains that the company relies on, all of which are fundamental elements of the SDGs. An integrated commercial strategy encourages companies and boards to widen their aperture for a fuller view of sustainability, strategy, and long-term performance. Wherever the company is on the sustainability journey, this framework can help to drive a robust conversation about what sustainability risks and opportunities may impact the company’s key stakeholders, corporate strategy, and long-term performance, and how they will be addressed. Aligning with SDGs will help businesses identify risks and opportunities that may have been omitted from previous analysis and will also provide them with a better understanding of their stakeholders and their relevance to those stakeholders. By communicating their progress towards SDGs, companies can enhance their reputation both internally (with employees) and externally (with the broader public); this transparency contributes to enhanced trust and confidence in the companies’ operations and contribution to society. The improved trust may then result in more robust and sustainable economic, environmental, and social performance. Companies that identify and incorporate these issues into their strategy will stand apart as forward-thinking organisations, future-proofed, well-managed, and able to recover quickest in a post-COVID-19 environment. In conclusion The changes we have experienced in the first months of this year will have a devastating impact on the global economy, but this in no way diminishes the relevance of the UN SDGs despite being conceived in a more stable environment. Businesses that have already aligned their strategies and practices have shown enhanced resilience – sometimes in unexpected ways. In the absence of a crystal ball, it is hard to predict the next six months, let alone the next decade. Still, there are many indicators that the operating environment will be even more favourable to businesses that effectively integrate sustainability into their core business strategy. Organisations that rise to these challenges and show leadership will be rewarded by their stakeholders and gain access to new opportunities. Those that fail to act may put their margins and even their business models at risk.   Caroline Pope is Associate Director at KPMG Sustainable Futures, a cross-functional team of experts who help corporate and public sector clients plan and execute programmes addressing environmental, social and governance topics, decarbonisation, and long-term value creation.

Richard Sheath and Susan Stenson share 12 practical tips to help your virtual board meetings operate smoothly in times of crisis. December seems a long time ago.  Back then, as a team of board evaluators,  we set out to imagine how boards would work by 2030. Suddenly the virtual board meetings we perceived as futuristic have arrived, forced on us all by the global COVID-19 pandemic. As boards strive to respond to the many new challenges, board and committee meetings must now work better than ever. And given the unprecedented breadth and difficulty of the issues presented, excellent communication, constructive discussion, and clear-cut decisions are vital. Postponing decisions is not an option, and confusing outcomes will undoubtedly be unhelpful – potentially destructive. Yet these better-than-ever meetings have to be conducted remotely, working with a management team that is likely similarly dispersed. Because we are in contact with many boards that are now meeting virtually, we see what works well and where things go wrong. Based on what we have learnt, here are some practical tips to help your virtual board meetings work well. 1. Get to the point Work even harder with the executive team to ensure that all briefings and presentations are to the point – the point being what the board needs to hear about, now. That means the board and committee chairs going through the possible meeting business and cutting it back to what is essential – whether it is crisis-related or business as usual matters that cannot be postponed. Then, help managers understand that a virtual meeting requires precise points communicated clearly in literally just a few minutes. 2. Set the scene succinctly Ensure that the pre-read papers are clear in terms of what is being asked of the board and that the “overview” page works in the way it should. This overview should include critical background information; a quick reminder of the story so far; the risks; what the board needs to discuss; what is proposed – and all on a couple of pages at most with effective signposting to any essential detail. 3. Draft your agenda from scratch Be extra vigilant in preparing the agenda. Stick to the essential discussion points and ask yourself: can some items be decided by written resolution instead, put in a ‘consent agenda’, or postponed? Start with a clean sheet; do not merely roll-over the usual agenda with some tweaks because that is unlikely to be enough to break the mould. Be clear about the outcomes you need to achieve, and how best to meet them. 4. Prioritise and pace Keep the meeting focused and put what really matters at the top of the agenda. Maintaining concentration for more than a couple of hours is going to be even more difficult than usual, so the essential items need to be addressed first. If there is not enough time, split the meeting into two or three blocks with long-ish breaks in between – long enough to stretch your legs, get some air, and return refreshed. 5. Choose video over audio  Insist on video participation to the greatest extent possible, as it makes a big difference – especially as those on audio-only are often forgotten. That means testing beforehand with each participant, with a co-ordinator (probably from the company secretariat) becoming the expert in how to make your chosen system work. Ask everybody to join a bit early so false starts and broken connections do not sap time and patience once the meeting has officially started. 6. Manage the transitions Sharing documents on-screen can work well on a video call, but the operator needs to know how to do it – and have rehearsed, if possible, knowing what to highlight and where to go. Practise switching between people and a document and back again before the meeting. Switching back is essential – you must get talking heads back on the screen if you want the discussion to flow. 7. Explain the meeting etiquette Establish and communicate the meeting etiquette. That might include the following: mute when not speaking; turn off your video if you need to be interrupted; how to intervene, and the hand signals to do so; how to vote where voting will be required. A chair who typically takes a quick look around the table to assess consensus may need to make this more explicit (for instance, asking everyone to give a thumbs-up). 8. Facilitate input The chair must call on individual directors for their input, rather than leaving them to find their own opportunities to contribute. More frequent stops to take the temperature of the meeting are also needed. 9. Encourage down-time Have comfort breaks at least as often as you would during an in-person meeting. Allow some time during the breaks for chit-chat; social engagement is more important than ever. 10. Stay security conscious Keep an eye on meeting your organisation’s security requirements. Ensure that the Company Secretary monitors who is on the line and remind participants who are not alone in their home offices that they need to use headphones and speak no louder than necessary. In any shared facility, there is a risk that someone may overhear – even through a wall. Screens must be shielded too. This may seem obvious, but we do see and hear things going wrong, resulting in embarrassment at best or a severe breach at worst. 11. Meet your legal obligations Check the legal formalities for your meeting (quorum and location requirements, for example). Take a roll-call at the beginning and if you are tight on numbers, keep an eagle eye on the quorum in case somebody falls off the call. 12. Gather feedback Set aside five to ten minutes at the end of the meeting to ask people how the meeting went and to gather ideas for future virtual board meetings. Alternatively, you can use a short questionnaire if time is short. A checklist for virtual board meetings Here is a list to help you consider the elements of a productive virtual meeting. Be extra vigilant when preparing the agenda and pre-read material Stick to the essential discussions and focus the agenda. Eliminate long verbal presentations. Make sure the pre-read papers are clear on what is being asked of the board. Check the legal formalities for your meeting (quorum requirements, location, etc.)   Check the technical logistics Include a video link and encourage all participants to be in ‘video on’ mode. Ask all participants to join five to ten minutes before the start of the meeting. Test the document sharing facility, if needed.   Set the ground rules Instruct participants to wear headphones and prepare their meeting environment (lighting, camera angle, wi-fi connection, security/confidentiality, etc.) Instruct participants to use mute, turn off video if leaving the room, and take calls elsewhere. Take a roll-call and ensure that everyone knows who is present and who has joined. Secure the meeting – check all joiners and flag confidentiality continually. Set out the rules on how to intervene. Define the use of the chat function or oral questions to facilitate questioning. Work out a mechanism for voting and indicating agreement or dissent.   For the chair Call on individual directors more for their inputs. Stop periodically to take the temperature of the meeting. Include comfort breaks and encourage participants to interact socially during this time. Encourage participants to be respectful, present, and engaged if bad behaviour becomes apparent. Check with participants after the meeting to gauge their experience. Richard Sheath is a Director at Independent Audit Limited, the board evaluators. Susan Stenson is a Director at Independent Audit Limited, the board evaluators.

Far from being ‘nice to haves’, diversity and inclusion remain vital during the COVID-19 crisis and could be even more important in its aftermath, writes Rachel Hussey. Our collective experience during the COVID-19 pandemic has given rise to a considerable amount of discussion and analysis about how this experience will ultimately change the way we live – or want to live – when the crisis subsides. The pandemic, and our response to it, has called into question many aspects of life we took for granted. The world of work has been turned on its head. The most obvious and immediate impact is that most of us are working from home (or, more accurately, at home during a crisis trying to work). The pandemic has caused us to examine the essence of the ‘workplace’ and we are trying to imagine how the future of work during, and after, COVID-19 might look. As the pandemic begins to ease and we begin to return to our former workplaces for at least some of the time, flexibility will be more important than ever. Parents will have to manage childcare and work, possibly in the absence of schools and crèches. Traditional work practices may no longer be possible. We will need to have flexibility around work organisation, meeting times and general time planning, and allow people to control how they plan their day. This will mean not only continuing with a significant element of working from home, but also introducing genuinely agile working practices in the future. The former world of work is probably changed forever, and we cannot – and should not – seek simply to recreate it. Now we have reached the end of the beginning, the focus on diversity and inclusion has begun to re-emerge with some interesting new perspectives. Many organisations are looking at cost-cutting measures and there is a risk that diversity initiatives might be regarded as non-essential. I believe that inclusion and diversity are as – if not more – important during this crisis as they were before and will continue to be as we emerge from the current crisis. Organisations that had a strong focus on inclusion and diversity before the crisis were better equipped to deal with it when it happened. The starkest example of this is that organisations and firms that had agile working policies and practices in place, which mostly resulted from strategies around inclusion and diversity, were best placed to make the transition to working from home. Firms that resisted flexible working took longer to get set-up remotely and back to business. The last couple of months have demonstrated beyond doubt that it is possible to run a professional services firm in a dispersed way. Some partners and other leaders who may never have worked from home are now forced to do so and realise that people can be as (or even more) productive working remotely. The COVID-19 crisis has busted the myth that agile working does not work. Of interest too are the leadership traits that have been important in this crisis. They include compassion, empathy, humility, and putting other people ahead of yourself. These traits tend to be associated with women, though they are of course found in many men too, and they are becoming more highly valued at this time. Inclusive leadership is particularly essential. Managing teams remotely involves being alive to team dynamics and being mindful of people on teams who might be isolated or feel excluded. Even on video conferencing calls, inclusive leaders will try to include each team member in the discussion. Making people feel included will help maintain productivity and motivation. It has been established beyond doubt that one of the clear business benefits of diverse teams is increased innovation. Now more than ever, companies and firms need to innovate to respond to this crisis. It is, therefore, critical to focus on team composition to ensure that they have the right balance of experience, perspective, and cognitive diversity to nurture innovation and generate the best business results possible. Specific organisations recently reiterated their commitment to diversity and inclusion publicly. At some stage, and let us hope that it will be sooner rather than later, we will emerge from this crisis and companies and firms will again be competing for the top performers. Companies and firms that stay the course and keep a sharp focus on diversity and inclusion during this crisis will be best placed to attract that talent. Once the crisis is over, companies and firms that do not stay the course will have some serious catching up to do. Rachel Hussey is Chair of 30% Club Ireland and a Partner at Arthur Cox.

What does ISA 570 (Ireland) Going Concern (Revised) mean for directors and statutory auditors? Noreen O’Halloran explains. Trust matters. The importance of accurate and reliable corporate information, especially information subject to external audit, is fundamental to the confidence of shareholders, investors, and the wider public. Recent corporate failures, particularly in the UK, severely affected that confidence and unsurprisingly led to public concern over whether more could have been done to prevent these failures from occurring. The collapse of several high-profile companies prompted the UK government and regulators to conclude that radical action was necessary to restore public trust and confidence in audit quality and the effectiveness of the audit in the UK. To identify the required changes, the UK government commissioned several very significant reports on the regulation and operation of statutory audits in the UK. These reports included Sir John Kingman’s Independent Review of the Financial Reporting Council (FRC), which stated that it was time for the FRC “to build a new house”. The report proposed that the FRC be replaced with a new independent statutory regulator with a clear focus on shareholders, investors and the wider public, and the power and support to regulate appropriately. Separately, the Competition and Markets Authority (CMA) conducted a study of the statutory audit market and provided its recommendations thereon. Sir Donald Brydon also carried out an independent review of the quality and effectiveness of the audit. The FRC has witnessed examples of audit weakness through its inspection and enforcement work and believes that a revision of the International Standards on Auditing (ISAs) UK will assist in restoring public trust. One of the most noteworthy of these revised standards is ISA (UK) 570 Going Concern (Revised). The standard sets out significant changes from the previous standard, with the aim of strengthening investor confidence. The Irish Auditing and Accounting Supervisory Authority’s (IAASA) stated policy concerning standard-setting in the Republic of Ireland is to follow the FRC standards, amending where there is a conflict with Irish or EU law. IAASA has therefore released ISA 570 (Ireland) Going Concern (Revised), which is largely based on the FRC’s version. This standard is effective for statutory audits of Irish entities, like the FRC version, for periods commencing on or after 15 December 2019. The standard addresses the auditor’s responsibility in the audit of the financial statements relating to going concern and requires the auditor to include an independent assessment of the entity’s ability to continue as a going concern. Nevertheless, attention must first be given to what the directors will be expected to provide to the auditor. The responsibility for making the going concern assessment of an entity has, and always will, rest with the directors. But going forward, directors must be prepared for increased scrutiny and challenge from the entity’s auditor in respect of their assessment of going concern, which may result in more work for the directors of an entity when making and supporting their going concern assessment. Directors’ assessment Where directors have not performed a going concern assessment, the auditor must request that one be completed and shared with the auditor. If the directors cannot, or will not, make an assessment, the auditor must consider whether there is a significant deficiency in the entity’s internal control system. The inability or unwillingness to prepare a going concern assessment will result in a limitation of scope in terms of the evidence available to the auditor. This limitation is likely to result in a qualified opinion in the auditor’s report. The assessment made by the directors should take into consideration both the environment in which the entity operates and its internal systems and controls. The auditor will expect the directors to be able to show how developments in the industry or economic environment, along with internal operations, current and future business risks, and any future or prospective plans, have been taken into consideration to assess going concern. The directors’ assessment should explain how alternative methods, assumptions and data were considered. The directors of smaller companies or companies that may not have previously performed, or provided the auditor with, such a detailed assessment on going concern must identify the necessary additional steps. A transparent process of internal review and challenge will also be important, as the auditor will need to understand the nature and extent of the entity’s oversight and governance regarding its going concern assessment. The oversight and governance within the entity will influence the auditor’s understanding of the effectiveness of the directors’ assessment of going concern. When the assessment has been delegated to management, the auditor should expect that the directors possess the skills and knowledge to understand the methods used by management, the ability to evaluate the assumptions used, and the authority to challenge management. Entities will need to consider whether changes to their systems of internal control are required. These changes will inevitably lead to increased costs for entities when making their going concern assessment, perhaps disproportionately so for smaller entities. Nevertheless, the UK market has demanded more reliable corporate information and IAASA believes that the public interest in Ireland is best served by adopting the FRC’s standard with minimal change. The standard will also require increased work effort from the auditor: As part of the auditor’s risk assessment procedures, the auditor must design procedures that actively look for matters or conditions that may cast significant doubt on the entity’s ability to continue as a going concern; The auditor is required to obtain adequate support from the directors for the going concern assessment including methods, assumptions and sources of data used in the analysis; The auditor will need to evaluate how the directors have determined the relevance and accuracy of the methods and data used and understand whether alternative methods, assumptions and data have been considered; The auditor must maintain professional scepticism and probe the directors when audit evidence obtained suggests that there may be bias or contradictory evidence included in the assessment; and The auditor may perform a retrospective review of previous outcomes and forecasts to assist in measuring the effectiveness of the directors’ process for assessing going concern. Events or conditions not identified by the directors If the auditor identifies events or conditions that may cast doubt on the going concern assessment, and which the directors have not identified, the auditor must understand why the relevant events or conditions were not identified. They must also determine whether there is a significant deficiency in internal controls and perform additional audit procedures regarding the newly identified events and conditions. Audit report implications Shareholders and investors can expect to see a change in the auditor’s report with respect to reporting on going concern. The auditor previously reported by exception as to whether the directors’ use of the going concern basis of accounting was appropriate and whether appropriate disclosures were made. Going forward, the auditor must carry out a process of independent testing and examination on the entity’s assessment of its prospects and conclude based on sufficient and appropriate audit evidence. When the going concern basis is appropriate, the auditor’s report will include a conclusion that the auditor has not identified, either individually or collectively, any events or conditions that result in a material uncertainty that may cast doubt over the entity’s ability to continue as a going concern and that the directors’ use of the going concern basis of accounting is appropriate. Also, for public interest entities and certain other entities, the auditor must make additional disclosures in the auditor’s report over and above those previously required. This includes an explanation as to how the auditor evaluated the directors’ assessment of the entity’s ability to continue as a going concern and, where relevant, key observations arising concerning that evaluation. Conclusion Re-establishing shareholder confidence and trust in the audit is critical. Society wants and expects more from auditors concerning the future prospects of entities. Sir Donald Brydon stated in his Independent Review into the Quality and Effectiveness of Audit that “audit is not broken, but it has lost its way and all the actors in the audit process bear some measure of responsibility”. The regulators are of the view that this new standard will go some way to re-establishing trust in the audit. The intention of the standard is not to create a checklist for directors and auditors. Instead, it is to ensure that the directors and the auditors focus on the prospects of the entity and consider all available information. It will put the directors’ assessment of the entity’s ability to continue as a going concern under increased scrutiny and challenge by auditors. It will also, in some cases, lead to significant additional cost and effort for the directors and their auditors. However, if it can provide the earlier warning signs concerning corporate distress that are envisioned, this can only be of benefit to society.   Noreen O’Halloran ACA is a Director in the Department of Professional Practice  at KPMG.

In his latest interview for the Governance Webcast Series, Níall Fitzgerald talks to recently appointed Chair of Irish Funds Association, Lisa Kealy FCA, to discuss:  •             The impact of the Covid-19 Crisis on the Irish funds industry •             Insights about fund manager and investor activity in recent weeks •             The expected role the Irish funds industry will play in Ireland’s recovery As investors continue to search for yields, in some cases willing to trade liquidity for above average returns, there is evidence the pandemic is driving more interest in Environmental, Social and Corporate Governance (ESG) investing. Ireland may well be on its way to becoming a green hub of investment management with sustainability at the heart of its industry and culture. We also hear of expected growth in the Irish funds industry as many multi nationals are looking to relocate high value roles such as product investment management and risk management to hubs like Ireland. In addition, the industry is continuing to offer many roles for graduates and experienced professionals returning to Ireland. To hear more from Lisa please watch her seven minute interview included in our Governance Webcast Series.