Sustainability reporting requirements and initiatives to mobilise capital to support green investments are well intentioned but may not be enough on their own to make a meaningful difference to emissions output. That’s the belief of Dr Seán O’Reilly, assistant professor of accounting at University College Dublin, who has carried out extensive research in the area.
“The Corporate Sustainability Reporting Directive (CSRD) is due to come into force next year for a lot of companies when they will have to report on this year’s performance,” he notes. “A lot of companies still have big issues with that.”
The problem centres on data availability, he explains: “Sustainability reporting has evolved from voluntary, self-reported metrics to a rigorous, standardised practice that is increasingly aligned with financial reporting. This evolution reflects growing stakeholder expectations for accountability and the need for reliable data to assess the long-term resilience and ethical standing of companies in today’s economy.”
In O’Reilly’s view, collecting that data may be difficult. “Companies are expected to capture data on their scope 1, 2 and 3 emissions in accordance with the European Sustainability Reporting E1 standard on climate change,” he says. “Scope 1 and 2 are pretty easy as they are internal. Scope 3 is emissions from the supply chain. You could have a supplier somewhere in southeast Asia and it is very difficult to know how they make things and ship them. How reliable is the data coming from there?”
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Will it make a difference? “It’s well intended but more work needs to be done to get companies to buy in,” says O’Reilly.
Green finance also has its limitations. “Does it make it easier to obtain debt finance if you have better sustainability credentials?” he asks. “I’m not sure if it does. There’s not really that much of a discount and the lenders aren’t really pushing it.”
He believes more needs to be done to push companies towards improving sustainability performance, and that will require a mix of rewards and penalties – the carrot and stick approach, if you will.
“The Government needs to lead on this. Tax credits and subsidies are possibilities for the Government to look at. If something on the lines of the R&D tax credit was introduced, that would be huge. Also, the Irish Strategic Investment Fund (ISIF) should look at an investment fund for cleantech and start-ups focused on green innovation. There is huge interest in that in the investment community. In Ireland we are very good at focusing on particular sectors. Fintech is an example. If we did that with cleantech with ISIF support, Ireland could establish a leading position in the sector.”
O’Reilly’s colleague, Geertje Schuitema, associate professor in consumer behaviour and technology adoption at UCD’s College of Business, has carried out research into public acceptance for sustainability policies and initiatives.
She says very few people disagree about the importance of tackling climate change but getting them to act on it is a different matter.
“Usually if you implement a new policy or programme of change such as a new renewable energy project, for example, if the change is seen as positive people will accept it, but if it is perceived as negative in some way, they don’t want it.”
Those negative perceptions are not always related to the nature of the project or policy and are often linked to its implementation.
“Research has shown that when people feel included and engaged, even if they don’t get what they want they still find the project or policy more acceptable. They want their views to be taken seriously,” says Schuitema.
She points to the introduction of congestion charging in Stockholm as an example of a public engagement process which delivered positive results. The proposal met with huge initial resistance.
“People don’t like to pay extra for driving,” she explains. “Very cleverly, the city government implemented a seven-month trial with a referendum on the measure afterwards. Before the trial, people were very negative. They didn’t expect positive changes in pollution, air quality, congestion and parking. These outcomes were much more positive than they thought. And the congestion charge was not as expensive as they first thought. In the end, a small majority voted in favour of the proposal. This demonstrates how positive effects can help gain public acceptance.”
Applying that experience to Dublin, Schuitema believes that trialling aspects of the transport plan for the city that don’t require infrastructure changes could yield positive results. She points to the success of the deposit refund scheme as an initiative that can be very effective for a relatively small investment.
“There is relatively little effort required to make the change. In return, the consumer gets a payment and the feeling that they are doing something good. That’s an interesting motivator. It’s not necessary to focus only on material gains.”
That will not apply to big investments like home insulation or electric vehicle purchases. “Support is still needed there,” she says. “People seem to need some kind of certainty of what they will get back. The more uncertainty around that, the less inclined they are to make a big investment.”
The education system also has a role to play, says O’Reilly. “I’m of the belief that every single undergraduate and postgraduate programme should have at least one sustainability module,” he adds. “When we asked businesses what supports they need in relation to sustainability reporting, many of them said subsidised courses and educational programmes. Government-funded education programmes would definitely help.
“The UCD Smurfit School already has postgraduate programmes in the area and Smurfit Executive Development has short programmes on various aspects of sustainability. Sustainability reporting is so technical, with so many data points to collect – people need to know how to do that.”