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Stemming the tide of greenwashing lies
Sustainability credentials are big business in 2024, but not all are genuine.
 Being green is big business. Consumers<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Consumers</span>
</span> will pay a premium for sustainable products and investors are increasingly looking to invest in companies that are perceived as sustainable. Banks also want to lend to businesses showing green credentials.
38 who invested in, or covered, companies in Ireland.  Ninety-seven percent of this 38-strong cohort believe that corporate reporting on sustainability performance contains unsupported claims. Globally, the corresponding figure stands at 94 percent. The characteristics of greenwashing So, what is greenwashing?
 It can be unintentional.
 Or, it can be intentional greenwashing, such as the Volkswagen scandal, whereby the German car manufacturer was found to have intentionally rigged its emissions testing to deliver greener results.
13 billion off its capitalisation. Greenwashing has become so prevalent that Planet Tracker, the UK-based sustainable finance think tank, has identified six distinct types: greencrowding; greenhushing; greenlabelling; greenlighting; greenrinsing; and greenshifting. Greencrowding is where an entity adopts a group initiative, such as forming an alliance, and then progresses at the pace of the slowest participant. While collaboration with other entities in a similar industry to create goals for sustainability initiatives can be beneficial, joint statements need to be clear about what will be achieved. Otherwise, tracking progress can become challenging. Greenhushing is where entities deliberately underplay, under-report or hide their environmental, social and governance (ESG) or green credentials to evade scrutiny because, for example, their sustainability practice might not be as impressive as claimed.
Greenlighting is where an entity focuses its marketing on a particularly green feature of its operations or products, diverting attention from other damaging environmental practices. Greenrinsing is where entities modify their ESG targets before they are achieved, thereby avoiding being held accountable for, or actually achieving, their goals. Greenshifting is when entities imply that the consumer is at fault and shift the blame on to them. The potential effects of greenwashing The effects of greenwashing vary from fairly harmless to potentially very serious. The more Consumers<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Consumers</span>
</span> hear about greenwashing, the less likely they are to believe any green claims made by companies and organisations as is evidenced in the PwC Investor Survey, outlined above. Consumers<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Consumers</span>
</span> purchase sustainable goods and services to play their part in protecting the environment, but greenwashing disrupts this, and Consumers<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Consumers</span>
</span> become cynical. Furthermore, entities engaging in greenwashing tactics potentially harm not just themselves, but all other entities engaging with sustainable practices and particularly those companies with genuine green products or operations. Once trust is lost, it is hard to regain.  EU actions to mitigate greenwashing Regulation to prevent greenwashing has, until recently, been limited. Much of the enforcement has been performed by advertising regulators who have moved to ban misleading greenwashing ads, for example.
Advertising Standards Authority<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Advertising Standards Authority</span>
</span> on the basis that the claim was unsubstantiated.
ASAI found that this was likely to mislead consumers due to the omission of a comparison with any other mode of transport. The ASAI then concluded that the claim should not be used again in its current format. The European Union<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">European Union</span>
</span> (EU) is very focused on reducing greenwashing and lending transparency to corporate behaviour.
Sustainable Finance Disclosure Regulation<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Sustainable Finance Disclosure Regulation</span>
</span> (SFDR), introduced in 2021, requires financial market participants and financial advisors to evaluate and disclose sustainability-related data and policies at entity, service and product level.  The aim is to provide standardisation of the language used and to categorise investment products by how sustainable they are. Disclosure requirements are applied to each category.  Under the SFDR, all Funds<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Funds</span>
</span> are classified into one of three categories: Article 6 Funds<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Funds</span>
</span> need not incorporate any sustainability information into the investment process (for example, oil producers). Article 8 Funds<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Funds</span>
</span> should promote environmental characteristics and have good governance practices.  Article 9 Funds<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Funds</span>
</span> should make a positive impact on society or the environment through sustainable investment and have a non-financial objective at the core of their offering.
 Green bleaching can occur where a fund management company does not want to risk non-compliance with the more onerous requirements of Article 9. Therefore, it categorises a fund under a category with less onerous requirements, which results in inaccurate disclosures.
The EU Taxonomy Regulation The EU Taxonomy Regulation is a classification system establishing a list of environmentally sustainable economic activities; essentially, a common language for everyone. It establishes six environmental objectives: Climate change mitigation; Climate change adaptation; Sustainable use and protection of water and marine resources; Transition to a circular economy; Pollution prevention and control; and Protection and restoration of biodiversity and ecosystems. In order to be considered aligned with the taxonomy, an entity must adhere to at least one of the environmental objectives and the related technical criteria, do no significant harm to the other objectives and meet minimum safeguards regarding human and labour rights. Disclosure obligations will apply from 1 January 2024 with respect to the 2023 financial year. In theory, this should create security for investors and help companies become more climate friendly.
 While it has not been stated that the CSRD will specifically prevent greenwashing, it will make greenwashing more difficult, given the significant requirements of the directive. These include the following: The framework underpinning the CSRD is the European Sustainability Reporting Standards<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">European Sustainability Reporting Standards</span>
</span> (ESRS), which is a set of 12 standards covering ESG metrics. Entities will have to report on their ESG metrics, as will their competitors, making information more comparable and therefore more transparent and less prone to exaggeration, omission or suppression. The requirement to complete a double materiality assessment whereby a company must consider its impact, not only from a financial perspective, but also from the perspective of its impact on people and the environment.
There are a significant number of additional requirements over and above those required under the Non-Financial Reporting Directive or the voluntary frameworks, both quantitative and qualitative, which will leave less room for ambiguity and the individual interpretation of sustainability information. Mandatory independent assurance of company ESG information will be required under the CSRD. Initially, this will be limited assurance, but it is expected that reasonable assurance will be required by 2028.
The requirement for external assurance should, above all, bring with it the trust investors have been looking for. As a single framework, the CSRD will bring increased comparability to ESG reporting, greatly assisted by the mandatory electronic XBRL tagging of the report|SPK. Investors will now be able to compare information provided by companies and make investment decisions based on this information, which will be more granular in nature, thereby offering a higher level of detail. Draft Green Claims Directive The Green Claims Directive is the latest piece of regulation introduced by the EU to tackle greenwashing and is an important step in increasing transparency and trust in relation to environmental claims.
 The report|SPK followed a European study in 2020, which found that more than 53 percent of environmental claims in the EU were misleading, vague or unfounded.
Potential penalties, such as a temporary exclusion from public procurement tenders or fines of at least four percent of annual turnover. The directive is due to come into force on a gradual basis, depending on company size, from 1 January 2026.
Our agreement on this (Green Claims) text ends the proliferation of deceitful green claims which have tricked consumers for far too long.
  Regulation will work only if there is enforcement, however. Individual countries need to ensure that they have the processes in place to punish those who do not adhere to the regulations. Dee Moran<span itemscope itemtype="http://schema.org/Person">
<span itemprop="name">Dee Moran</span>
</span> is Professional Accountancy Lead with Chartered Accountants Ireland
Pay & File extension date 2024
Revenue has announced the extended ROS filing and payment date for self-assessed income taxpayers and taxpayers liable to capital acquisitions tax (CAT). The due date for filing the 2023 Form 11 and the payment of taxes is Thursday 14 November 2024. This is also the due date for CAT returns and payments for beneficiaries receiving gifts/inheritances with valuation dates in the year ending 31 August 2024. The extension is available to taxpayers who pay and file through ROS only. Where either one of these actions is completed other than through ROS, the deadline for submission and payment is Thursday 31 October 2024.Â
Making Tax Digital for income tax update sees wider trial due to commence from 22 April
Monday 22 April, we take a look at recent developments in this area. The Institute<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Institute</span>
</span> still has many reservations about this project and will continue to represent members views on MTD for income tax when in attendance at HMRC forum meetings in this space.
 Amended MTD regulations As previously announced, MTD for income tax will commence for unincorporated businesses and landlords with business and/or property income over £50,000 from April 2026. Those with income over £30,000 are mandated from April 2027. In December 2023, HMRC consulted on the amended draft MTD for income tax regulations which Chartered Accountants Ireland responded to. Following this consultation, The Income Tax (Digital Requirements) (Amendment) Regulations 2024 have now been laid.
VAT return filing deadline for those within VAT Stagger 1.  An Update Notice has also been published which sets out the information which will need to be sent to HMRC quarterly using MTD-compatible software.
HMRC will also publish the Software Notice and Notice for joint property owners in the Spring, alongside detailed guidance for each. More information is also still to be published on the digital record keeping and digital links requirements.
25 is to expand the current MTD for income tax trial by encouraging agents to consider which clients can sign up and then to sign them up to participate in the expanded private beta testing trial in 2024/25. This month, HMRC will be sending further communications regarding the MTD for income tax trial to its entire agent mailing list. Overall, this involves a three-armed email campaign which will provide several opportunities for agents to learn more about the testing and how to sign up.  HMRC began sending these comms last month. The next email will then be sent at launch, which will signpost agents towards the updated GOV.UK pages on compatible software, eligibility criteria, and sign-up pages.  However, as of 10 April 2024, there still remains a very limited number of software packages that are available to participate in the trial with just five vendors confirmed, although many are in development, some of which may become available during 2024/25 or later. The Institute<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Institute</span>
</span> recommends that agents carefully consider the advantages and disadvantages of signing up clients to participate in the trial. HMRC has also now published detailed guidance in respect of the penalty regime which will apply when trial participants testing MTD for income tax make late submissions. These changes to penalties only apply during the testing phase and must be agreed to before a taxpayer can be signed up to participate in the trial.
 Step 2 - discuss this with the client and get their agreement before going back into the service to actually sign them up. Note that full client approval is needed to then progress onwards and sign the client up to participate.
We have also published an updated Tax Information and Impact Note<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Tax Information and Impact Note</span>
</span> (TIIN), to accompany the Regulations. Among other impacts, this sets out the latest projected exchequer benefits, operational costs, and customer cost impacts of MTD ITSA. Since we published the last TIIN in September 2021, we have updated the assumptions within the customer costs model. We have also reviewed the methodology and cost assumptions with tax professional bodies and the Administrative Burdens Advisory Board<span itemscope itemtype="http://schema.org/Organization">
<span itemprop="name">Administrative Burdens Advisory Board</span>
</span> (ABAB).  We recognise that there are transitional costs for business in moving to MTD. Both these, and the continuing costs will vary depending on factors such as size, complexity, and digital capability of the business.  Continuing costs   Once implemented, MTD expansion is estimated to increase the total net continuing costs of complying with the tax system for all mandated businesses by £196m per year - about £110 per year, per business. This compares to a previous net cost estimate in 2021 of £152m per year, or about £35 per year, per business. A range of assumptions have been updated since the last estimates, including uplifting costs and wage rates in line with inflation, re-examining time spent undertaking tasks, reviewing the price of software products, and using the latest evidence on record keeping practices.  Transitional costs   The decision to increase the previous £10,000 income threshold to £30,000 means there is a smaller, more digitally able population within scope. We have therefore reduced our per-business estimate for the transitional costs, in comparison to the estimates published in our last TIIN.  We estimate the transitional costs for all mandated businesses will total £561m, which equates to about £320 per business. This compares to £1,383m (about £330 per business) in our 2021 figures. Although the reduction in population size means transitional and continuing costs are lower overall than previously estimated, we recognise that the continuing customer costs per business are significantly higher. We are confident that these updated estimates in the TIIN present a more granular and informed position. These remain estimates, not a definitive statement of costs, but we have used the most robust methodology possible to estimate and set them out in a realistic and straightforward way. ABAB have also advised that they are comfortable with the revised assumptions.  We also know that, whilst there are costs in using MTD, we expect there to be benefits in the future. For example, using compatible software will reduce opportunities for error and help businesses and landlords get their tax affairs right first time. Evidence from MTD VAT also points to the use of compatible software encouraging businesses to digitalise other elements of their business due to productivity benefits. We are committed to extending these benefits to business, self-employed individuals and landlords who are registered for Self Assessment from April 2026. The government will continue to keep the decision on whether to mandate businesses and landlords with income below £30,000 to use MTD ITSA under review, although this group can still sign up voluntarily.
 Turnover less than £30,000 population As announced at the 2023 Autumn Statement, for now, HMRC is not extending MTD for income tax to unincorporated business and landlords with turnover less than £30,000. In February 2024 HMRC published externally commissioned qualitative research conducted with small businesses with turnover between £10,000 and £30,000 per year. Key findings from the research are set out in detail at section 1.3 of the report|SPK.
November 2023 on Progress with Making Tax Digital.
 Several of the PAC's recommendations are underpinned by evidence of work that has already been implemented or which is underway with the overall aim of accelerating towards expanding the testing programme in 2024/25, so that HMRC can fully test its IT functionality well ahead of April 2026.Â
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