The Institute has issued its response to the public consultation on draft European Sustainability Reporting Standards (ESRSs), prepared by the European Financial Reporting Advisory Group (EFRAG). Under the Corporate Sustainable Reporting Directive (CSRD), the European Commission have proposed changes to the nature and extent of sustainability reporting in the EU over the coming years. The CSRD proposes mandated European Sustainability Reporting Standards and aims to strengthen sustainability reporting requirements currently mandated under the Non-Financial Reporting Directive. The public consultation involved the consideration of 13 exposure drafts across the following areas; Two cross-cutting exposure drafts covering general principles, strategy, governance and materiality assessment. Five environmental topical standards covering Climate change Pollution Water & marine resources Biodiversity, and Resource use and circular economy. Four social topical standards covering Own workforce Workers in the value chain Affected communities, and Consumers and end users Two governance topical standards covering Governance, risk management and internal control, and Business conduct The Institute assembled an experienced working group of industry experts to review the consultation and prepare a response. Some of the summary points to note in the response include; The Institute fully support the introduction of sustainability reporting standards to ensure that certain entities report transparently on their Environmental, Social and Governance (ESG) impacts. There are concerns regarding the short timeframe allowed for responding to such a comprehensive consultation. It is critical that the ESRSs are closely aligned to the ISSB standards which are currently being drafted. One way of achieving this alignment would be for EFRAG to work with the ISSB to agree on a global baseline of minimum disclosure requirements. This would be an alternative to having standards requiring differing disclosures about the same ESG matter. The Institute has voiced concerns regarding materiality as proposed in the draft standard. There is a lack of guidance on how to apply “double materiality” as proposed in the ESRSs which may lead to inconsistent use across entities. There are also concerns regarding the workability of the rebuttable presumption contained in the standard and it is unclear how this can be applied which may lead to a lack of comparability between entities. The transition to the ESRSs will be challenging for entities as many of the concepts within ESRS and the systems needed to report are not yet well established. There are some concerns noted regarding the verifiability of information required to be reported on under the ESRSs. Information to be reported about an entity’s supply chain may be difficult to verify and gain assurance on in some instances. The response highlighted some terminology improvement recommendations as well as opportunities for greater harmony across governance disclosure requirements. There is no provision for disclosure exemption on the basis of commercial sensitivity and legal prejudice in the ESRSs. Overall, whilst the Institute believes that the introduction of ESRSs is an important step in businesses reporting transparently on their ESG impacts, there is much room for improvement in the standards as they are currently drafted. The Institute encouraged EFRAG to take the time necessary to address respondents concerns and to make the standards more operable before they are finalised.

  In this week’s sustainability/ESG bulletin we bring you news of the Irish Government’s Climate Conversation, which invites people across the country to fill in an online questionnaire about Ireland’s climate. Also covered is new funding for social enterprise projects, a public consultation opened on a proposed small-scale renewable electricity generation scheme, the UK Government’s response to the ISSB exposure drafts, and the EU’s plans to measure progress on Green Deal environment and climate goals. The Climate Conversation 2022 The Irish Government is inviting people across the country to contribute to the 2022 Climate Conversation. Through an online questionnaire people can give their views on shopping, reuse and recycling, food and food waste, heating homes and businesses, sustainable living, local environment and climate change, as well as how actions in these areas – by individuals, Government, businesses and society as a whole – can positively impact our climate goals. This initiative is part of the National Dialogue on Climate Action (NDCA) which aims to empower everyone in society to help the Government co-design the annual Climate Action Plan. You don’t need to be a climate expert for your opinion to be valued, but you might find the Climate Jargon Buster useful, as well as Climate Essentials for Accountants. The survey closes 9 September 2022. 10 minutes of your time can make a huge difference! €1.5 million announced for Scaling-up Scheme for Social Enterprise Minister for Rural and Community Development, Heather Humphreys, TD, has announced a €1.5 million Scaling-up Scheme for Social Enterprise, funded by the Dormant Accounts Fund. The scheme, which is open to applicants from now until 15 September 2022, is designed to improve the impact and sustainability of social enterprises, i.e. businesses that work to achieve a social, societal, or environmental impact. Like other businesses, social enterprises pursue their objectives by trading in goods and services, but any surpluses they generate are re-invested into achieving their core social objectives, rather than maximising profit for their owners. Public consultation opens on small-scale renewable electricity generation scheme The Government has opened a public consultation to gather stakeholder feedback on aspects of a proposed support scheme for Small-Scale Generation (SSG), i.e. renewable electricity generation technologies with an electricity output greater than 50kW, but smaller than typical commercial generators. The scheme aims to fill the gap in tariff-based supports between the Micro-generation Support Scheme (MSS) and the larger Renewable Electricity Support Scheme (RESS), and to provide an easier route to market for community projects while enabling farmers, businesses and others to maximise their participation in the energy transition. The closing date for submissions is 5.30pm on Thursday 29 September 2022. UK Government’s response to International Sustainability Standards Board exposure drafts The UK Government has responded to the first two exposure drafts from the International Sustainability Standards Board (ISSB): IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (General Requirements Exposure Draft); and IFRS S2 Climate-related Disclosures (Climate Exposure Draft). Read the response here. The UK Endorsement Board (UKEB) – the body that influences, endorses and adopts new or amended international accounting standards issued by the International Accounting Standards Board (IASB) for use by UK companies – has also published its Final Comment Letter and Feedback Statement on the drafts. EU to measure progress on Green Deal environment and climate goals The European Commission has presented a list of headline indicators for monitoring progress towards the EU’s environment and climate goals to 2030, as well as the 2050 long-term vision to ‘live well, within planetary boundaries'. The indicators will capture progress towards environmental wellbeing, including economic and social aspects, and will include the 2-3 most policy relevant and statistically robust indicators for each of the thematic priority objectives to 2030, covering climate mitigation, climate adaptation, circular economy, zero pollution, and biodiversity. Commenting, Executive Vice-President Frans Timmermans, in charge of the European Green Deal, said: “We have very ambitious environmental and climate targets to help us deliver the just green transition that Europe and the world needs. But what you cannot measure, you cannot manage. To keep us on track, we need to keep a close eye on whether we are meeting our goals. These indicators help us do so.” The Commission will report annually on the progress made, based on stocktaking done by the European Environment Agency from 2023 onwards, with the help of the selected headline indicators. Of interest Accountancy Ireland (Aug/Sept 2022) has just published with articles on offshore energy, social enterprise, ESG reporting and ethical business (Accountancy Ireland) How to shop in season in Ireland this August (RTÉ) Explaining greenwashing (RTÉ)  Upcoming events 2022 Responsible Business Awards in Northern Ireland, 8 Sep Dublin Climate Action Week, 12-17 September Ireland Climate Finance Week, 17 - 21 October Natural Capital Finance & Investment Conference, 19-20 October   You can find information, guidance and supports to help members understand sustainability and meet the challenges it presents in our online Sustainability Centre.

Originally posted on Business Post 09 July 2022.  Glowing reports from the IMF won’t mean much to those struggling with rent, fuel and food costs. It feels as if the country has just done some kind of economic Leaving Cert, with end of term reports published last week. First there was the Summer Economic Statement, then the Central Bank quarterly update, and finally on Thursday a good conduct report from the International Monetary Fund. Subject to the usual terms, conditions and hedging that we tend to find in economic assessments, the portrait which all three of these reports painted of the Irish economy is surprisingly positive. The Summer Economic Statement projects that there will be a modest budget surplus in 2022 with significant money available to help on the social welfare and tax front to take the sting out of inflation. The Central Bank is of the view that the inflation spike will be most pronounced in 2022, and that once we are through this current calendar year, inflation may revert to something more tolerable. Both the IMF and the Central Bank conclude that the employment outlook is perhaps as strong as it has ever been, with less unemployment, more vacancies available and much greater female participation in the labour force. This time three years ago, the predictions from all these bodies were not as positive. The commentary in the 2019 Summer Economic Statement and the Central Bank’s quarterly forecast in July 2019 was dominated by Brexit fears. The IMF chimed in with Brexit concerns as well, adding the escalation of global protectionism, and having to adapt to ongoing international tax changes for good measure Since then, of course, we did have Brexit which was orderly or disorderly, depending on your political (not commercial) point of view, a crushing pandemic, and a Russian invasion of Ukraine disrupting commodity supplies worldwide. You would never seek it out, but one outcome of the pandemic is that it was like an experimental laboratory for the economy. Decisions were stress-tested in a way that would otherwise never have been possible. Depending on how you count them, more business supports and social welfare benefits were paid out by government in the two years of the pandemic than might usually be the case over five years. The outcome of this “experiment” has been that these payments seem to have been more in the nature of an investment than in the nature of largesse. The pandemic has also proven that our tax base is very resilient. We have discovered that the exchequer is predominantly funded by the corporate sector paying corporation tax, high-income earners paying income tax – about 80 per cent of all income tax and USC comes from the top 20 per cent of earners – and consumer activity in the form of Vat. According to the June exchequer figures, over 85 per cent of all of our tax revenues come from these three sources. Whatever else is done in the September budget, these sources have to be managed and preserved as no package of social welfare benefits and tax reliefs can be delivered without them. This resilience is further underlined by the fact that it is Irish business that acts as the collector of taxes for PAYE and Vat. During the pandemic, a sensible process of tax debt “warehousing” was introduced which allowed business to defer paying PAYE and Vat to Revenue. However, it is surprising how little tax debt was deferred in this way. Totals did vary over the ebb and flow of the lockdowns, but broadly speaking, there was deferral only to the tune of 5 per cent of the total tax yield. That's a confident performance by Irish businesses in a pandemic crisis. This sense of business confidence is reflected by surveys such as the Bank of Ireland’s Economic Pulse, suggesting that business sentiment is currently higher than consumer sentiment, but vastly more so than in April 2020, when we all stared into the abyss of the Covid-19 pandemic. There will be some who will argue that all this confidence and positive sentiment is misplaced and that we underestimate the interest rate and inflationary challenges of the coming months, but nevertheless, that confidence is there and is already having a bearing. It may yet be bolstered further. The indifference, bordering on hooliganism, shown by the current British administration to the political and economic status of Northern Ireland and Ireland’s position within the EU could soon be remedied. It certainly can’t get much worse. The problem now for the government is to translate this economic capacity and success into consumer sentiment. Glowing reports from the IMF won’t cheer anyone who is struggling with fuel, grocery or accommodation costs, nor for that matter the employer who can’t get staff because prospective employees can’t find a place to rent. And while inflation is expected to ease over the next ten months or so, it won’t over the next ten weeks between now and budget time. The economic exams may have been passed with flying colours. The budget will be a different matter entirely. There could even need to be some economic mistakes made by over-spending or undertaxing on the next Budget Day to make the public aware of these past successes. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland