Ireland Seeks Stakeholder Views on the EU Corporate Sustainability Reporting Directive Proposal

Ireland Seeks Stakeholder Views on the EU Corporate Sustainability Reporting Directive Proposal

May 28, 2021, Covington Alert

The Irish Department of Enterprise, Trade and Employment (“DETE”) has announced a public consultation on the EU proposal for a Corporate Sustainability Reporting Directive (“CSRD”). The CSRD was announced in April 2021 as part of the European Commission’s Sustainable Finance Package — see our blog posts on what companies need to know on these developments, here and here. DETE is seeking the views of stakeholders to inform Ireland's negotiating position on the proposed CSRD. 

Corporates that are potentially affected by the proposal in Ireland may wish to note the following in particular when considering responding to DETE’s request for feedback:

• The expanded scope of the CSRD proposal to all large and listed entities. 
• The proposed changes from voluntary to mandatory reporting standards.
• An audit requirement.
• Digitization and ‘tagging’ of reported information.
• The ambitious implementation timeline.

There is a six-week period for responses, which ends on 23 June 2021. 

The consultation in Ireland on the proposed CSRD is structured around a series of questions and requests for feedback on:

1. The expanded scope of the proposed CSRD (compared with the existing EU Non-Financial reporting Directive, as implemented in Ireland);
2. The new listed SME requirements;
3. The sustainability reporting standards;
4. The new role for auditors in assurance of sustainability reporting; 
5. Whether Member States should have the option of providing for independent assurance providers;
6. Digitalizing sustainability reporting via the European Single Electronic Format (“ESEF”);
7. The costs of sustainability reporting both to the existing and proposed entities in scope;
8. The timeframe for implementation of the new requirements; and
9. Any other views on the proposal and its impacts.

Ireland is the domicile for 5.9 percent of world-wide investment funds assets, making it the 3rd largest global centre and the 2nd largest in Europe (EFAMA International Statistical Release, Q3 2020). Given this, the current focus on sustainability, and increased importance to investors, it is not surprising that corporate sustainability reporting and disclosures are increasingly important issues in Ireland. For example:

• KPMG reports that 88 percent of the top 100 Irish companies are now reporting on sustainability; and
• CDP Ireland, part of a global disclosure system, reported an increase of 52 percent in the number of Irish companies reporting on climate change in 2020.

The expanded scope of the CSRD proposal to all large and listed entities, from the more limited existing EU Non-Financial Reporting Directive (implemented in Ireland by S.I. No. 360/2017) will naturally affect a larger number of corporates in Ireland. 

While the consultation document acknowledges the CSRD proposal “does not substantially change the type of information that must be reported, it increases significantly the detail of the information as new EU standards are developed”.

The consultation also states that auditing “will help to ensure that reported information is accurate and reliable” and “should go a long way towards addressing the concerns of investors and other stakeholders about the reliability of the sustainability information that companies report today.” However, it leaves open whether or not Ireland will use the discretion offered in the CSRD proposal to ‘open up’ the sustainability assurance market beyond the traditional auditors – this aspect in particular may have important practical implications.

The timeframe for adopting the proposal, along with sustainability reporting standards, is ambitious, as is the current estimate for Member State implementation (December 2022), with reporting due for financial years 2023 onwards. The Commission’s Better Regulation agenda asserts that good regulation starts with good planning. Companies, particularly those with large and complex organizational structures, may need time to incorporate new clearly defined reporting standards into their business planning cycles. 

*           *           *

For the latest information on the Sustainable Finance Package, of which the Corporate Sustainability Reporting Directive forms part, please refer to our Inside Energy & Environment blog and, in particular, the following posts:

• The EU’s Green Capitalism Takes Shape: Taxonomy Screening Criteria and Corporate Sustainability Reporting
• The EU Corporate Sustainability Reporting Directive Proposal: What Companies Need to Know
• The European Commission Approves the EU Criteria on Sustainable Hydrogen Activities

If you have any questions concerning the material discussed in this client alert, please contact the members of our Environmental practice.