How high ethical standards can drive the ESG agenda for Irish businesses

The need of the hour is to build processes and controls that can turn ESG programmes into long-term value creators.

In brief

• Independent corroboration can turn strong ESG performance into a long-term value creator.
• Organisations that exaggerate their ESG credentials are exposed to reputational damage.
• Society expects business to report on all of its impacts.

Environment, social and governance (ESG) reporting has become increasingly important for businesses in recent years. Customers, investors, financiers, and society at large now expect companies to report on the non-financial aspects of their operations in much more formal ways. That pressure can be harnessed to energise an organisation’s integrity agenda.

ESG reporting goes beyond the Corporate and Social Responsibility (CSR) reports which most people are familiar with. People now want to know how the core business of the organisation impacts the planet and its people. They also want details of the impacts of non-core aspects, downstream and upstream, across the entire supply and value chains.

The environment is providing the impetus for the establishment of recognised frameworks and standards such as the Global Reporting Initiative of the Sustainability Accounting Standards Board or the newly established International Sustainability Standards Board.

“Our Climate Change and Sustainability Services team has seen a marked increase in the demand for independent verification of ESG reports,” says Derarca Dennis, EY Ireland Assurance Partner. “We expect this will become the norm in the near-term along with harmonisation of sustainability accounting standards,” she added.

The EY Global Integrity Report shows that “greenwashing,¹” however artfully delivered, is increasingly ineffective at convincing ever more sceptical employees, customers, and other stakeholders of an organisation’s supposedly superior ESG credentials.