Seanad debates

Wednesday, 24 November 2021

Companies (Emission Reporting) Bill 2021: Second Stage


10:30 am

Photo of Robert TroyRobert Troy (Longford-Westmeath, Fianna Fail)

I welcome the opportunity to be in the Seanad today to discuss the Bill, and to have the opportunity to hear the contributions of a number of Senators.

I thank Senator Ruane for bringing forward this legislation. As previous speakers have said, it is timely and important legislation. I very much share her ambition for positive change in this space.

Initially, the Government had said it would like to bring forward an amendment to read the Bill in 12 months. That was not in any way a stalling tactic and Senator Ruane will know this as we have spoken on this issue. This amendment was to facilitate the ongoing work at EU level on corporate sustainability reporting, which will result in a new EU law next year that will have to be transposed into Irish law shortly thereafter. It was not by any manner or means a stalling tactic; it was to refrain from duplication. We are not delaying. We are simply saying that we need more time. In fairness to the Senator, we have met on a number of occasions and she said that she was prepared to give more time. Perhaps we are just in disagreement about the time that is needed. I certainly intend to continue working Senators Ruane and Higgins, and with any Senator who wants to work with me, to ensure that the best laws are in place for the economy and society to tackle climate change. This Bill is important. Not only does it allow us an opportunity to discuss sustainability reporting, it is also well timed to maintain the momentum and the focus on the urgent need for action on climate change following COP26 in Glasgow.

I will now turn to the Bill. I have a particular interest in the area of sustainability reporting. Senator Ruane and I have met on a number of occasions to discuss this important issue. I acknowledge the Senator's positive and constructive engagement to date and I want to ensure that this positivity and constructive debate and engagement continues.

On my appointment as Minister of State with responsibility for company regulation, one of my first actions was to consider how we could address the need for more robust environmental reporting measures by companies. At that time I was informed that the work was under way by the EU Commission on the revision of the non-financial reporting directive. The outcome of this work is the proposal for a corporate sustainability reporting directive, which was published in April of this year.

Earlier this year, more than 100 participants attended a stakeholder webinar I hosted on the new proposal in May. At the webinar, Commissioner Mairead McGuinness, who holds the policy responsibility for sustainability reporting under the remit of her directorate-general DG FISMA, congratulated Ireland on taking the initiative in holding the webinar to inform stakeholders of the contents of the proposals. The responses to the public consultation launched that day showed broad support for the revision of the rules on non-financial reporting and good support for the main elements of the proposed directive. Since then, much work has taken place at EU level. Ireland, along with other member states, has met regularly at EU Council working party level to progress the negotiations with a view to agreeing the text of the directive.Discussion is also under way on the proposal in the European Parliament, which is a co-legislator.

I met Commissioner McGuinness in September to discuss sustainability reporting further. She also spoke about the importance of the file in respect of the EU actions under the European Green Deal. In parallel, the European Financial Reporting Advisory Group, EFRAG, has commenced the process of developing EU mandatory standards for sustainability reporting. Along with other EU ministers, I am going to hear an update from the representatives of Slovenia, which holds the Presidency of the EU, tomorrow at the Competitiveness Council, COMPET, in Brussels. I will be making the point that Ireland wants to see continued momentum in the discussions in the first half of 2022 under the incoming Presidency of France.

Overall, given the scale of the climate challenge, the interconnectedness of economies and the global nature of enterprise, it makes sense to work with the European Commission and other member states on the legislative requirements concerning sustainability reporting. Therefore, while the Government agrees with the policy enshrined in this Bill to deliver the reduction in the level of greenhouse gas emissions by companies and public bodies, we require more time for further consideration and analysis of this Private Members' Bill. I again reassure Deputies that this is not a stalling or pausing tactic. This is to enable the work that has already commenced and will continue to ensure we will hit the right balance in this regard.

We want to include a regulatory impact assessment, RIA, in respect of how the Bill will achieve its objectives and to consider developments at EU level regarding the proposal for a corporate sustainability reporting directive, which will be adopted across EU member states and will introduce mandatory EU sustainability reporting standards. It is worth pointing out there are many commonalities between the Senator’s proposal and the proposal for the corporate sustainability reporting directive. The directive will include mandatory reporting on environmental, social and governance, ESG, matters and will require all large companies and all companies listed on regulated markets, except microenterprises, to report annually as part of the companies' directors' reports. It will also introduce more detailed reporting requirements and a requirement to report according to mandatory EU sustainability reporting standards. In addition, the directive will require the auditing of reported information and that companies digitally tag that reported information so that it is machine readable and can be fed into the European single access point envisaged in the capital markets union, CMU, action plan. The proposed directive will also contain financial and other sanctions for companies that do not comply with their obligations under the requirements. As published, it is expected the new requirements will be phased in, that companies will publish their first reports according to mandatory standards in 2024, and that those reports will cover the financial year of 2023.

As it stands, the EU proposal has struck the correct balance by targeting large companies with more than 250 employees initially, before an envisaged expansion to include listed SMEs after three years. On scope, the Senator's legislation proposes a wider scope of entities for inclusion. Following further analysis and regulatory impact assessment, I believe this can be assessed in tandem with the text of the directive, once it is confirmed. Therefore, this is useful in respect of feeding into the Irish position and into what ultimate position we will take in respect of the directive.

Turning to having the greatest impact on climate change at national, EU and global levels, it is right that a focus should be placed on large multinationals, given the reach of their operations and their contributions to greenhouse gas emissions. I agree wholeheartedly, therefore, with the Senators who made that point. Nonetheless, many companies are keen to develop their reporting in this area and wish to differentiate themselves based on their responsibility in respect of the environment and climate change. The principle of "think small first" is essential to EU and Government policymaking, and the SME test is used in this context. There is a cost to providing this information. Requirements and standards for listed SMEs should be proportionate and relevant. While it is not proposed that the provisions of the directive will be extended to non-listed SMEs, those companies are also exposed to climate risks and may wish to implement listed standards voluntarily. As Senator Ruane pointed out, having a blueprint established will assist those SMEs that wish to differentiate themselves and to embark on this journey voluntarily.

As well as proportionality, the sustainability standards being developed by EFRAG will take into account best practice internationally as well as international agreements such as the Paris climate agreement. EFRAG has also recently launched a call for expressions of interest from potential new member organisations. The organisation wants to have a balanced representation of all stakeholders with an interest in corporate reporting and its new sustainability reporting pillar. EFRAG is seeking expressions of interest from NGOs, academics, trade unions and national authorities as well as from industry and the accounting profession. Overall, there is a level of ambition and vision in keeping with the proposals in this legislation.

I turn now to other aspects of the Government’s plans to deliver the action needed to respond to the challenge of climate change. We have set ambitious targets, and the Government is determined to deliver the required change. The programme for Government commits to reducing our greenhouse gas emissions by 51% by 2030. The Climate Action and Low Carbon Development (Amendment) Act 2021 now includes a commitment in law to pursue and achieve our national climate objective, by not later than the end of the year 2050, of transiting to a climate-resilient, biodiversity-rich, environmentally sustainable and climate-neutral economy.

The new climate action plan 2021 contains measures to ramp up significantly Ireland’s approach to climate change. This includes an acceleration of measures to achieve the level of decarbonisation required in the industrial sector. The target for the enterprise sector is a reduction from 7.9 million tonnes of carbon dioxide equivalent in 2018 to approximately 5 million tonnes in 2030. Business must implement a detailed agenda of transition and change if it is to ensure sectors are climate resilient and can remain competitive in a decarbonising world. The agenda will include enterprises improving the energy efficiency of their processes, buildings and transport; replacing fossil fuels with renewables in their processes, buildings and transport; improving the way in which resources are used in their supply chains to reduce emissions and conform to the principles of the circular economy; being innovative across production, distribution and marketing to realise the opportunities arising in those areas; developing new skills and techniques as necessary; and developing metrics on climate and environmental impacts from activities which will become more widely expected in the marketplace.

My Department will shortly be launching a new website called Businesses will be able to input some simple information to get an estimate of their carbon footprint and a tailored plan to reduce it. The plan will point users to grant funding available through, for example, Enterprise Ireland's climate enterprise action fund and the Sustainable Energy Authority of Ireland, SEAI, to help those businesses to make the required changes to their buildings and the way they use energy. The Government wants to ensure enterprise contributes to the transition to a low-carbon economy and benefits from the resilience and competitiveness this can bring.

The principle of a just transition is embedded in the new climate action plan. Delivering a just transition is based on recognising the transformational level of change required to meet our ambitious targets. It refers to having a shared understanding that the transition is fair and just and that the costs are shared equitably. It is only right that our climate policies should seek to protect the most vulnerable. A just transition commission will be established to support Government policy development in this area. In addition, all increases in carbon tax receipts, amounting to €9.5 billion out to 2030, are earmarked for targeted social protection measures and an expansion of retrofitting, particularly for social, low-income and agri-environment projects.

I accept, therefore, what the Senators said in their contributions. We can work together. I genuinely believe I have shown my willingness, sincerity and commitment in this area in the past 12 months, as I accept the Senator has too.I would like to think we can park this Bill today not as a delaying tactic but to give us an opportunity to carry out a regulatory impact assessment and work with the EU directive which will be coming through. We are interconnected. We are not an island on our own and cannot do this on our own. If the Senator is happy to do that, I pledge to work with her in the coming months to ensure when the directive comes through it is fit for purpose and it is something on which we can jointly agree.


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