The new guidelines include disclosures on biodiversity, climate impact, corporate governance and sustainability practices. The inclusion of so-called Scope 3 emissions – the indirect emissions in a company’s value chain – is a significant step and will affect many small Irish businesses that supply the larger corporations.

In recent years, investor attention to environmental, social and governance (ESG) issues has made international headlines, driven by the increasing number of mandatory ESG regulations around the world, with more on the horizon.

This year’s Top 250 Companies in Sustainability include many corporations such as Apple, Google and Facebook, but also many EU companies such as Schneider Electric, Nike, BMW and Roche, as well as many other global heavyweights that are driving the sustainability movement.

In March of this year, the U.S. Securities and Exchange Commission (SEC) finalized changes to regulations and reporting forms to ensure consistent, comparable and reliable information for investors regarding ESG factors.

Meanwhile, China is aiming to overtake the US or even the EU and become a global leader in corporate sustainability reporting. Earlier this year, the country announced new ESG reporting standards for companies listed on the Shanghai Stock Exchange, Shenzhen Stock Exchange and the Star Market. In addition, the country requires companies with dual listings abroad to disclose ESG information, including Scope 3 emissions.

China’s new reporting standards could have significant global implications.

If Chinese companies that are already competitive today are also considered pioneers in this field, they could be even more successful than before.

Other countries are also introducing ESG-related disclosure laws, including the UK, Japan, Singapore, Canada and Australia.

For many CEOs, the negative impacts of climate change on companies are already having a visible impact on their customers, and understanding ESG risks is becoming increasingly important for investment decisions.

However, as always, it is a difficult balancing act to create corporate growth and shareholder value while supporting ESG efforts.

Corporate leaders and investors have long called for greater transparency, trust and consistency in ESG reporting. However, a mix of voluntary frameworks and standards makes reliable performance assessment almost impossible.

It is hoped that while the EU Sustainability Reporting Directive will primarily affect Irish and European companies, it will also impact companies in the US, Asia and beyond, leading to a more consistent global standard.

Initially, this is likely to lead to an increase in the reporting obligation for large listed companies, which will be required to publish from 2025. Later, the obligation will also be extended to small and medium-sized companies, which will have to report for the first time from 2027.

Companies – both small and large – subject to EU sustainability reporting will have to take time over the course of 2024 to implement processes to ensure compliance.

Business Minister Peter Burke said the EU regulation provides companies with a helpful structure to produce their sustainability reports clearly and consistently.

While EU sustainability rules primarily apply to large, listed companies, Burke has also released a new policy statement that will hit small businesses that rely on the support of their local corporate headquarters across the country.

The new directive introduces climate-oriented assessment criteria for capital grants for manufacturing companies and internationally traded service companies.