Speech by Minister Robert Troy TD at the ACCA sustainability roundtable

Wednesday 19 January 2022

Good morning, Chair, everyone.

I would like to thank the ACCA for the invitation to speak with you this morning and for Aleksandra and Yen Pei for their presentations earlier.

Today’s roundtable is timely – not just on the topic of sustainability and role of accountancy and advisory firms have to effect change among the SME sector but also because it comes at the beginning of the year – a good time to reflect on what has been and where we want to go. 

2021 was another extraordinary year in our history and while the challenges have been great there has also been real and valuable work done to sustain enterprises with a comprehensive package of supports and ensure our legislation was fit for purpose; from the COVID-19 measures to allow for virtual AGMs and extensions to provisions in examinership, to the design of a new small company rescue process to assist viable small and micro businesses restructure and continue trading something that was a personal priority when I entered office.

As Minister with responsibility for company regulation, I want to build on this momentum over the course of this coming year. In that context:

I expect to launch a public consultation shortly on new Co-operative legislation.

In the coming weeks I will publish legislation to reform and enhance the role of the Personal Injuries Assessment Board.

Furthermore, we will introduce two significant pieces of legislation to give greater enforcement powers for our regulatory bodies, CCPC and Comreg, and to modernise consumer protection legislation.

Work is also underway in the Department on audit exemptions for our SMEs, and finally turning to today’s discussion, I want to see further progress on Corporate Sustainability Reporting Directive at EU level as discussed earlier.

Climate change is something that impacts all of us, societies, and economies across the globe. If we are to truly to suppress the worst effects of it, action is needed from all of us, governments and enterprises alike. Many enterprises large and small now recognise the need for change but are sometimes challenged on where to start.

It is essential businesses develop and deepen their knowledge and skills to understand how to access resources. I therefore commend the ACCA for its initiative to guide and equip its SMP members through its Sustainability Playbook as well as in tracking for members relevant EU developments like the proposal for a Corporate Sustainability Reporting Directive.

This Government recognises the challenges of climate change and under the current Programme for Government has set out how important the coming years are to address the climate change and biodiversity crisis facing Ireland and the world.

Ambitious climate action goals have been set at international level, such as in the Paris Agreement, at EU level, in particular in the EU Green Deal and nationally through the Climate Action and Low Carbon Development Act.

The Climate Action Plan 2021 identifies the current additional measures needed to meet Ireland’s enhanced climate ambitions, align investments with decarbonisation priorities, and co-ordinate action across all sectors.

Climate Action Plans will be produced annually to ensure Ireland stays on track to meet its climate goals.

The Enterprise sector has an important role to play in meeting our climate targets. In 2018, the sector emitted 7.9 million tonnes of CO2 equivalent gases. That is 12.7% of Ireland’s total emissions. The sector must reduce emissions to 5 million tonnes per annum by the end of the decade, a reduction of 40% relative to 2018 levels.

The biggest share of these emissions comes from a small number of large companies in the manufacturing sector, mostly in alumina, food processing, beverages and cement. These manufacturers are covered by the EU Emissions Trading System which already sees them committed to reducing their emissions.

We understand that the emissions from enterprise that fall outside the EU Emissions Trading System are highly diverse and a large proportion of these arise from SMEs.

Government has taken action to put in place a range of initiatives that are of particular relevance to SMEs.

The ‘Climate Toolkit 4 Business’ helps businesses in any sector get a starting estimate of their carbon footprint and create a tailored climate action plan for their operations.

The target audience for the Toolkit is SMEs and micro enterprises who wish to start their decarbonisation journey.

Most importantly it will direct users to advice, grants and other resources, whether that be financial, educational, training or expertise, available from Government through the Local Enterprise Offices, Enterprise Ireland, the Sustainable Energy Authority of Ireland, Irish Water and the Environmental Protection Agency.

The Climate Toolkit 4 Business is an important resource for SMEs and I would ask ACCA members to strongly encourage their clients to avail of the facility to start their climate action.

My Department is currently in the process of rolling out targeted EU funding awarded under Ireland’s National Recovery and Resilience Fund.

The proposed programme under the overall Fund has two components, the Climate Enterprise Action Fund and the Carbon Reduction Fund. I want to highlight two specifically in the time I have:

The Climate Enterprise Action fund is particularly geared toward applications from SMEs and micro-businesses.

It will assist companies at an early stage of their decarbonisation journeys to develop a high-level company action plan.

This will enable them to measure their carbon footprint and identify projects leading to reduced emissions and greater resource efficiency for example in energy, water and materials.

The fund will also assist businesses at a more advanced stage develop comprehensive multi-annual business plans with climate change and sustainability actions integrated into the company’s overall strategy.

The Carbon Reduction Fund is for the investment in carbon measurement and abatement technologies for manufacturing enterprises. It will support their engagement in green research, development and innovation, capital investment, and capacity building with a focus on abating their high CO2 emissions.

The fund aims to reduce the payback period on the installation of carbon reduction technologies and so encourage their early adoption. 

The funds are complimented by other initiatives for SMEs administered by Enterprise Ireland, IDA Ireland the Local Enterprise Offices; The GreenPlus assignment programme, The GreenStart programme, and the Green for Micro Programme.

There are significant opportunities for businesses that embrace the transition to low carbon early. The best advice is to start immediately: use the Toolkit and take advantage of the supports available.

Government for its part is determined to provide the necessary and targeted supports to assist businesses to grow sustainably in the medium and long term.

As trusted advisers you can help your clients to build their businesses’ resilience, innovation and productivity and to add value for their customers and communities by taking action on their environmental impact.

Turning now to the regulatory aspects of climate action. The EU proposal for a corporate sustainability reporting directive is seeking to develop sustainability reporting in parallel to financial reporting to better inform investors and other stakeholders of companies’ performance on environmental, social and governance matters.

Yen Pei has given you a detailed presentation on the proposal itself so I will confine my remarks to my hopes for the dossier.

Sustainability Reporting by companies is an area in which I have a strong personal interest.

Many companies are already developing their reporting on sustainability and seeking to differentiate themselves on the basis of their responsibility in relation to the environment and climate change.

The purpose of better company reporting on sustainability is to broaden out, streamline and bring consistency to the information provided about companies.

This information will allow investors, consumers, policy makers and other stakeholders to make choices based on the performance of companies on environmental and social matters.

It encourages companies to develop a sustainability focussed approach to their business.

It will allow the information to be tracked and compared over time.

It will strengthen the link between the environment and other important social matters and companies’ operations and direction.

It will redefine what we think of as important when we think about company performance in future.

Given the scale of the climate challenge, the interconnectedness of economies and global nature of enterprise, the best approach is to work closely with the EU Commission and other Member States on the legislative requirements relating to sustainability reporting.

Responsibility for this rests with Commissioner Mairead McGuinness whom I met last year and she confirmed the ambitions of the EU Commission to make progress on this file. Since then, the Slovenian Presidency and now the French Presidency of the European Council have put considerable time into the dossier so negotiations by Member States are well underway. Next week I will meet with French Minister for Social Economy, Olivia Grégoire, to discuss this proposal further.

For policy makers and legislators there is an onus on us to require sustainability reporting in a clear and consistent way and give the maximum relevant information possible to investors, consumers and other stakeholders and minimise any unnecessary burdens on companies.

I think what will be important is how the new requirements are sequenced to allow companies and the accounting and audit industry time to understand the standards, start measuring and deepen the knowledge and skills necessary.

Negotiations continue on the Corporate Sustainable Reporting Directive, and I plan to update and brief stakeholders again later in 2022 when matters progress further.

I would also encourage ACCA members to engage in the ongoing consultations by EFRAG, the European Financial Reporting Advisory Group, who has been tasked with developing the sustainability reporting standards that will underpin the new reporting requirements.

Looking to the future, there will be further annual Climate Action Plans alongside in due course the new EU wide sustainability reporting rules and standards. I hope to continue to hear feedback and experience of stakeholders like the ACCA and its members, to ensure that Ireland develops the best possible approach to targeted actions to drive change and support SMEs in their climate action.