Irish businesses are increasing their focus on sustainability according to the latest EY Ireland’s State of Sustainability report, as an increased understanding of sustainability, its impact on the bottom line, and a desire to create a more sustainable business approach becomes embedded across the economy.
At a time of growing scrutiny around transparency and authenticity of sustainability credentials, business leaders are also reporting a rise in concern around accusations of greenwashing, as well as increased prioritisation of sustainable practices by investors in the capital markets, directly linking ESG performance with financial opportunity.
The report, which surveyed 200 senior sustainability decision-makers across the public and private sector in Ireland, reveals that 81% of respondents report a heightened focus on sustainability over the past year, a 19% increase from the last survey in 2022. This is the largest percentage increase noted in the study, indicating that Irish businesses are now making a significant commitment to sustainability. The findings suggest progress is being made by Irish businesses when it comes to sustainability, as 74% of respondents rate their efforts on sustainability as ‘established or better’, a rise from 61% in 2022, and 15% consider their efforts ‘industry leading’, doubling from 7% in 2022. However, 35% of respondents feel their organisation is not doing enough, a notable rise from 17% in 2022, showing that there is still more to do.
Meanwhile, awareness of the negative impact and reputational risks of misleading sustainability claims is growing as 35% of respondents indicate that fear of greenwashing influences their communication strategies, a significant increase from 13% in 2022.
Key sustainability motivations
Increased stakeholder interest, regulations, and perceived bottom-line benefits are key motivating factors driving sustainability in organisations. Almost two thirds (65%) of businesses reported wider stakeholder enquiries about sustainability impact, up from 49% in 2022. More than half (58%) believe demonstrating a greater commitment to sustainability is necessary for them to get access to capital and 36% of businesses are looking to improve their position on sustainability by merging with or acquiring another company. Interestingly, almost a third (30%) indicated they are increasingly assessing the sustainability status of target companies when considering a merger or acquisition.
Derarca Dennis, EY Ireland Partner and Sustainability Services Lead says: “It’s very encouraging to see a shift amongst Irish businesses towards a better understanding of sustainability, its impact on the bottom line, and a real desire to create a more sustainable business approach across all sectors. The findings show the link between sustainability and profitability is increasingly influencing the corporate strategies of Irish organisations, including how they approach mergers and acquisitions. As companies embrace this agenda, it’s vital they engage with all stakeholders to create a more resilient and sustainable business.”
Regulatory concerns
Negotiating a path through complex new and existing EU regulations is the leading sustainability-related concern for organisations with the EU Emissions Trading System cited as a cause for concern by almost two-thirds (65%). That is followed by supply chain due diligence (62%), likely driven by the Corporate Sustainability Due Diligence Directive (CSDDD). More than half (54%) of respondents were concerned about the EU Deforestation Regulation, which has far-reaching implications for what can and cannot be produced or sold within the EU, and plastic packaging-related measures were cited by 46%, relating to the Packaging & Packaging Waste Regulation (PPWR).
The regulation which is of the least concern is the Corporate Sustainability Reporting Directive (CSRD), cited by just 15%. This is likely because many organisations believe they are prepared to meet CSRD and International Sustainability Standards Board (ISSB) reporting obligations. 52% said they are either very prepared or have established reporting practices in place, while just 10% said their organisations are not prepared at all.
Supply chain responsibility
Sustainability regulations such as CSRD and CSDDD are designed to make organisations more sustainable by making them responsible not only for their own impacts but also for those of their supply chains, so it is not surprising to see that 62% of respondents cite supply chain due diligence as their biggest sustainability-related concern.
Levels of engagement with supply chain suppliers on ESG reporting by organisation varies. 26% have not engaged with their supply chain on ESG reporting at all to date, while 19% of businesses have had initial conversations and 17% have had advanced discussions about the importance of collaboration.
Encouragingly half (50%) of all organisations have technology solutions in place to gather data from their supply chains for compliance purposes while 32% have systems to gather information in order to assess the ESG performance of their supply chains.
Derarca Dennis says: “Given the growing demands of regulators, investors and consumers for sustainable supply chains, organisations that have not yet started engaging and collaborating with their supply chains run the risk of being left behind. We need to continue to see more organisations having advanced discussions with suppliers and putting sustainability reporting systems in place. Technology will have a critical role to play in supply chain engagement. Vast amounts of data from disparate sources will need to be collected, curated, analysed, and put into a form that meets regulatory standards. There is a huge opportunity for companies that want to get sustainable procurement right.”
