Sustainability reporting in a shock-prone world - The bigger picture

In a unsettled world in which global temperatures continue to rise, accounting for sustainability has never been more important, writes Susan Rossney 

On 26 February 2025, the European Commission proposed changes to the laws governing, among other things, sustainability reporting. 

Regardless of any changes to sustainability reporting legislation, there will be little let-up in the momentum of the sustainability policy developments impacting those accountants working to embed sustainability in company strategies and operations.

Accountants and sustainability 

‘Sustainability’ is a broad term, defined in 1987 by the United Nations (UN) as: “meeting the needs of the present without compromising the ability of future generations to meet their own needs”. 

Financial professionals often describe it as ‘ESG’—i.e. measuring an organisation against specific environmental, social and governance metrics. 

The need to gather the data required to measure business performance, and allow investors to compare businesses, is one of the many reasons sustainability has become increasingly important for accountants. 

Even before the introduction of legislation compelling disclosure of sustainability information, however, many businesses had been working hard to integrate sustainability into their operations.

This is partly because it makes good business sense—reduced energy costs being just one of them—but also because businesses are run by and for people who appreciate that businesses depend on a functioning society.

And society, in turn, needs functioning ecosystems—energy, raw materials and a healthy workforce with access to clean air, clean water, food and security. 

The risk of the ‘wicked problem’ 

Climate change and biodiversity collapse are archetypal ‘wicked problems’, a term coined in the 1970s by design theorists Horst Rittel and Melvin Webber.

Wicked problems describe planning and social policy problems that seem difficult or impossible to solve. They resist resolution. Like Whac-A-Moles, you hit one part of a wicked problem on the head and another one pops up to surprise you. 

Solving wicked problems requires thousands of stakeholders to do “everything, everywhere, all at once,” as UN Secretary-General António Guterres has put it. 

With all indicators pointing to a relentless rise in global temperatures, both mitigation (reducing harmful emissions) and adaptation (adapting to the effects of climate change—wildfires, floods, droughts, migration, costs etc) have never been more necessary for businesses to mitigate risks. 

Systemic risks

Systemic risks are the widespread and interconnected threats posed by the climate and biodiversity crises to the stability of financial systems and the global economy. 

These risks include the world reaching so-called ‘tipping points’—levels of global warming and rising sea levels from which there is no return, for example.  

A report commissioned by the European Central Bank in 2022 found that climate risk could substantially amplify losses in an interconnected financial system of banks, investment funds and insurers. 

In a report published in December 2024, the European Central Bank and the European Insurance and Occupational Pensions Authority warned that climate change is increasing the frequency of natural disasters, resulting in multibillion euro costs left uncovered by insurance. 

In January 2025, global reinsurer Aon disclosed that economic losses resulting from natural disasters in 2024 totalled $368 billion, marking 2024 as the ninth consecutive year of losses exceeding $300 billion.  

Physical risks

The physical risks to businesses can be both acute and chronic. 

An example of an acute physical risk is a wildfire, such as the Los Angeles wildfires that took place in the US in January, which are likely to be one of the costliest natural disasters in US history. 

A chronic risk could be a drought, such as those that cause water shortages in regions in which semiconductors are manufactured—a core component of enabling technologies critical to economic growth, national security and global competitiveness. 

Along with the loss of life and suffering of those caught up in these physical events and their immediate and long-term aftermath, there are also risks to business.

These include damaged assets, raw materials shortages, environmental degradation (such as those affecting tourism industries), resource scarcity, supply chain disruptions and business interruption. 

Transition risks

In the context of business and climate change, transition risks are the financial and operational uncertainties businesses face in the shift towards a low-carbon economy. 
These transition risks include fluctuating costs and secure energy supply as the economy and societies transition to net zero.

They also include increased operating costs for waste management and insurance and exposure to carbon tax liability, which is expected to rise to €100 per tonne of CO2 emitted in Ireland by 2030. 

Recent reports from the World Economic Forum warn that climate inaction could cost businesses up to seven percent of annual earnings by 2035.

Other risks include reputational risk and a threat to a company’s ‘social licence to operate,’ as well as legal challenges. 

In 2024, London’s Grantham Research Institute on Climate Change and the Environment reported that there are 2,666 ongoing climate litigation cases globally, noting a rise in the number of climate cases filed against companies.

Another transition risk for businesses is their potential inability to secure lower-cost funding, as lenders and investors increasingly seek information on sustainability-related risks. 

Equally, a company’s existing products or services could become obsolete in the transition, while competitors may gain an advantage by adopting new technologies and attracting or retaining valuable talent as more and more candidates vet companies’ ESG credentials before deciding to join or remain with a business. 

This shift in preference towards more sustainably run companies extends to an organisation’s ability to tender for contracts, particularly in the public sector with the rise of green public procurement practices.

In Ireland, for example, the Government published Buying Greener: Green Public Procurement Strategy and Action Plan 2024-2027 in April 2024 with the aim of driving green and circular procurement practices across the public sector.

With annual public sector purchasing accounting for 10 to 12 percent of Ireland’s gross domestic product, this plan will likely influence a significant portion of economic activity and demand. 

Regulations and policies

Businesses must carefully consider sustainability-related regulations and policies that affect every level of the economy, from international to local.

At the international level, treaties such as the Paris Agreement and the Kunming-Montreal Global Biodiversity Framework join supranational policy initiatives, such as the EU Green Deal and EU Biodiversity Strategy, to ensure specific climate action and biodiversity protection commitments cascade to the national policy level. 

Sustainability is one of the core pillars of Northern Ireland’s 10X Strategy where the Climate Change Act (Northern Ireland) 2022 requires at least 80 percent of electricity consumption in the region to be from renewable sources by 2030. 

The Northern Ireland Executive’s Programme for Government 2024-2027, Our Plan: Doing What Matters Most, prioritises the development of a globally competitive and sustainable economy while also focusing on protecting the environment. 

The UK government recently published its National Biodiversity Strategy and Action Plan in which it commits to achieving all 23 targets of the Global Biodiversity Framework at home.

More recently, the UK government published the Department of Agriculture, Environment and Rural Affairs’ Corporate Plan for 2025-2027 which sets a strategic direction for its path towards a transition to a net-zero, nature-positive future.

Ireland has implemented similar policies to achieve its climate and biodiversity targets through successive Climate Action Plans and sectoral targets for emissions. Additionally, under the fourth National Biodiversity Action Plan, a key objective is to engage 900 businesses in the Business for Biodiversity Ireland initiative by the end of 2025. 

Other measures will prevent companies from making misleading claims about the environmental merits of their products and services, while also helping Ireland to transition to a circular economy. 

Achieving the legally binding climate targets established under the Climate Action and Low Carbon Development Act 2021, which aims to ensure Ireland meets its national emissions reduction targets, is critical from both a financial and a climate perspective. 

In December 2024, the Irish Fiscal Advisory Council (IFAC) warned that the climate transition poses Ireland’s second largest budgetary challenge, second only to our ageing population. 

In a 2025 joint report with the Climate Change Advisory Council, IFAC estimated that failure to meet our climate targets would incur penalties of up to €8 billion for Ireland and €26 billion for Europe.

Alongside these policy developments, businesses will be required to gather more climate, nature and biodiversity information this year and beyond — and accountants in 
the public and private sectors will play a critical role in managing it. 

In a shock-prone world where all indicators point to a relentless rise in global temperatures, accounting for sustainability has never been more crucial. 

Chartered Accountants Ireland’s Sustainability Centre offers guidance and resources for businesses. Additionally, members can subscribe to the Institute’s fortnightly Technical Round Up and weekly Sustainability/ESG Bulletins, both included in the weekly Chartered Accountants Ireland newsletter, and on LinkedIn.