The world is in a better place as a path to net zero emissions has been set in a great many countries; Ireland included. There is cause for optimism on climate action. Green alternatives are clearer; likewise the considerable benefits of sustainability, not just across economies but throughout societies.
Governments, as key policymakers, are getting tuned into the merits of carrots over sticks. There are signs of innovation everywhere with a view to quicker achievement of climate goals.
Particularly with business; arguably the sector pushing on most. Corporations, multinationals, native industries and SMEs are heeding analysis of climate risks being made worse by human activities. This a crisis of now; there is acceptance they have to take responsibility for curbing their emissions and those of their suppliers.
A recent survey by Smurfit Kappa in partnership with the Financial Times indicated sustainability plays a pivotal role in the strategy and planning of senior business leaders across Europe and the Americas. It indicates progress but also implementation gaps.
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Some 50 per cent of businesses have tangible and ambitious plans to achieve net zero by 2050 but only 11 per cent of businesses believe they have a robust and actionable sustainability strategy.
On a more positive note, more than half who responded (61 per cent) say sustainability is changing the way they measure financial performance. Many have started to build sustainability into their leaders’ performance assessments and incentives. This underscores the impact sustainability requirements are already having across businesses.
However, while 63 per cent of businesses believe they have complete transparency on how and why sustainability decisions are made, 29 per cent claim their company’s actions rarely align with the sustainability ambitions they communicate to stakeholders. The gap between stated ambition and action continues to expose businesses to accusations of greenwashing.
The research highlighted the importance of transparency, underscoring how it is central to building confidence among consumers, investors and critical stakeholders – it reinforces credibility.
The research also shows the importance of ensuring consumers are informed, as they increasingly demand clear, reliable information from brands to make better-informed decisions. The three most effective ways to increase transparency among consumers are impact reporting (47 per cent), clearly labelled packaging (43 per cent) and annual sustainability reporting (40 per cent).
EY global head of sustainability law Michelle Davies understands the challenges for corporates and financial institutions in delivering on sustainability at a time when they have so many issues to focus on, including keeping the business afloat
“Organisations need to view sustainability beyond compliance and de-risking the business – so that it’s valuable in today’s globally transitioning market,” Davies says.
To a large extent this is beginning to happen because there is a growing realisation that “those who fail to transition will lose business, becoming non-investable, losing key stakeholders”.
A recent EY client survey found ESG (environmental, social, and governance) among Irish finance leaders is viewed as a responsibility rather than an opportunity, Davies notes. ESG and non-financial reporting have fallen down the critical list, when a sustainability plan must shift “from a nice to have to a must have”.
“Sustainability is one of the defining challenges of our time. In simple terms, every organisation needs to change what it does, or how it does it, to remain valuable in the transitioning global economy,” Davies explains.
“And no one organisation can approach sustainability in a vacuum – it exists in an interconnected world of sustainability. Understanding the sustainability drivers of its key stakeholders in this respect will also be an integral part of its own sustainability success story.”
Tom Marren, chief executive and founder of Astatine, which helps companies identify a decarbonisation roadmap through adopting renewables (especially renewable heat), highlights hurdles arising particularly in Ireland. “Decarbonisation of energy use, especially heat, remains a significant challenge for companies,” Marren says
While they express an interest in decarbonising, he says, “huge education” is needed to ensure that course is pursued, even when they are aware of what can be achieved in terms of reducing carbon emissions with quick payback for their investment in electrical heat – known as “eHeat”.
Astatine specialises in the use of heat pumps to generate industrial heat at considerably higher temperature compared to domestic heating. According to Marren, “eHeat is also a flexible demand that can be controlled to respond to variation in renewable electricity supply.”
Energy utilities, big dairy companies and other food and drinks manufacturers are increasingly recognising its benefits. But Ireland, with 5.7 per cent eHeat, is far behind the EU average of 29 per cent and the Nordics with more than 50 per cent.
For that reason, Marren cofounded eHeat Ireland in 2021, a member trade association to accelerate the decarbonisation of heat through electrification.
It is an all-Ireland body led by industry experts who are committed to promoting renewable electricity to generate decarbonised heat as an economically viable alternative to fossil fuels.
“We want to encourage [the] use of eHeat and to create awareness for how deployment of the technology can support achievement of the 2030 climate action targets through emissions reduction and optimised use of renewable electricity,” Marren says.
Despite coming from a low base, there has been a huge shift in the level of awareness, interest and investment by Irish companies in decarbonisation over the past 18 months, according to sustainability strategy and decarbonisation lead with Deloitte Aoife Connaughton.
Businesses realise the need to transition but the response has been “a very mixed bag” in dialling down emissions, Connaughton says. Only 33 Irish companies have approved science-based targets in place, though this is on a par with global peers.
Once started on the transition path, companies soon learn how demanding it is, especially in requiring person power; resources and executive focus – far from having a stand-alone mid-level manager in charge of sustainability.
Aligning companies to “a 1.5 degree future” (a critical Paris agreement target) is even more arduous, Connaughton says. Nonetheless, she predicts the meat on the bone in terms of high quality transition plans will happen over the next two years. “I’m a lot more hopeful than before that it will happen.”
Climate change is among the top two priorities for CEOs, though for many the hard work has yet to come.
In the Irish context, Connaughton says the 2023 Climate Action Plan “is really welcome... it provides a clear pathway”, and is reinforced by ambition.
The private sector has come to realise it does not set out what they have to do, she says, but their customers, suppliers, investors and other stakeholders are pushing them in that direction. So much gap analysis is required and it is a complex, constantly changing scenario with increasingly demanding compliance requirements under EU regulations.
Therefore multilayered involvement is needed including chief financial officers and those in charge of risk – and should be backed with outside supports. Realisation of what others are doing and peer reviews have to be part of the mix too, Connaughton says.
In drawing up a business case, resources and investment present big challenges, as well as ensuring external funds are drawn down.
Companies recognise the long-term benefits of decarbonising, Connaughton says, especially Irish agri-food businesses, but they can view the case for it from different angles – some, for example, view it from a risk point of view.
The issue is keeping CEOs awake at night as “they see the risk” or fear they may be missing out on something, Connaughton believes. It is hard to put figures on the level of investment required, but quick payback applies in most instances while green funding is plentiful.
Connaughton’s advice to companies comes in two forms; high level and practical. First is to note net-zero commitments highlighted in the UN Intergovernmental Panel on Climate Change report on non-state entities released last year. It provides clear indications of direction of travel, while avoiding greenwashing and use of carbon credits. There is no place for fossil fuels, “and they cannot carbon credit their way out of it”.
Yet there is no need to over-egg the transition, Connaughton says. On the ground, the approach needs to be top down, ambitious and marked by bravery is setting “stretch commitments”. Often there is an upside; better staff engagement and bringing value to their brand. Talent in the form of knowledge and capability is key, while advisory panels including NGOs can be of considerable assistance.
There are many support networks in place, “and loads of industry groups... just join them” – and lots of resources such as Project Drawdown (drawdown.org) which includes proven solutions.
Connaughton highlights the need for quality data and “radical transparency” while companies realise that it also helps in getting a handle on costs.
Understanding that it is all about decoupling growth from rising emissions is essential, Connaughton says – which entails reducing consumption and pursuing different business models.
Yet, she says, a lot of organisations mistakenly believe the market will do what is necessary and “there will be a rising tide, and we will all be fine”. The global imperative to decarbonise quickly is clearcut, “this is not business as usual”.
