Seanad debates

Wednesday, 24 November 2021

Companies (Emission Reporting) Bill 2021: Second Stage


10:30 am

Photo of Lynn RuaneLynn Ruane (Independent)
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I move: "That the Bill be now read a Second Time."

I thank the Minister of State for joining us. I thank my colleagues in the Civil Engagement Group for their support and for allowing this business to be taken in our group Private Members' time, particularly in the context of the recent COP26 climate conference. I also thank Sebastian McAteer, who drafted the Bill and has been involved in every stage of its journey to date. I also thank my secretarial assistant, Tadhg Browne, for his ongoing support in preparation for today. Finally, I thank the Minister of State and the officials in his office for their constructive engagement with this Bill as well as for meeting with me in my office on three occasions over the past year to discuss the Bill's provisions.

My motivation for introducing the Bill before us today is rooted in my belief that our long-term climate policies are not sustainable if the State's response continuously focuses solely on the targeting of individual emission consumption. This belief arises from the 2017 Carbon Majors report, which found that just 100 companies had been responsible for over 70% of global greenhouse gas emissions since 1988. Two things are clear for me. First, corporations are making significant contributions to global carbon emissions on a scale unmatched by individuals. Second, they must be accountable and transparent in reporting these emissions if we are to combat the climate crisis properly.

This should not just be viewed as an abstract, global problem to be left to our international counterparts or promised EU legislation. This is a pattern we find repeated across the world at national level and Ireland is no exception. In 2018 Ireland's 200 largest energy consuming corporations collectively used 21% of the total national primary energy and accounted over 50% of the total industrial energy use. Considering that the European business registry records 181,000 companies as 'live' in Ireland, this translates to less than 1% of Irish companies consuming 21% of the national primary energy. As I said, Ireland is not exceptional in these figures but we have an opportunity today to be exceptional in how we respond to them. The Bill I am progressing would ensure private companies operating in Ireland would have to make mandatory public disclosures on their greenhouse gas emissions every year. The idea is to require companies to publish their emissions and promote a culture of public scrutiny, allowing us to hold companies to account. It ensures corporations make decisions based on proper environmental considerations and adopt company policies that will reduce their emissions in line with national targets.For this Bill to be effective, we cannot wait. I want to comment on the 12-month delay the Government will propose for the legislation. It is difficult to understand how such a move can be justified considering the extraordinary time pressure we are under to use every moment of the next decade to prevent the collapse of the climate and irreversible damage to the planet. At COP26, Mia Mottley, the Prime Minister of Barbados, spoke of how, without a fundamental change of approach to climate policy, island nations such as hers could simply cease to exist within a few short years. That is the scale of the existential crisis we face and it is this reality that must animate every single debate in these Houses on climate change. We have a moral responsibility to hold large companies to account rather than burden marginalised people in the global south who have contributed the least to climate change. We will be able to count every day we delay important climate change legislation in every metre of rising sea level faced by people in countries such as Bangladesh and Fiji as their land disappears before their eyes. Delay is not an option. Since when has Ireland needed to wait for the European Commission to do the right thing? We must act today.

This Bill should be viewed by the Government as an opportunity for Ireland to become the benchmark in company emission reporting policy. If the Government chooses to support and implement the Bill, it would see us immediately join France as the only two EU member states with emissions reporting legislation. Ireland would be a continental leader in corporate climate legislation. The Bill would offer the Government a platform to promote good practice already present in the commercial sector through schemes like Business in the Community Ireland. For example, Kingspan already engages in emission reporting as part of the RE100 programme under which it committed to 100% renewable energy by 2020. The Bill offers the Government an opportunity to see which specific sectors and companies are struggling to meet emission targets. This will offer the Government a chance to further promote schemes such as excellence in energy efficient design, EXEED and the accelerated capital allowance scheme for energy-efficient equipment. It will also allow the Government to tailor future schemes to the needs of specific sectors that are struggling to meet the agreed climate targets with the benefit of clear, accurate and regular data. I count at least a dozen actions in the section of the climate action plan relating to the Department of the Minister of State that would be made easier with this information and the incentives required of businesses under the Bill.

I stress that the Bill should not be viewed as unachievable or idealistic. There is already a level of emissions reporting taking place in the Irish economy at both an EU level under the non-financial reporting directive and the emissions trading scheme and at local authority level for businesses seeking to access various licences under the Air Pollution Act 1987. In effect, the Bill would standardise the reporting that is already taking place.

This is a relatively short Bill. Section 3 sets out the main reporting obligation on companies operating in Ireland. Such companies will be required to disclose the volume of their greenhouse gas emissions annually to the Minister for Enterprise, Trade and Employment. Section 4 sets out certain important parameters in applying these obligations to companies. It is important to note that any company with fewer than 50 employees will be excluded from reporting. Reporting will then be introduced on a phased basis which is based on the size of the company. The intentional focus on large companies first is expected to create a standardised framework for reporting greenhouse gas emissions which can later be matched by smaller and medium-sized companies.

Section 5 sets out the type of information the Bill requires to be disclosed in companies' annual reports. This includes a breakdown of emission scopes into three distinct categories. The first category is the direct combustion of fuel, scope 1; the second is the operation of any facility, such as powering an office building, scope 2; and scope 3 relates to the measurement of greenhouse gas emissions created in the company's supply or value chain.

The Bill creates several other important environmental requirements for companies. Disclosures must set out the measures being taken by businesses to ensure their future plans are in line with the principles of a just transition and to limit global warming to 1.5° Celsius required by the Paris Agreement. It should be noted that much of section 5 is directly reproduced from the European Commission's revised non-financial reporting directive to ensure this legislation is completely aligned with the expected new European requirements on companies. The section also requires that company disclosures be independently audited by a statutory auditor to ensure accountability.

Section 8 is the central public transparency mechanism of the Bill which will allow us to hold companies to account. The section also compels the Minister to publish the report online to ensure public access. Sections 9 to 11, inclusive, set out enforcement provisions. If companies do not comply with the law, they will be fined and prosecuted by the Office of the Director of Corporate Enforcement. Insufficient progress in achieving reductions will also incur a penalty.

Having laid out the Bill, I will finish with this. When it comes to climate policy, there are neither rewards nor punishments, only consequences. The Bill represents an opportunity for us to shape what those consequences will look like. I urge the Minister of State to reconsider the proposed delay and I look forward to working with him in the future.

Photo of Mark DalyMark Daly (Fianna Fail)
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I call the seconder of the Bill, Senator Higgins.

Photo of Alice-Mary HigginsAlice-Mary Higgins (Independent)
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I know the Minister of State has been engaging very constructively with my colleague, Senator Ruane, and I commend her and both Tadhg Browne, her current assistant, and, of course, Sebastian McAteer, who has done really important work in developing this legislation. I am very proud to have this Bill brought forward in the name of the Civil Engagement Group. In the short time I have, I will focus a little on why this represents best practice, some of the strengths within the Bill, and why we need it now. I urge the Minister of State to reconsider the proposed delay of one year in moving forward on this issue.

As regards some of the strengths of the Bill, the measurements are based on the United Nations Environment Programme greenhouse gas, GHG, indicator guide, which is best practice as put together by the United Nations, and the standards put forward by the Global Reporting Initiative, which is an independent international organisation. An important aspect of the Bill relates to its supplementing of some of the areas in which measures are already in place. For example, it adds to the measures under the emissions trading scheme or the non-financial reporting directive. It is important that the Bill accounts for scope 1, involving direct emissions from under control sources, scope 2, involving indirect emissions from the generation of purchased electricity, and, crucially, scope 3, which looks at other indirect emissions in the supply or value chain. This is the direction of travel. Scope 3 emissions are crucial to measuring and understanding the real impact in terms of emissions. That means that every part of the chain is considered, including transport, inputs, materials and further outcomes. That is what I would call real world reporting on carbon emissions.

We know that, in the end, one cannot argue with science or the reality of emissions. The problem at the moment is that a large amount of emissions are not being measured, captured or tracked. That is why global practice now is to look at scope 3. The emissions trading scheme will need to move to chart 3. The Minister of State will be aware that the EU corporate sustainability reporting directive that is currently being developed will also, crucially, address scope 3 emissions. This is a chance for Ireland to be ahead of the curve on this.

To be clear, this is something that many businesses really want. Good businesses want to be recognised for having quality supply chains and properly tracking their emissions. Members need not take my word for it. I refer to annexe 5 of the European Commission's impact assessment on corporate sustainability reporting. A survey carried out for the Commission by the Enterprise Europe Network with small businesses right across Europe found that more than half of them were already getting requests for environmental, social and corporate governance, ESG, reporting. SMEs in particular were finding reporting to be of great importance in the context of being able to access the supply chain. It was also important for larger corporations and companies in the context of being able to be part of supply chains, while larger companies found it to be crucial so that they could account for their supply chain. Some 68% of them stated that what they wanted were clear standards.

What is offered in the Bill is a clear standard on corporate emissions reporting that will stand up and can be put into practice. This legislation should progress through the Oireachtas this year in order that by next year Ireland will be in a position to have teased out any issues that exist in order to ensure we have best practice in terms of corporate emissions reporting. That would mean that we would be positioned to be ahead of the curve.The climate action committee is currently considering the Circular Economy Bill. When the circular economy directives kick into effect and we really start tracking supply chains, when the arrangements concerning environmental and social governance, ESG, supply chains come through and when the directives on corporate sustainability reporting come through, Ireland would be in a position to have put in place good practice and to have skilled up its companies to make them ready to lead in driving best practice across the EU and in accessing contracts in respect of ESG. This is because the companies would have a clear mechanism. There would not be an ad hocapproach. At present, some companies are tracking things in their own way. It is ad hocin that the companies are tracking using different mechanisms. We do not have a clear State role in that regard so we do not have clear marking of how emissions are tracked in the State. This relates to those who are trying to make crucial choices within companies. There is a lot of focus on the consumer choice. Sometimes there is an excessive focus on the consumer choice point, but we really need to think about choices within company management and boards of governance. Those in company management do not have consistent information about their own company, nor do they have, crucially, comparator information they can look to across the sector so they can learn from best practice. Since being held to account is not being anticipated, it is harder for companies and individuals on boards of governors who want to prioritise these issues to push them up the agenda and make the case internally for better and best practice and for more environmentally sustainable practice.

I wanted to highlight that this is an opportunity. By delaying for one year, we are not only delaying the opportunities that would flow from this Bill and from Ireland leading on this matter but we are also creating jeopardy. There can be a danger if emissions are not to be tracked for another year or two. It will take time, even after the Bill passes, to put the arrangements in place. We could end up with companies recognising at the last minute that they are required by Europe to do reporting and not having what they need in place. When this happens, it results in the kinds of situations we are seeing now, whereby individual sectors are saying they cannot comply because what is required is too hard for them, and that they cannot make the changes. It results in the kind of crisis-framing that is being introduced inappropriately on peat and haulage. It is crisis-framing rather than opportunity-framing.

I appreciate that the Minister of State has engaged constructively but I urge him to look to how we can move forward on this legislation. I wish it were not being delayed for a year. If it is to be delayed for a year, I ask that Government time be allowed when it comes back so it can speedily move through Committee and Report Stages. We have heard a lot about Ireland being a leader. The objective is to make Ireland a leader in this area rather than having it dragging along behind the requirements and doing what it did in the past, that is, making excuses sector by sector rather than embracing compliance and higher standards and leading the way.

The Bill is very clear. It is positive in that it contains offences for those who do not comply, even though I believe they are quite weak. I would like to see them strengthened. It is important that the Bill allows for public bodies to show leadership in this area.

Photo of Eugene MurphyEugene Murphy (Fianna Fail)
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I acknowledge the role of Senator Ruane in introducing this legislation and allowing us to have what I would call a very important debate. I am sure it is in everybody's interest to have this matter discussed and make progress where we can. However, I am inclined to support the Government's proposal to wait 12 months in respect of this Bill. I do not believe this is a delaying tactic whatsoever. I very much share the view that we are making a huge effort to bring Irish society with us to make massive changes in this area, particularly regarding emissions.

I support a lot of what the Senators are doing. I have always said that while it is important to introduce Bills such as this, we cannot browbeat people. The number of people who engage with me regularly on making environmental changes is extraordinary, be it in agriculture or industry. I could name 20 companies straight away that are coming forward saying they are going to do something for environmental reasons. They may have a half an acre of ground on which they want to plant trees. Many companies are progressing with the planting of trees.

With regard to agriculture, I recently visited with the Taoiseach a plant called Easyfix, near Ballinasloe, County Galway. I would recommend a visit to see the technology that is being produced there to help farmers to reduce emissions from slurry and everything else. It is just extraordinary. Companies like this will represent a complete game changer as we move forward.

There is a huge debate in every sector of our society on acknowledging that we have to react to global warming. We all accept that but we should not fail to underscore the massive voluntary effort being made. People are not being pushed and they are listening to the debate. They are listening to all the politicians talking about climate change and looking at new rules brought in by the current Government. We now have targets in law that will have to be met. Many companies will have to adhere to those targets. Many companies, under EU law, will have to come up trumps in respect of their emissions.

The enterprise sector is responsible for 13.3% of Ireland's total greenhouse gas emissions. Sixty-eight percent of this proportion is accounted for by large energy-using companies operating in the EU emissions trading system, EU ETS. The EU ETS is a cap-and-trade system whereby a defined number of emissions allowances is allocated to each installation annually. Companies are required to have an approved plan for monitoring and reporting annual emissions, administered by the Environmental Protection Agency, EPA. This plan is also part of the EPA permit to operate required for industrial installations. The emissions report data for a given year must be verified by an accredited verifier by 31 March of the following year. Once verified, operators must surrender the equivalent number of allowances by 30 April of that year. Failure to surrender allowances currently leads to penalties. The system is EU wide and ensures that Ireland's enterprises are on a level playing field with their European counterparts from a competition perspective, with the subsequent incentivisation of emissions reductions in a market-based system. Currently in the EU ETS, there are 105 Irish installations, consisting of Ireland's largest public bodies and enterprises. EU ETS emissions in Ireland have been steadily declining, having reduced by 20% between 2016 and 2019. Under the EU Fit for 55 package, EU ETS sector targets are expected to be revised to involve a reduction in the order of 61% by 2030 compared to 2005 levels, representing a significant increase on the current target, 43%. Additional proposed changes to the EU ETS include the expansion of the scheme into the maritime sector and the phasing out of free emissions allowances for aviation to align with the UN global carbon offsetting and reduction scheme for international aviation.

There is much more I could say but my time is limited. I do not want to give the impression I am against what the Senators are trying to do today, but I genuinely believe the one-year process will involve a year of consultation, with all of us working together so we do not come across as browbeating, particularly to smaller businesses, which are quite good environmentally-----

Photo of Lynn RuaneLynn Ruane (Independent)
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Small businesses are not included.

Photo of Eugene MurphyEugene Murphy (Fianna Fail)
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It states "fewer than 50 employees".

Photo of Lynn RuaneLynn Ruane (Independent)
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It refers to more than 50.

Photo of Eugene MurphyEugene Murphy (Fianna Fail)
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My apologies. A company employing 50 is still very small. I am not opposing what the Senators are doing but we need time. We need to have proper discussions and consult the industry more. I return to the point that Ireland has now set really solid targets for the reduction of emissions. That is what we have to do. We all acknowledge that. I am sure we can all work together on a process that will ensure we can make further progress. I am sure good will come from this Bill. There are provisions in it that I agree with, but I have a concern. Even when Senator talks about business with more than 50 employees, she should remember that if we put more pressure on many such businesses up and down the country, they might say there are going to get out of employing people in this country.We, therefore, need the correct balance.

As for trucks and all the emissions they produce, yes, we have to make huge improvements, but it should always be remembered that we are an island country and we will always need transport.

Photo of Garret AhearnGarret Ahearn (Fine Gael)
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I thank the Minister of State for being present for this debate. I acknowledge the work done by Senators Ruane and Higgins on the Bill and the Minister of State's constructive engagement on it, which Senator Higgins acknowledged. Like Senator Murphy, I agree with the Government's proposal of a 12-month timed amendment. It would give us an opportunity to discuss this more.

I think a great many of us agree with the spirit of the Bill of driving the reduction in the level of greenhouse gas emissions by companies and public bodies. A series of targeted measures is in place to achieve this objective, largely EU-driven, such as the emissions trading scheme, the energy efficiency directive and the sustainable finance agenda that includes a proposal for a corporate sustainability reporting directive, which is currently being negotiated. Given the scale of the climate challenge, the interconnectedness of economies and the global nature of enterprise, it makes sense to work with the EU on this rather than going on our own.

It is welcome that action in each of these policy areas is ongoing. The 12-month timed amendment will allow for progress at EU level on the corporate sustainability reporting directive in particular. That will achieve the goals of this Bill on an EU-wide basis rather than just in Ireland. Irish enterprises will be required to implement a detailed agenda of transition and change to ensure our sectors are climate-resilient and can remain competitive in a decarbonising world. The new climate action Bill includes an acceleration of measures to achieve the level of decarbonisation now required in the industry sector. The target is for a reduction of 7.9 million tonnes of CO2 equivalent in 2018 to about 5 million tonnes in 2030. Under the Government's Climate Action Plan 2021, an increase in energy efficiency in Irish enterprises of 50% by 2030 will be sought. That is an increase on the previous action plan target, which was 33%. Irish enterprises will be required to implement a detailed agenda of transition and change to ensure they are climate-resilient and can remain competitive in a decarbonising world, including improving the energy efficiency of processes, buildings and transport. The enterprise sector is responsible for 13.3% of Ireland's total greenhouse gas, GHG, emissions, 68% of which are accounted for by large energy-using companies operating in the EU emissions trading scheme.

In April 2021, the European Commission published a proposal for a new corporate sustainability reporting directive to revise substantially the existing non-financial reporting rules. It is currently being negotiated at Council working party level. The main elements of the proposal relate to environmental and social matters, as in the existing directive, with the addition of governance. The proposal aims to extend the scope to large companies, that is, those with at least 250 employees and all companies listed on the regulated markets. It requires the audit of reported information and introduces more detailed reporting requirements and a requirement to report according to mandatory EU sustainability reporting standards. It also requires companies to digitally tag the reported information so that it is machine-readable and feeds into the European single access unit envisaged in the capital markets Union action plan. It is expected that the new obligations will be phased in in order that companies will publish their first reports according to the mandatory standards in 2024. That will cover the financial year 2023. That will coincide with the proposed introduction of the requirements in the Bill.

As legislators, we need to map out a clear and constant path in order that Irish enterprises can make the right decisions on investment for the future. Proceeding with national legislation ahead of EU developments at this time would be very costly and confusing.

Photo of Pauline O'ReillyPauline O'Reilly (Green Party)
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I welcome Senator Ruane's Bill and I also welcome the Minister of State. The Bill would require companies operating in Ireland to make annual disclosures of greenhouse gas emissions caused by their activities within the State. As many have said, that is not unusual, and there is already a directive in that regard, but this Bill would go further than the directive, and that is important to point out. Whereas the directive refers to 250 employees, this Bill refers to 50 employees as the starting point. Disclosures would have to include plans to bring the company in line with the Paris Agreement commitments. There would be fines of up to €50,000 for companies not complying with the Bill, and a log would be kept of those fines. The Bill is modelled on the gender pay gap legislation, which has a similar model of reporting and which also has such a phased approach to companies to help small and medium-sized companies to put in the investment to get the returns.

As I said, I welcome the Bill. We made a submission as a party to the consultation on the directive. A lot of the work on that was done by Senator Garvey and several other party members. We argued then that, while the directive was an improvement, the EU should push for much more than it was initially proposing, including metrics having a clear focus on absolute emissions reductions, a much wider focus on social sustainability and natural capital metrics. Companies would have to show how they were preparing for a just transition, for instance, and statements on the climate literacy of the company's board would be required. This Bill is timely in light of the directive and I hope it will influence the EU in drafting its own directive. That is what is important about bringing the Bill to the floor of the Seanad.

I wish to address some of the commentary on emissions reporting generally, where the focus tends to be negative and on what companies have to pay. However, reporting of emissions is a huge opportunity for companies. It allows those already leading the way to show their customers that they are greener choices. While it is envisaged that complying with the new directive will require investment, the costs of corporate climate inaction are far greater. We think we could run the risk of SMEs becoming uncompetitive if they do not report and change their business practices and leave them unprepared for climate risk and the transition. Of course, they need to be supported to do this by Government policy. I believe they are but I also believe that the directive and this Bill would be part of that support. We on the Joint Committee on Climate Action considered this in the context of regulations in respect of the circular economy. It is important we have regulations in place because, unless we do, there will not be a level playing field for all companies. If not, companies that are ethically responsible and greener will put investment in and those that are not will not. That is why it is important for everyone to be on the same pitch, and that is why this Bill and what the Government is doing in this regard are important. That is, in substance, what we say in our submission on the directive. Companies tell us this would support them to meet these regulations because it would allow them to compete with others.

The Greens are supportive of the Bill. It is on the record that we have already put in a submission. The Minister of State should have a look at it.

Photo of Lynn BoylanLynn Boylan (Sinn Fein)
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Cuirim fáilte roimh an Aire Stáit. I too welcome the Bill and commend the Senators in the Civil Engagement Group, Senators Ruane and Higgins, on their work on it. Many of us who campaign on climate issues have seen that the focus on individual actions is far too strong on encouraging the use of keep cups and other tiny efforts. The hypocrisy of that approach is made clear by the ongoing data centre debacle. We have a Government encouraging ordinary people to use less electricity while it offers massive tax incentives to tech companies to ramp up consumption through data centres.We also know that the focus on carbon footprints of calculating the carbon cost of every purchase is playing right into the hands of the fossil fuel industry, which has spread the idea because it has deflected attention away from their activities. We are aware from the carbon inequality report that not every individual's emissions is the same. The top 10% of earners generate the same emissions as the bottom 50% of earners. Even the focus on high-emission lifestyles pales in comparison to the emissions by companies. The Carbon Majors report pinpointed how just 100 companies are responsible for 71% of emissions since 1988.

This is where this Bill comes in to compel companies to report their emissions and plan how they are going to reduce them. It places the burden of the climate crisis closer to where it should be, which is on the companies responsible.

The transparency and accountability measures in the Bill go a long way to tackling the avalanche of green washing and spin from companies that are doing very little for the climate but which are trying to convince us otherwise. I raised the issue previously in this Chamber of greenwashing in the electricity sector, where energy companies market their energy as 100% renewable when in reality is it is generated from fossil fuels. This sort of greenwashing is difficult to tackle because it has the sanction of the EU and the energy regulator, and it is backed up with complex reporting obligations. I raised this with the Minister, I raised it with the Competition and Consumer Protection Commission, and I have raised it with the Advertising Standards Authority for Ireland. Despite the fact that these institutions are supposed to protect citizens from greenwashing, it continues unabated. The problem with climate action is too often we are guilt-tripping people into trying to do their little bit when the system around them is designed to mislead them or force them in the direction of carbon intensive activity.

I believe there is a lesson there with regard to implementation of this legislation because even with the best will in the world, companies can ensure that it is watered down as much as possible when it comes to implementing it. We must stay vigilant about this if the Bill progresses. I read in the Business Postthat the Minister of State does not plan to oppose the Bill in principle but that he will not advance it because EU legislation is forthcoming. Again, we have heard from others that the EU legislation is for much bigger companies. If the EU legislation is weaker than this Bill, which is too often the case, the EU's ambition will be a ceiling but a floor. There are reports that the EU proposals will apply to much larger companies, but I believe there is no reason Ireland cannot do this on a national level and lead as a country, rather than always having to rely on the EU to do everything for us when it comes to the environment.

Another example of corporate greenwashing is Amazon, which claims to be going 100% renewable. Again, it is based on the same wishy-washy offsets that allows for greenwashing in the energy sector. If someone googles the Amazon web service, they actually say that they are doing their bit for climate action by helping fossil fuel companies extract oil and gas faster and to transport it across the world faster, thereby reducing their emissions. That is the kind of twisted logic of some of the corporations we are trying to deal with. I take this opportunity to express solidarity with the Make Amazon Pay campaign where workers and activists are rising up with strikes and protests against the activities of Amazon.

On voluntary reporting, some companies do make voluntary efforts to report their emissions, but again it goes back to the lack of transparency and the obligation to complete a full assessment of scope 1 to scope 3 emissions. It is very difficult to hold the companies to account. This Bill would go some way to addressing that. I will quote Ali Sheridan, who recently highlighted the damaging impact of voluntary climate reporting. Ms Sheridan refers to it as the "black hole theory" of corporate sustainability and states:

The company continues to contribute to climate change, pressure grows for the company to respond, the company releases strategy focused on offsets and future technologies, the company then receives high ratings based on these stated intentions and receives more investment, investment then flows to business-as-usual operations, small actions are championed to give the perception of progress, and alternative sustainable models of transformation are actually inhibited. The company delays climate action and continues to contribute to climate change.

And on and on it goes.

The provisions in this Bill will be welcome in the ongoing battle against this sort of greenwashing by standardising how the emissions are reported so that we can compare them, and by revealing what reductions are being delivered year-on-year instead of just relying on vague promises based on offsets. The Bill will bring some welcome transparency and accountability to emissions reductions by companies. I am very happy to support the Bill, and my Sinn Féin colleagues also support it.

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

Photo of Lynn RuaneLynn Ruane (Independent)
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I thank the Minister of State for his very considered response. I acknowledge and am thankful an official amendment has not been tabled to delay the legislation by 12 months and that the relationship is built on trust on the basis of the way we have collaborated to date on it. I and my Civil Engagement colleagues have no interest in ever rushing legislation through that would be voted down at some stage unnecessarily when we can engage with each other with live legislation that can be brought back to the House at any time. Sometimes when legislation is not timebound to 12 months it acts an incentive for us to more actively engage in it rather than saying it cannot be read again until the end of 2022, which means it feels somewhat dead in terms of our feeding into it. That fact that it will not be officially delayed by an amendment means we can continue to work together collaboratively on active legislation on the floor of the House. That allows for a better and more robust engagement between ourselves and the Minister of State’s Department. I am glad there has not been an official delay. I signal my intention not simply to retable the Bill within a few months without engaging constructively with the Minister of State and on the EU directive that is due.

I will make a few comments on the Bill. With due respect to Senator Murphy, I did not like the use of the word "browbeat" in terms of it meaning intimidation. We cannot really intimidate large firms.

Photo of Eugene MurphyEugene Murphy (Fianna Fail)
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I did not mean that. That is a fair point.

Photo of Lynn RuaneLynn Ruane (Independent)
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It is that type of language I do not accept. We have introduced legislation, which is fair and well thought out, and can act as an incentive and tool for our accountancy firms. If we are first out of the traps on developing the way we report emissions, that is a skills set and a resource for the rest of Europe that will support us in introducing reporting. Our companies can export that level of skills and the building of the system and framework, which will be required to report emissions. We ensured the requirement for companies of the largest scale to report would be implemented in the first phase and the requirement for smaller companies to do so would not be implemented until phase two and phase three. There is a phasing in. We hope the system would be built on the back of the largest firm with the best and biggest capacity to resource the building of the systems to report emissions. We did that bearing in mind the pressures companies are under to ensure there was a phased system of implementation. The Bill can act as that blueprint.

We made sure the legislation followed what is provided in the gender pay gap legislation The framework in this legislation is already replicated in Government legislation and companies are already required to feed into that. It is something they will be used to. We stayed as close to that legislation as possible in this Bill to make it as easy as possible for people to engage with it.

I thank the Minister of State and his officials. I look forward to continuing to engage on this over the next 12 months especially as France takes on the EU Presidency next year. As I said in my opening contribution, France is the only other country to have legislation on reporting emissions. In our past conversations on the Bill we spoke about the fact it is ideal France is in that position, as it will hopefully see this as a priority, and that our timeline for this legislation should match very well the timeline within the EU. If there are parts of the EU legislation that need to go into this legislation we will always be open to amending it. As I stated in the past, I am not overly precious about having to own legislation. If the Government introduces legislation in the meantime that reflects these same principles, that would be brilliant and we would fully support, welcome and encourage that. I thank the Minister of State and his officials for all their work on this to date. I also thank all the Members for their engagement on the legislation today.

Photo of Mark WallMark Wall (Labour)
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The Minister of State wants to make a further contribution.

Photo of Robert TroyRobert Troy (Longford-Westmeath, Fianna Fail)
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I reiterate I have ambitions of sustainability reporting and want to see Ireland taking a lead role in this area. I cannot speak in much detail about the member state negotiations but I can say they are under way and are being attended by officials both from Dublin and Brussels. As a member of the EU, Ireland plays its part in developing these laws for all member states and for the whole of the Internal Market. I genuinely believe this Bill will feed into those negotiations. I am not saying this in any way condescendingly but I acknowledge what the Senator and those in her office have done during the past 12 months. I acknowledge she has not brought this legislation to the House on a whim. She has put a lot of time and effort into making sure it is good legislation and that will feed into the work we are doing.

The challenge for the co-legislators of the European Union is to introduce these new and far-reaching proposals in a timely, clear and consistent way, to give the maximum relevant information possible to investors, consumers and other stakeholders and minimise any unnecessary burden on companies. We need to map out a clear and consistent path in order that Irish enterprise can make the right decisions on investment for the future. If we are aligned in our ambition for change, proceeding with national legislation ahead of EU developments would not be right at this time and could be counterproductive. This directive will be coming through very quickly. We have a major opportunity to influence and shape what is coming from Europe. As I said, that is something we will do.

The Government has set ambitious climate goals for Ireland over the coming decades and those are goals we must meet. They are enshrined in legislation and there is no getting away from them. The new corporate sustainability reporting requirements, along with other measures outlined in the new climate action plan, will help us achieve those goals.

While initially I was putting forward an official amendment, I took on board the Senator’s bona fides. When she rang last night she said she would not be pushing this legislation without consultation and working with us on it. We want to get it right. Hopefully as I said to the said to her on the phone, it is not my intention she would have ever had to read this Bill a second time in 12 months. We want to have so much work done that she would feel it was an unnecessary use of her coveted Private Members’ time in the Seanad. We will work together collaboratively over the next 12 months to ensure we have reached our ultimate ambition. I have no doubt we will agree on a lot and disagree on some things but, ultimately, working together is a better way to progress this forward. I thank the Acting Chairperson for his flexibility in allowing me in a second time.

Question put and agreed to.

Photo of Mark WallMark Wall (Labour)
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When is it proposed to take Committee Stage?

Photo of Lynn RuaneLynn Ruane (Independent)
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Next Tuesday.

Committee Stage ordered for Tuesday, 30 November 2021.

Sitting suspended at 2.09 p.m. and resumed at 2.30 p.m.