New rules forcing Irish companies to report on their non-financial performance – the impact their activities have on society and the environment – are “the most significant development in the accounting profession in 30 years”, according to a leading Irish accountancy body.
Acca Ireland – the Association of Chartered Certified Accountants – says the signing into law on Monday by Minister for Enterprise Peter Burke of the EU corporate sustainability reporting directive introduces European sustainable reporting standards that will require businesses to review their operations and strategically plan in a way that supports society and the environment and helps create a more sustainable future.
The standards will be phased in with large companies required to comply from next year and all organisations having to comply by 2028.
[ New EU directive will make companies legally liable for environmental damageOpens in new window ]
Accountants PwC say the biggest concern that companies have about new sustainability requirements is the availability and the quality of data.
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A survey of global businesses by PwC found that almost two-thirds (63 per cent) of companies said they were “very or extremely confident” they would be ready to report under the EU’s new directive.
The global survey of more than 500 senior executives and business professionals found three-quarters are “factoring sustainability into decision-making”.
The biggest concern listed was “data availability and quality”, which 59 per cent of respondents cited. Only one-fifth of companies due to report in the next six months have validated the availability and completeness of data for their disclosures. Additionally, less than 60 per cent of all respondents have involved their technology function, although most respondents said they planned to do so.
Fidelma Boyce, assurance partner with PwC Ireland, said: “It is positive to see companies are largely confident that they will be ready to report. However, there is still some way to go, with the majority grappling with complex challenges, particularly the quantity and quality of data required, not only for their own operations but across their value chain.”
[ Investors wary of Irish companies’ sustainability claims - PwCOpens in new window ]
As this includes suppliers, partners, regulators, investors, bankers and many other stakeholders, Acca Ireland says the expectation on small and medium business to provide clarity on their impact on society and the environment will increase due to the crucial role they play in the value chain for larger companies.
“We would urge any companies that have not yet reviewed their environmental footprint, to do so as a matter of urgency as it will increasingly influence the growth of their business in the years ahead,” said Acca Ireland head Stephen Noonan.
“The breadth and depth of reporting presents a massive challenge as teams work to collect, verify and consolidate many new types of data,” Ms Boyce said. “Organisations need a plan for how they are going to define, source, govern and process the data in a manner to ensure that it is capable of being assured.
“As the [directive] essentially requires sustainability reporting to be on par with financial reporting, leading executives are recognising that sustainability information must be available, accurate and capable of being assured: not just on a one-time basis, but annually.
“The global impact of this shows the importance of getting to a global baseline of reporting standards to reduce complexity and improve comparability.”
Non-compliance with the new standards will, Acca Ireland says, be an offence under company law.
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