Irish companies are directing more attention to sustainability as expectations and pressure continue to build, according to a new report from EY Ireland. Eighty-one percent of companies reported increases in efforts this year, EY Ireland found from a survey of 200 senior decision-makers across both the public and private sectors of Ireland. These needs to grow through sustainability underscore expectations from the society and are now set at the fundamental basis of enhancing business growth, capital access, and resilience.
The report highlights an astonishing 19% increase in focus on sustainability compared to 2022. Irrespective of the challenges ahead, Irish businesses are increasingly positioning themselves on the global sustainability agenda, with ESG initiatives emerging as a critical determinant for the strategies of the corporates. This necessary speed behind the change comes from the rising awareness that sustainability can critically impact the bottom line as well as long-term prospects of a company.
A Slow Transition to Sustainability
A survey by EY Ireland indicates that the commitment of businesses to sustainability in Ireland is growing. According to it, out of the polled companies, 81% strengthened their efforts in this year compared to 62% in the year 2022. That reflects an uptick in the emphasis of businesses on sustainable practices in general. Besides, ‘established or better’ were rated to describe the business’s sustainability efforts by 74% versus 61% in the previous year. It is impressive that 15% of the companies describe their sustainability practices as ‘industry leading’, representing a doubling of the figure from last year. However, in this respect, 35% of businesses still feel they haven’t done enough and thereby admit that even more needs to be done to meet stakeholder demands and global standards of sustainability.
“The change we are seeing among Irish businesses is really encouraging. There is now greater, more evident understanding of the critical role that sustainability plays in business success – both financially and in resilience,” said Derarca Dennis, EY Ireland Partner and Sustainability Services Lead. “Businesses are not only addressing their environmental and social responsibilities but also looking to how sustainability can best help them thrive in this changing market.”.
Drivers of New Commitment
There are several forces driving this new commitment to sustainability. Much of the new interest is driven by rising stakeholder expectations. Two-thirds of the companies surveyed report that questions from stakeholders about their firms’ sustainability practices have risen year over year, from 49% last year. Increasing pressure to act comes from the fact that almost six in ten companies believe that ESG commitments are necessary for access to capital. This is the shift in attitude of investors that shows a growing relationship between sustainability and financial performance as more investors look for companies that have an edge in responsible and transparent ESG practices.
Mergers and acquisitions are also driving the scale of sustainability evaluations. Some 30 percent of businesses today review the sustainability status of target companies as part of M&A considerations, meaning that ESG metrics are increasingly becoming a key part of due diligence across companies.
Challenges on the Horizon
While the interest in sustainability continues to build momentum, Irish business continues to experience significant challenges in this domain. On of the most trying headaches for businesses continues to be the imposition of EU regulations like ETS and Corporate Sustainability Due Diligence Directive, which are complex. According to the report, 65% of companies are concerned about compliance with the EU’s Emissions Trading System while 62% are worried about the Corporate Sustainability Due Diligence Directive-the tool for ensuring businesses are held responsible for human rights and environmental issues in their supply chains.
Another increasing concern, one that has become the birth of false ESG statements, also referred to as greenwashing. Concerns over greenwashing come in at 35% of companies, while communications were up from last year’s 13%.
Concerns over greenwashing also indicate that the need to ensure business sustainability claims are not only transparent and verifiable but are not necessarily action.
Supply Chain Responsibility and the Role of Technology
Supply chain responsibility is another focus area for businesses to target their efforts. The new regulations by the EU have recently widened the scope of accountability to suppliers, forcing businesses to acquire and verify data related to the sustainability of their supply chains. According to the report, 50% of businesses have already implemented supply chain tracking technologies. The development is a milestone toward compliance with the sustainability regulations.
As sustainability expectations continue to rise, Derarca Dennis emphasized that businesses must engage with their suppliers and set up strong sustainability reporting systems. Technology will be key in enabling this engagement and ensuring that the businesses meet the demands of regulation while driving sustainability across their value chains.
Conclusion
Expectations are building from the various stakeholders, investors, and regulators for improved sustainability efforts in Irish business operations. This rising attention to ESG factors can no longer be seen merely as an evolution in corporate reputation but forms an important tool in achieving long-term financial growth and resilience. Improved adoption of sustainable practices and leveraging technology in enhancing transparency and accountability are moving the bars of a greener future for businesses in Ireland.
For a comprehensive analysis, read or download EY Ireland’s State of Sustainability report here.