In this week’s public policy bulletin we take a look at proposals issued this week by the Department of Finance on the set up of a new national public savings vehicle. We also review the latest inflation estimates from the CSO as well as the launch of a public consultation on the right to request remote working by the WRC. In addition, we take a look at the latest data on the growth of the UK economy from the Office for National Statistics. Department of Finance publishes proposals to establish long-term public savings vehicle The Department of Finance has this week published a paper entitled ‘Future-proofing the Public Finances – the Next Steps’. This scoping paper outlines some of the merits of establishing a long-term public savings vehicle in Ireland. With the Government forecasting budget surpluses of up to €65 billion between now and 2026, the proposed long-term savings fund would be capitalised with some portion of windfall tax receipts and future budgetary surpluses. According to the paper, this approach would follow a well-trodden path of advanced countries establishing sovereign wealth funds in order to build fiscal buffers in good times to part pre-fund future liabilities. It is understood that the Minister for Finance is planning to bring forward legislation in the coming weeks to establish such a long-term savings vehicle, similar to sovereign wealth funds that have operated in Norway, Australia and Japan. Slight ease in rate of inflation recorded in April – CSO The CSO this week published its latest Consumer Price Index for April 2023. According to the Index, inflation fell to 7.2 percent in the 12 months to April, down from 7.7 percent in March – marking its lowest level in a year. The most significant increases in the year were seen in the costs of housing, water, electricity, gas and other fuels which rose by 20.7 percent, while food and non-alcoholic beverage prices increased by 13.1 percent. On an annual basis, the Index found that electricity prices jumped by a total of 51.3 percent in April, while gas prices increased by 55.8 percent. The CSO noted that the cost of education and transport were the only divisions to show a decrease when compared with April of last year, with prices in the sectors down 6.3 percent and 2.3 percent respectively. WRC launches public consultation on code of practice for remote working The Workplace Relations Commission (WRC) has launched its consultation on the Code of Practice that will govern the right to request remote working under the Work Life Balance and Miscellaneous Provisions Act 2023. The code will set out practical guidance for employers and employees when it comes to requesting remote or flexible work while complaints can be taken to the WRC where an employer has not complied with the code. The deadline for submissions from stakeholders is 5pm on 9th of June 2023. Further details regarding the consultation process can be found here. UK economy grows slightly in first quarter but slumps unexpectedly in March The UK economy marginally grew over the first quarter of the year, according to official data from the Office for National Statistics (ONS). UK gross domestic product (GDP) increased by 0.1 percent between January and March, the lowest amount possible to still be classed as growth as IT and construction sector activity offset the impact of ongoing strikes in other industries. However, the economy shrank 0.3 percent in March as retail and car sales fell sharply, and public sector strikes intensified. Contraction also came thanks to a 0.5 percent fall in services production while distribution and retail also underperformed as cost of living pressures hit consumers.  

The European Financial Reporting Advisory Group (EFRAG) has released a series of 20 educational videos on the first set of draft European Sustainability Reporting Standards (ESRSs). These videos provide some useful guidance in the form of short "glimpses" and longer "educational sessions" which will help viewers gain an understanding of the requirements as set out in the ESRSs. The ESRSs , which were subject to public consultation in 2022 set out the sustainability reporting requirements which will be phased in over time for different kinds of companies, with the first reporters doing so for years commencing on or after 1 January 2024.

The FRC Lab has published a report entitled "Net zero disclosures". This report, which highlights examples of current practice, discusses some of the key considerations for investors who use net zero disclosures and the elements of net zero disclosures that investors want to understand. The report builds on three key elements of net zero disclosures (commitments, impacts and performance) and discusses areas of consideration and challenge within these topics. The report provides some useful guidance for preparers seeking to navigate the difficult area of reporting on their greenhouse gas emission reduction commitments.

In this week’s sustainability/ESG bulletin, we bring details of Cabinet’s approval of Ireland’s new Circular Economy Bill. Also covered are EU developments, the release of sustainability-related strategies in both the Republic and Northern Ireland, technical updates, and a link to listen back to our interview with Sustainability Expert Rosie Dunscombe. In the news Ireland’s Circular Economy Bill receives Cabinet approval  In what has been described as a landmark Bill that will introduce world-leading moves to reduce waste and influence behaviour, the Circular Economy Bill received Cabinet approval this week. The new legislation will underpin Ireland’s shift from a ‘take-make-waste’ linear model to a more sustainable pattern of production and consumption that will instead minimise waste to help significantly reduce our greenhouse gas emissions. Click here for details of the Bill, particularly what it will mean for businesses. EU Commission to empower consumers for the green transition The EU has also taken action on the circular economy this week. The European Commission is proposing new consumer rights and a ban on greenwashing. It announced proposals to amend the Consumer Rights Directive to oblige traders to provide consumers with information on the durability and reparability of products, and is also proposing several amendments to the Unfair Commercial Practices Directive (UCPD). The rules will strengthen consumer protection against untrustworthy or false environmental claims, banning ‘greenwashing’ (a form of corporate misrepresentation where a company will present a green public image and publicise green initiatives that are false or misleading) and banning practices misleading consumers about the durability of a product.  Sustainability-related strategies Sustainability-related strategies were in the news last week in both Ireland and Northern Ireland: The first ever Further Education and Training (FET) Green Skills Summit in Ireland took place last week, led by SOLAS, the Further Education and Training Authority in collaboration with Education and Training Boards Ireland (ETBI). The summit addressed the green economy as an area of opportunity, and pointed to the key challenge of upskilling and reskilling for changes to existing roles. Speaking at the summit, Minister for Further and Higher Education, Research, Innovation and Science Simon Harris described it is “an important step in our response to the challenge of climate change and the targets we have set for ourselves at a national level.”   Northern Ireland’s first overarching Environment Strategy was given approval by Northern Ireland’s Environment Minister Edwin Poots . The strategy sets out Northern Ireland’s environmental priorities for the coming decades and forms part of the Executive’s Green Growth agenda. Commenting, Minister Poots said the Strategy “will provide a coherent response to the global challenges of biodiversity loss and climate change.” The draft strategy, which will have to be formally approved by an incoming Executive before it can be published, can be found here.   Technical Updates The European Commission’s advisory Platform on Sustainable Finance has published its final report on how to bring investments in line with four environmental priorities of the EU’s taxonomy of green investments which are: Ensuring a sustainable use of water and marine resources Protecting and restoring biodiversity and ecosystems Transitioning to a circular economy; and Preventing and controlling pollution. Recommendations made in the report include giving a green label to activities that meet specific environmental criteria (additional criteria are expected to be recommended by the Platform in May). The Commission is expected to publish a Delegated Act later this year.   The International Sustainability Standards Board (ISSB) has launched a consultation on its first two proposed standards. One sets out general sustainability-related disclosure requirements and the other specifies climate-related disclosure requirements. Find out more here.   Our colleagues in Professional Accounting tell us that the IFRS Foundation and Global Reporting Initiative (GRI) have announced a collaboration agreement under which their respective standard-setting boards, the International Sustainability Standards Board (ISSB) and the Global Sustainability Standards Board (GSSB), will seek to coordinate their work programmes and standard-setting activities. Resources ESG? Sustainability? ISBB? Net zero? Drowning in the ‘alphabet soup’ of sustainability terminology? You’re not alone! Listen back to our ‘Ask the Expert’ short interview that took place on Wednesday 30 March to hear Rosie Dunscombe FCA explain the key terms you're likely to hear as a finance professional.   British technology firm Dyson has reportedly created headphones designed to help people avoid polluted air in cities. The headphones come with a visor that delivers filtered air and were created in response to growing concerns about air and sound pollution in urban areas. The World Health Organisation (WHO) estimates that nine in 10 people globally breathe air that exceeds its guidelines on pollutant limits, and approx. 100 million people in Europe are said to be exposed to long-term noise exposure above its recommended level.     You can find information, guidance and supports to help members understand sustainability and meet the challenges it presents in our online Sustainability Centre.   

In this week’s Public Policy Bulletin, read about recently announced Government initiatives to support remote working in Ireland, a BearingPoint study which analyses 123 European banks and the recently released annual report on public debt in Ireland. We also cover Minister McConalogue and Northern Ireland’s Minister Lyons’ trip to Expo 2020 Dubai and a statement from Minister Lyons on the independent review of Invest Northern Ireland  Initiatives to support remote working announced by Minister Humphrey   This week, the Minister for Rural and Community Development, Heather Humphreys, announced a series of major initiatives to support Remote Working. Through the Connected Hubs 2022 Call, the Department of Rural and Community Development will provide €5 million to add additional capacity to the existing remote working infrastructure in Ireland by upgrading existing hubs and Broadband Connection Points (BCPs). €8.9 million has already been provided for 118 remote working projects across the country in 2021.  In May 2021, the National Connected Hubs network was launched with 60 hubs onboarded onto the connectedhubs.ie platform. There are now in excess of 200 hubs live on the connectedhubs.ie platform, with an aim to hit 400 hubs by 2025. The Connected Hubs mobile app has been launched to allow users to find their nearest hub facility and easily book a desk space using their mobile device.   Read the press release here.  Pandemic impact on European and Irish Banks   A BearingPoint study has found that Irish banks were hit harder than many of its European peers during the Covid-19 pandemic. The study looked at 123 European banks from 2013 to 2020 and found that Irish banks set aside significantly more capital for the impairment of loans during the pandemic (an increase of 1300 percent), when compared to their European counterparts (an increase of less than 120 percent).  In 2020, Bank of Ireland and AIB had impairment charges of €1.1 billion and €1.4 billion respectively due to Covid-19 concerns. Irish banks had a negative return of 6.3 percent in 2020, compared to a European average return on equity of 2%. 2020 cost income ratios for Irish banks averaged at 68.7 percent, higher than the European banks average of 64 percent and the optimum cost income ratio, which should be less than 55 percent.   Noel Crowley, the Financial Services Director at BearingPoint, shares his response to the report here.   Annual Report on Public Debt in Ireland 2021   The Minister for Finance, Paschal Donohoe released the fifth annual report on public debt this week. The report found that public debt increased by €33 billion during the two years of the Covid-19 pandemic, now approaching a quarter of a trillion euros. This is an estimated 106 percent of national income or €47,250 for every person in the country. These figures stood at 95 percent and €41,450 in 2019.  Minister Donohoe highlighted the major fiscal challenges that lie ahead, including a likely fall in corporation tax receipts, an aging population and the large fiscal costs that will be required to finance the journey to “net neutral”. In a press release issued by the Department of Finance, Minister Donohoe concludes “This is why we need to rebuild our fiscal buffers, including by steering the public finances to a more balanced path. We can do this while continuing to make significant capital investment, as outlined in the National Development Plan. This will help to lay the foundations for future growth while protecting against the future fiscal challenges that lay ahead of us.”   Read the full report from the Department of Finance here.     Dubai’s Expo 2020  Minister for Agriculture, Food and Marine, Charlie McConalogue opened a Board Bia celebration of Irish food at the Irish pavilion at Dubai’s Expo 2020, with the current year theme “Island of Inspiration” highlighted when he remarked “that spirit of inspiration and creativity reflected in the Irish food producers, large and small, who are innovating and finding routes to premium markets in the Gulf region”.  Northern Ireland’s Economy Minister Gordon Lyons also attended the event during his two-day visit program to the UAE. Speaking from the UK Pavilion at the Expo, under the UK’s theme of “Innovating for a shared future”, Lyons said “Today, Northern Ireland is centre stage at the world’s largest live international event. We are here to bring a flavour of Northern Ireland to the world and showcase our innovations within business, tourism, food and education to a global audience."  Invest Northern Ireland independent review  Northern Ireland’s Economy Minister Gordon Lyons made a statement to the NI Assembly this week in relation to his decision to commission an independent review of Invest Northern Ireland (Invest NI). He pointed out the fantastic track record Invest NI has in making Northern Ireland the most attractive location in the UK, outside of London, in respect of foreign direct investment.   The statement from Lyons can be read here.   Dame Rotha Johnston DBE and Ms Maureen O’Reilly have been appointed as panel members to work with the panel chair, Sir Michael Lyons for this independent review. The report of their findings is expected in September 2022.   Invest NI’s offers of financial assistance to companies beyond March 2020 is currently on pause, as they await clarification on their potential 2022/2023 Budget sign allocation from its parent Department for the Economy 

Oireachtas Committee responds to the final report published by the Commission on Pensions In its response to the Report of the Commission on Pensions, the Oireachtas Joint Committee on Social Protection, Community and Rural Development and the Islands has recommended that Ireland’s State Pension age remain at 66 years. This rejects the proposal put forward by the Commission on Pensions last year that the qualifying age is increased from the current 66 years by three months every year from 2028, reaching 67 in 2031.  To fund this, the Committee recommends that the Commission on Welfare and Taxation examine potential changes to Employers’ PRSI contribution rates.  Among the 13 proposals put forward, the Committee also recommends banning the mandatory retirement age for both new and existing employment contracts. Chartered Accountants Ireland issued a statement following the response this week, welcoming the recommendation to leave the state pension age unchanged at 66 years, while recognising that the shortfall in funding the State Pension long-term needs to be addressed. The Institute said that asking employers to pay increased rates of PRSI cannot be a long-term solution and the fact that employers are already paying high salaries to compensate workers for high personal tax rates must be recognised. The Committee also recommended that funding auto-enrolment should not be prioritised over retaining the current State Pension age. Chartered Accountants Ireland however believes that reforms to enhance the sustainability of the State Pension cannot take place without parallel reforms to increase private pension coverage in Ireland to enable workers to avoid living their retirement in poverty.    Calls for coherent Government policy were also made to enable workers to adequately plan for their retirement. Bank of Ireland’s recent economic pulse survey indicates pay rises this year    According to the most recent Bank of Ireland economic pulse survey, 50 percent of firms are pricing in pay rises this year. 56 percent of people surveyed indicated that it is now easier to find or move jobs, with a third of firms reporting a struggle to fill open positions. 46 percent of those surveyed expect to see a 3 percent average increase in wages in the next year. According to Bank of Ireland’s chief economist Loretta O’Sullivan, “As businesses look to retain and attract staff, and workers find it easier to get or change jobs, upward pressure on pay is likely” with a shortage of workers helping to drive the pay increases. The survey also indicated that 77 percent expect houses prices to rise in the next 12 months, with 70 percent also expecting a rise in rent. The Economic Pulse is based on a series of monthly surveys of households and firms where they are asked for their views on a wide range of topics including the economy, hiring activities, business plans, personal spending and financial situations among others. Tánaiste intends to strengthen remote working laws   We highlighted the draft Bill to give employees the right to request remote working published by Tánaiste Leo Varadkar. The proposed legislation will set out a legal framework to apply for remote working, the reasons the request could be refused and outlines the process for appeals. The Tánaiste discussed the draft Bill with the Select Committee on Enterprise, Trade and Employment this week, indicating his plans to strengthen the legislation and his intention that “employers cannot just tick a box to say no”. The Tánaiste also reiterated that the Bill is in draft form and that “there can’t be an absolute right to remote working”. Chartered Accountants Ireland has written a letter to the Tánaiste to request clear and comprehensive guidance, including practical examples, to assist our members to implement the legislation when it becomes law. Read the Draft Scheme of the Right to Request Remote Working Bill 2022. Enhanced Illness Benefit (EIB) extended The Minister for Social Protection, Heather Humphreys TD, has secured Government approval to extend the EIB payments until the end of June 2022. Almost €230 million has been paid in EIB to date, supporting over 374,000 people. The €350 weekly payment is available to people diagnosed with Covid-19 or told to self-isolate. This is available to employees or self-employed people. For more information, and to apply, go to MyWelfare.ie. Northern Ireland Business Demography Statistics 2020 released Northern Ireland Statistics and Research Agency (NISRA) recently released the latest business demography results for Northern Ireland which looks at births, deaths and survival rates of Northern Ireland businesses by Industry and District Council Area. 6,375 businesses were born in 2020, a decrease of 3.8 percent on the previous year. 4,900 businesses closed during the year, a decrease of 9 percent from 2019. The number of businesses births was greater than the number of business deaths for all district council areas across Northern Ireland.   Retail saw an introduction of 780 businesses in 2020, a 47 percent increase on 2019 and the highest number of births for the sector since the series by industry began in 2009. Importance of Traineeships as part of economic recovery in Northern Ireland This week, Northern Ireland’s Economy Minister Gordon Lyons highlighted the importance of traineeships to enable economic recovery in the region stating that “developing the local skills base is a key priority for me and a cornerstone of the recovery”. As part of the Department for the Economy’s 10X Economic Vision, the goal is “to equip people with the skills they need for the constantly evolving jobs market and build on Northern Ireland’s successes on the global stage”. The £180 million NI Traineeship program, launched in September 2021 as part of the economic recovery package, intends to fund 20,000 Traineeship places over the next seven years.

Susan Rossney, Public Policy Officer, writes: It seems that everyone is talking about sustainability nowadays. Accountants in SMPs are watching the news and listening to the debate. You may well be asking questions like: “What can I do in the face of a global issue?” “How will this affect my practice and my clients’ businesses?” “What questions will my clients ask me next?” “ What expertise should I be developing now?” “How will sustainability work for me?” The sense of urgency to address climate change across the world is intensifying. Droughts, floods and wildfires are increasing, ecosystems are collapsing, and in response people are calling for change. But climate change is part of a broader sustainability challenge – one that can be summed up as ‘environment, social and governance’, or ESG. The responsibility to meet this challenge falls on all businesses and firms, including small ones. As ESG continues its rise up the political and corporate agenda, smaller businesses now more than ever need to meet certain ESG criteria so they can access finance, win contracts or be part of larger companies’ value chains. Clients and consumers also expect businesses to have a positive impact on the environment and to be doing their part to contribute to change. Companies that want to prosper in the future will have little choice but to become sustainable. Small businesses have a crucial role in the transition to more sustainable economies and societies. Accountants are key financial advisors for those businesses, but also need to understand and implement sustainability practices for their own businesses. This article discusses the opportunities for small businesses – and their advisors – in embracing sustainability. “Practices who want to engage particularly with the next generation of staff and clients need to be able to take sustainability seriously and need to be able to demonstrate that” Conal Kennedy, Head of Practice Consulting, Chartered Accountants Ireland Environmental, social and economic issues present huge risks for businesses. Examples include: losing out to competitors; having reduced access to capital; developing weaknesses in supply chains; developing succession risks; and failing to meet the requirements of stakeholders, including consumers, clients, banks, business partners, staff and regulators. Accountants can identify and quantify these risks for their own practices, and develop policies for themselves and their clients to address them. But managing risks against ESG factors can also benefit businesses directly. As this article will show, if properly addressed, it impacts employee welfare, improving employee experience and leading to greater output; it affects ability to access finance; it enhances an organisation’s reputation, helping to attract new business and staff; and it can help companies comply with supply chain requirements of their larger clients. Preparers and auditors of financial statements will also need to consider these issues going forward. Generating new business Many accountants are now adding “sustainability consulting” to their services to clients. As trusted advisors, they can play a key role in helping SME clients think about their potential sustainability risks, and leverage opportunities offered by the sustainable transition. For example - Accountants can help clients to: assess sustainability impact and risks improve efficiencies reduce costs avail of grants acquire finance identify opportunities to expand their range navigate the changes Sustainability is also an increasingly important factor in tendering for contracts with larger organisations which have stricter sustainability goals. Some of these large organisations perform assessments of potential suppliers. Others also carry out regular risk screenings of existing supply-chain suppliers, and/or conduct internal audits and onsite supplier audits to verify that their supply chain suppliers are conforming to their policies. Accountants have a huge role to play in helping companies prepare this information, and in doing so themselves if they are part of these supply chains or are tendering for contracts. Accessing Finance Embracing sustainability is working towards ensuring the financial future of accountants’ businesses or their clients’ businesses. Investors are actively looking to invest in sustainable projects, and are screening out certain sectors or companies (like those heavily reliant on fossil fuels, for example). Businesses seeking this investment benefit from being able to collect and report on their sustainability-related activities against a recognised standard. Many banks are also adopting sustainability criteria and may require proof of sustainable practices from companies looking to avail of finance. There are also business grants as well as support schemes and tax incentives available for organisations looking to transition to more sustainable practices. Again, accountants have a huge role to play in guiding clients through this. Savings Operating in a sustainable manner saves costs. While there may be short-term costs associated with transitioning to a sustainable business model, businesses can recoup the investment they make and can also reduce their business costs by introducing more sustainable ways of working. According to the Sustainable Energy Authority of Ireland (SEAI), the average SME can save up to 30% on its energy bill by becoming more energy efficient. A business with an engaged and motivated team is also less likely to experience high employee-turnover and associated costs. In a drive to decarbonise Ireland’s economy, the rate of carbon tax increased by €7.50 in October 2020 from €26 to €33.50 per tonne/CO2. Reducing your carbon emissions will reduce your cost. Ultimately, though, any costs associated must be reframed as the cost of compliance or risk management. The greater costs are the costs of not being sustainable. Reputation With social media increasing access to companies, there are very few places to hide for organisations which are falling short of sustainability-related expectations. Staff expect it, and customers demand it. Companies not being transparent about their sustainability achievements, or their goals, will be called out by their customers and staff. Likewise, there is little patience for companies that are ‘green-washing’, i.e. presenting a false or misleading green public image. “64 percent of customers are ‘belief-driven buyers’ who will choose, switch, avoid or boycott a brand based on its stand on societal issues.” 2019 Edelman Trust Barometer Special Report: In Brands We Trust? Mobile Survey Attracting clients On the flip side, though, organisations that do embrace sustainability are in a strong position to attract clients. They can do this by becoming more visible in their community. Supporting local literacy or numeracy projects, participating in local charities or sports clubs, or engaging in local-tree planting initiatives not only increases brand awareness of a firm or business: it builds trust with a community. Remember – not everyone may be doing this, so you will have a first-mover advantage if you do. As a greater number of large companies are either required to or decide to report on human rights, diversity and climate-related policies, a greater number of local businesses supplying those companies will also be obliged to disclose their own sustainability practices, and will need help from a financial advisor to do so. Accountants who are experienced in offering clients this support may attract more clients looking to comply with the sustainability requirements of large organisations. Attracting & retaining talent Candidates are actively seeking jobs in companies with strong ESG credentials and are rejecting jobs in those companies not aligned with their own values. What was identified by McKinsey in 1997 as the ‘war for talent’ is as fierce as ever within the professional services sector, and organisations are going to great lengths to recruit talent. These same companies are now including their commitment to ESG values as a competitive differentiation. This is a trend seen by Karin Lanigan, Head of Member Experience in Chartered Accountants Ireland: “I have worked in recruitment for more than 20 years and in recent years, I have noticed a growing trend whereby candidates have become more and more discerning about types of organisations they’ll work for. They are not just considering salary and package; they are looking at the sector, at the reputation of an organisation, and asking themselves ‘will I feel proud if I’m out with my friends on a Friday night to say that I work with whatever the organisation is or whatever the sector is that they are in?’ They want to have sense of pride in their place of work.” Remember: a commitment to ESG does not have to mean having a large sustainability department or running an eco-business. It can also mean being a firm or company that looks after its employees, provides good training and promotion opportunities, and is active in its local community. “With ‘measurements’ everyone thinks of ‘carbon footprint’. But it doesn’t have to be. You can measure staff satisfaction through surveys. You can measure employee-turnover and retention or absenteeism. Encourage staff to measure the number of hours they spend giving back to others in the community.” Teresa Campbell, PKF FKM Impact on Financial Statements Preparers and auditors of financial statements should consider the impact on sustainability and climate change on every entity. Quoted companies, and some categories of larger companies have defined obligations to report on the impact of environmental matters on the companies’ businesses. These specific reporting requirements do not apply to private limited companies reporting under FRS 102. However, climate change and sustainability are major and developing issues that cannot be ignored by anyone. Both IAASA and the FRC have recently commented on matters that they expect to see considered in financial statements. Whilst their comments were largely made in the context of the IFRS framework, much of what they have said is directly applicable to financial statements prepared under FRS 102. Accountants should consider and report on how climate change has impacted on the assets and liabilities of the company, what additional risks have emerged and whether new or increased provisions are necessary. How has climate change impacted on the estimates and judgements applied, and do these need to be disclosed? Consider such matters as the useful lives of property, plant and equipment. Consider also the impact on impairment assumptions. Does the entity have an obligation to remediate environmental damage caused by any of its activities? Have any of its contracts become onerous, or are they likely to? The financial statements, taken as a whole, should contain sufficient information to be useful to stakeholders, and preparers should avoid the use of non-specific boilerplate. See IAASA’s recent observations on published financial statements. The Institute will cover these areas in more detail in future issues of Practice Matters, broadcasts of Practice News, and CPD courses. Some member resources Find more on the Institute’s Sustainability Hub with resources from articles, podcasts and webinars to a glossary explaining the acronyms and terms. You can also find tips in the Institute’s guide on Sustainability for Accountants. This free guide for accountants describes what to do – and where to start – to operate sustainably, successfully and cost-effectively.  

Dr Michael Hayden provides the accounting practitioner with some food for thought.The COVID-19 pandemic brings a realisation of the importance of certain sectors in our society. While many businesses cease operations, food producers and farm enterprises are acknowledged as essential services.The economic significance of the Irish agricultural industry is well documented. However, in these unprecedented times, the focus has turned to its social importance. This provides an opportunity for the accounting profession to reflect on how it can best assist and support farming businesses, not only in the current circumstances but in the future.A question worth considering is: does the agricultural community reap the full benefit of the extensive knowledge and skills the accountancy profession has to offer? While acknowledging that challenges exist for accountants in delivering their services to farm clients, there are significant opportunities for accountants and farmers to work more effectively together to develop sustainable farm enterprises.Industry contextThe agricultural industry is an integral part of our economy and society. After the economic crisis of 2008, the government primed the agricultural sector to stimulate economic growth and set out ambitious goals for it in the Food Harvest 2020 and subsequent Foodwise 2025 strategy documents. The Department of Agriculture, Food and the Marine’s 2019 Annual Review and Outlook report outlines the importance of the industry. It claims that food produced in Ireland was exported to over 180 markets worldwide and was valued at €13.7 billion in 2018, which represents 10% of merchandise exports. Additionally, the sector contributed 7.5% of gross national income (GNI) and employed 173,000 people (7.7% of total employment) in 2018.Despite the importance of the industry, when average farm size, farm incomes and dependency on farm subsidies are examined, as well as the average age and training levels of Irish farmers, a picture of economic vulnerability emerges. The National Farm Survey (NFS) is published annually by Teagasc and highlights this vulnerability. The 2019 NFS highlights that 34% of Irish farms were deemed viable, 33% sustainable, and 33% vulnerable. It also reports that the average family farm income (FFI) in Ireland was €23,933 in 2019, which varies significantly across farm types (for example, dairy generated €66,570, tillage generated €34,437 and beef generated €9,188). Furthermore, farming in Ireland remains reliant on subsidies which, on average, accounted for 77% of FFI in 2019.Experts warn of another economic crisis post-COVID-19, and there is no doubt that our agricultural industry will attract renewed focus. Furthermore, Brexit represents a significant external risk for Irish agriculture with potentially far-reaching economic, social and cultural consequences. In this context, it is perhaps more important than ever that the accounting profession supports the agricultural community in developing sustainable farm enterprises by assisting farmers in making informed financial decisions based on sound financial management information.Challenges in providing services to farm clientsBefore exploring the opportunities for accountants to provide support to the agricultural community, it is important to acknowledge some challenges that exist in assisting farmers in managing their enterprise.Despite the economic vulnerability of many farms, research shows that most farmers spend little time on financial management. A dislike of conducting financial management activities exists in the farming community. Indeed, they are often viewed as a necessary evil and do not always fit well with the identity of what farmers see as important farm management activities. There are other identity-related issues: many farmers are quite secretive about their financial affairs; some are naturally reluctant to seek farm management advice; many tend to rely on intuition and experience in managing their business as opposed to relying on financial information.As a result of the lack of engagement by farmers with financial management in the day-to-day management of their business, book-keeping systems can be relatively unsophisticated. There is a tendency to monitor bank balances (cash flow), and only a minority maintain management accounting records.The average age of a farmer in Ireland is 59 years. This high age profile is a well-documented concern for the industry. In terms of financial management, older farmers are less likely to invest in their farm and are less likely to strive for innovation and efficiencies.Historically, farmers view accountants as providing a statutory and compliance role, such as filing annual tax returns, with little focus on value-added services. Also, the cost of such value-added services is a barrier as quite often, farmers are unwilling to pay for such services.This profile of the farming community suggests that there are limited opportunities for accountants to provide value-added services to farmers. However, there are ‘green shoots’ that give cause for optimism.Green shoots to exploreIn recent years, there has been a considerable shift in the industry. This shift is transforming the Irish agricultural landscape and providing opportunities for accountants and farmers to work more effectively together to develop sustainable farm enterprises.Policy changes have resulted in some fundamental structural reforms, which have provided opportunities for growth. For example, milk quota abolition under the Common Agricultural Policy (CAP) has resulted in considerable investment and expansion in the dairy sector. While it is acknowledged that farmers tend not to engage extensively and/or dislike financial management, the mindset of many farmers in this respect is changing. In my research, I discovered that where farmers are making strategic farm expansion decisions, there is a considerable degree of engagement with their accountants.Many traditional farm enterprises are diversifying and exploring new markets for their produce. For example, there is an increase in the production of artisan food products directly by farmers, alternative supply chains where farmers sell their produce directly from farm-to-market, and an increased focus on organic food production. These trends and the movement from the traditional farm production system often bring a renewed focus on profit margins, cost management and overall financial management.Farm partnerships and the incorporation of farm enterprises are becoming more widespread in the industry. Such changes in legal structure provide additional opportunities for accountants who have expert knowledge in terms of tax, legal, and succession planning advice.As a result of the above developments, younger farmers are being enticed into the industry. Agricultural courses in colleges and universities have seen strong demand in the past decade, which is very positive. Numerous policy measures have also been enacted to encourage generational renewal, including changes to land leasing arrangements, while tax reliefs/incentives have been developed to facilitate younger farmers entering the industry.These transformations to the Irish agricultural landscape have encouraged farmers to be more open to engaging the value-added services of accountants. This provides opportunities for accountants to develop successful working relationships with farmers, whereby farmers could significantly benefit from the expert knowledge and skills that accountants have to offer.ConclusionThere is vast potential for accountants and farmers to work more effectively together to develop sustainable farm enterprises. Navigating the financial challenges of COVID-19 and Brexit are just two reasons why each farmer should look to his or her trusted accountant for support and expertise as the farming community strives to meet the critical societal demands for a sustainable food supply.Dr Michael Hayden FCA is Assistant Professor of Accounting at Maynooth University.

Imelda Hurley has had a challenging start to her role as CEO at Coillte, but her training and experience have proved invaluable in dealing with the fallout from COVID-19, writes Barry McCall.Imelda Hurley’s career journey to becoming CEO of Coillte in November 2019 saw her work on every continent for a range of businesses spanning food to technology. That varied background has helped prepare her for the unprecedented disruption caused by the COVID-19 pandemic.“We have been working remotely since March, and the business has kept going throughout the pandemic,” she says. “We closed the office straight away and have had 300 people working remotely since then. Our primary focus since has been on the health, safety and wellbeing of our colleagues, and against that backdrop, on ensuring that a sustainable, viable and vibrant Coillte emerges from the crisis.”A diverse challengeThis has not been as straightforward as she makes it sound. “Coillte is a very diverse business,” she adds. “We are the largest forestry business in the country, the largest outdoor recreation provider, we enable about one-third of Ireland’s wind energy, and we have our board manufacturing business as well. We needed to continue operating as an essential service provider. That remit to operate was both a challenge and an opportunity.”The company’s timber products are essential for manufacturing the pallets required to move goods into and out of the country. “Some of our board products were used in the construction of the Nightingale Hospital in London,” she adds. “And the wind energy we enable provides electricity for people’s homes and the rest of the country.”Organisationally, the task has been to enable people to continue to do their jobs. However, the challenge varied depending on the nature of the operation involved. “In forest operations, people usually work at a distance from each other anyway, so they were able to keep going. That said, we did suspend a range of activities. We needed to continue our factory operations, but we had to slow down and reconfigure the lines for social distancing. And we kept the energy business going.”Those challenges were worsened by an ongoing issue associated with delays in the licensing of forestry activities and by the unusually dry spring weather, which created ideal conditions for forest fire outbreaks. “Even a typical forest fire season is very difficult,” she notes. “But this one was particularly difficult. In one single weekend, we had 50 fires which had to be fought while maintaining physical distancing. Very early on, we put in place fire-fighting protocols, which enabled us to keep our colleagues safe while they were out there fighting fires, and to support them in every way possible.”The lure of industryHer interest in business dates back to her childhood on the family farm near Clonakilty in Cork. “I was always interested in it, and I enjoyed accountancy in school and college at the University of Limerick. I did a work placement in Glen Dimplex and that consolidated my view that Chartered Accountancy was a good qualification that would give me the basis for an interesting career.”She went on to a training contract with Arthur Andersen in Dublin. “The firm was one of the Big 6 at the time,” she recalls. “I availed of several international opportunities while I worked there and worked in every continent apart from Asia. I really enjoyed working in Arthur Andersen, but I always had a desire to sit on the other side of the table. Some accountants prefer practice, but I enjoy the cut and thrust of business life.”That desire led her to move to Greencore. “I wanted to be near the centre of decision-making and where strategy was developed. I stayed there for ten years, learning every day.”And then she moved on to something quite different. “Sometimes in life, an opportunity comes along that makes you pause and think, ‘if I turn it down, I might regret it forever’. The opportunity was to become CFO of a Silicon Valley-backed business known as PCH, which stood for Pacific Coast Highway, which was based in Hong Kong and mainland China with offices in Ireland and San Francisco. It was involved in the supply chain for the technology industry and creating, developing and delivering industry-leading products for some of the largest brands in the world.”The experience proved invaluable. “It changed the way I thought. It was a very fast-moving business that was growing very quickly. I got to live and work in Asia and understand a new culture. I took Chinese lessons and the rest of the team took English lessons. There were 15 nationalities on the team. It was remarkably diverse in terms of demographics, gender, culture, you name it. That diversity means you find solutions you would not have found otherwise.“I spent three years with PCH and ran up half a million air miles in that time. It had a very entrepreneurial-driven start-up culture. The philosophy is to bet big, win big or fail fast. It was a whole new dynamic for me. I also got to spend a lot of time in San Francisco, the hub of the digital industry, and that was a wonderful experience as well.”Returning to IrelandImelda then returned to Ireland to become CFO of Origin Enterprises plc. “As I built my career, I always had the ambition to become CFO of a public company. And I always believed that with hard work, determination and a willingness to take a slightly different path, you will succeed. Greencore and Origin Enterprises gave me experience at both ends of the food and agriculture business; they took me from farm to fork. A few more years in Asia might have been good, but Origin Enterprises was the right opportunity to take at the time.”Her next career move saw her take up the reins as CEO of Coillte on 4 November 2019. “I always wanted to do different things, work with different organisations and with different stakeholder groups,” she points out. “Coillte is a very different business. It is the custodian of 7% of the land in Ireland, on which we manage forests for multiple benefits including wood supply. It is a fascinating company. It is an outdoor recreation enabler, with 3,000km of trails and 12 forest parks. We get 18 million visits to forests each year. We also have our forest products business – Medite Smartply. We operate across the full lifecycle of wood. We plant it and it takes 30-40 years to produce timber.”Imelda’s varied career has given her a unique perspective, which is helping her deal with the current challenges faced by Coillte. “Throughout my career, I have worked in different ownership structures and for a variety of stakeholders. I worked for public companies, a Silicon Valley-backed business, and have been in a private equity-backed business as well. Now, I am in a commercial semi-state. That has taken me across a very broad spectrum and I have learned that a business needs to be very clear on a set of things: its strategy, its values, who its stakeholders are, and how it will deliver.”Entering the ‘new’ worldWhile Coillte has kept going during the COVID-19 pandemic, it is still affected by the economic fallout. “We are experiencing a very significant impact operationally, particularly so when building sites were closed,” she says. “There has been some domestic increase in timber requirements since then, and there has been an increasing demand for pallet wood. That has had a significant financial impact and it’s why I’m focused on delivering a sustainable, vibrant and viable Coillte. We remain very focused on our operations, business and strategy. In the new post-COVID-19 world, we will need a strategy refresh. We must look at what that new world looks like, and not just in terms of COVID-19. We still have a forestry licensing crisis and Brexit to deal with.”The business does boast certain advantages going into that new world. “Our business is very relevant to that world. The need for sustainable wood products for construction is so relevant. Forests provide a carbon sink. The recreation facilities and wind energy generated on the land we own are very valuable. It may be a difficult 12-18 months or longer, but Coillte is an excellent place to be. In business, you manage risk. What we are managing is uncertainty, and that requires a dynamic and fast-paced approach. Time is the enemy now, and we are using imperfect information to make decisions, but we have to work with that.”Coillte will begin the first phase of its office reopening programme in line with Phase 4 of the Government’s plan. “We have social distancing in place and it’s quite strange to see the floor markings in the offices. We are doing it in four phases and carried out surveys to understand employee preferences. We then overlaid our office capacity with those preferences. Our employees have been fantastic in the way they supported each other right the way through the crisis.”Words of wisdomDespite the current challenges, she says she has thoroughly enjoyed the role since day one. “It would be wrong to say it’s not a challenge to walk into a business you were never involved in before and take charge, but I have a very good team. None of us succeeds on our own. We need the support of the team around us. The only way to succeed is to debate the best ideas and when there isn’t alignment, I make the final decision, but only after listening to what others have to say. You are only as good as the people around you. You’ve got to empower those people and let them get on with it.”Imelda believes her training as a Chartered Accountant has also helped. “It facilitated me in building a blended career. The pace of change is so incredibly quick today and if we do not evolve and learn, we lose relevance. Small pieces of education are also very valuable in that respect. Over the years, I did several courses including at Harvard Business School and Stanford. I love learning and I’m not finished yet. I’m a firm believer in lifelong learning.”Her advice to other Chartered Accountants starting out in their careers is to seek opportunities to broaden their experience. “Learn to be willing to ask for what you want,” she says. “Look for opportunities outside finance in commercial, procurement or operations. Look through alternative lenses to bring value. Make sure you are learning and challenging yourself all the time. Keep asking what you have added to become the leader you want to be someday.”And don’t settle for what you don’t want. “Be sure it is the career you want, rather than the one you think you want or need. It’s too easy to look at someone successful and want to emulate them. You have to ask if that is really for you. This role particularly suits me. I love the outdoors and I get to spend time out of the office in forests and recreational areas. That resonates particularly well with me.”