5 minute read 22 Apr 2022
Diver diving in ocean

Why better understanding of the challenge is stifling climate action in Irish business

By Stephen Prendiville

EY Ireland Head of Sustainability

Senior Infrastructure and Sustainability Leader dedicated to disruption, resilience and network system thinking for public and private sector clients alike.

5 minute read 22 Apr 2022

The EY State of Sustainability (SOS) Report 2022 has revealed an increased level of appreciation among the Irish business community for the scale of the sustainability challenge facing them, but that heightened understanding has created a lack of confidence that goals can be achieved.

In brief
  • Awareness of sustainability increases, but confidence is down.
  • Sustainability efforts predominantly motivated by compliance.
  • Irish businesses are failing to see opportunities for value creation.

Overall, 64% of respondents to this year’s State of Sustainability report said their organisations had either a high or complete level of awareness in relation to sustainability considerations; furthermore, 62% said there has been a significant increase in focus on sustainability in their business in the last year. However, despite the warnings from COP26, the IPCC and others, just 39% say that there is a sense of time is running out on climate action within their organisations.

These results indicate that there is still some way to go on translating sustainability awareness into meaningful action. Indeed, it appears that what actions have been taken have been delivered as a result of a compliance mindset.

When asked to list the key factors driving compliance efforts in their organisations, compliance with regulations and legislation emerged as the clear frontrunner being cited by 28% of respondents. But this desire to be compliant is not necessarily a bad thing. Indeed, compliance should be expected to grow still further in importance in the coming years with the introduction of the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD), and Taskforce for Climate-Related Financial Disclosures (TCFD) and other measures.

How they measure or assess their compliance levels must be called into question. Less than half (48%) of the organisations surveyed said they engage a third party to provide some assurance of their sustainability reporting while the number of organisations with systems in place to record sustainability-related data remains disappointingly low at 58%.

A significant minority therefore have no real way of knowing if they are compliant or not.

That paucity of metrics may be explained by the perception of sustainability measures as cost increasers rather than value generators. Just 36% of respondents said their organisations had seriously considered the opportunities for value generation from sustainability or net zero strategies while only 40% said that their company's sustainability efforts have positively impacted the bottom line.

This suggests that a majority of organisations do not believe there is real value to be gained from sustainability actions. Indeed, a very small minority of respondents mentioned bottom line contributions as drivers of sustainability measures with only 7% citing improved competitiveness; 2% mentioning customer appeal; and none whatsoever pointing to profit growth.

This flies in the face of international evidence that businesses which perform well on sustainability metrics tend to do better than their peers when it comes to attracting capital, winning new customers, recruiting and retaining top talent, and a range of other measures.

There is therefore a need for a change in mindset among the leadership of many Irish businesses. The evidence is there that they understand the nature and scale of the challenge, but do not yet appreciate the real benefits of taking action to meet it.

The overall conclusion is that much work needs to be done if Irish organisations are to meet the sustainability goals set for them by governments, regulators, investors, customers and society at large. Former President of Ireland Mary Robinson has described the climate challenge as the moonshot for this era. Just as President Kennedy set an eight-year timetable for his country to land a man on the moon, we have the same timescale available to meet our 2030 decarbonisation targets.

Let there be no mistake, we have a steep mountain to climb, and we are standing at the foot of it at present. However, the evidence from the SOS Report for 2022 is that organisations do understand the scale of the challenge. That is an important first step but understanding now needs to be converted into action.

Summary

As they understand the scale of the challenge, Irish businesses are overlooking the value-led opportunities presented by sustainability.

About this article

By Stephen Prendiville

EY Ireland Head of Sustainability

Senior Infrastructure and Sustainability Leader dedicated to disruption, resilience and network system thinking for public and private sector clients alike.