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Sustainability Forecast for Irish Businesses 2023

Sustainability is now a crucial part of business strategy, with this focus only set to increase in the coming year. With challenges ranging from a rapidly evolving regulatory landscape to the fight for talent, clear prioritisation is essential to achieving your ESG ambitions.

From the macro trends impacting all businesses to the urgent micro issues requiring your immediate attention, these are the key sustainability trends on the agenda of Irish executives.

We know that the road to becoming a sustainable business can be a challenging one. Our expert teams can provide insight and actionable roadmaps to support you in driving change within your business and help you to assess, address, fund and report with confidence.

For further information, contact our Sustainability Team below

What is it? 

High demand, weakened supply chains and the impact of rising gas and energy costs on manufacturing have had an impact on European industries, specifically the energy-intensives. This poses a serious challenge for organisations aiming to progress their net zero agenda.

What to expect? 

This pressure is likely to be felt for many years to come and we will see differentiated pricing as companies look to price corrections to close the gap. The repositioning of portfolios, production assets and supply chain to optimize margins will emerge and finance will also start to play an important role. Expect to see freeing up of liquidity via working capital reduction and re-capitalisation of assets to ensure short-term funding of the company, while many will look to build a competitive advantage by investing in sustainability technology and new business models. 

Key considerations: 

Companies looking at energy crisis solutions need to fundamentally redesign themselves towards a more sustainable way of working that are aligned to their net zero targets. This should include 360-degrees scenario-based impact analysis; short-term financial security measures such as short-term (re)funding and intercompany pricing optimisation; and mid-term asset, capital and technology planning. 

This requires feasibility studies with clear market impact analyses, as well as knowledge on development of emerging technologies. Alternative renewable energies such as hydrogen, potential new energy transportation systems, and all European and national financial stimulation packages should be explored.  

Transform to React: Climate Policy in the New World Order. Read more >

What is it?

Green finance is any structured financial activity that has been created to ensure a better environmental outcome. This can include green bonds, green mortgages, green credit cards, renewable energy credits, and renewable and sustainable equity.

What to expect?

Mobilising the economic transition to a green, circular, and sustainable economy is expensive. Infrastructure powered by renewable energy, renewable energy production and zero waste products all need financing to assist global economies in aligning with the Paris Agreement. The ECB holds around 20% of all Euro-dominated green debt, indicating the regulators push to further the green agenda and support the growth of green finance.

Key considerations: 

This year will see continued momentum in the creation of green finance products. With growing demand from consumers, linking products directly to green incentives or outcomes is an increasing priority. 

Ingraining Sustainability in the Next Era of ESG Investing. Read more >

What is it?

The COP 27 climate negotiations in November 2022 yielded three key takeaways:

  • Creation of a “loss and damage” fund contrasted by failure to enhance ambition
  • Increased emphasis on private actors
  • The critical role of new and emerging technologies in the green transition

Although some positive strides were made on the climate adaptation front, many commentators were critical of the advances made to climate mitigation, building on commitments made during COP26 in Glasgow and phasing out fossil fuels.

What to expect?

It is expected that the ‘COP’ process will be re-evaluated in advance of COP 28 in Dubai and countries will re-focus on climate mitigations efforts and the 1.5-degree target. Scrutiny on net zero plans will only continue to increase at both a national and organisational level in 2023.

Key considerations:

The role of the corporate sector is becoming an increasing focus in the conversation around national targets and businesses should ensure that they have a clear roadmap to make their contribution. See Transition Planning below for more on this. 

Europe's Turning Point: Accelerating new growth on path to Net Zero. Read more >

What is it?

The Irish Government Climate Action Plan 2023 was launched in December and provides a detailed and ambitious framework by which the Government intends to meet legally binding economy-wide carbon budgets and emissions reductions targets by 2050.

What to expect?

We will need to see emissions start to fall rapidly in 2023 to be in with a chance of meeting the legally binding targets of the Climate Act which will be extremely challenging given past performance.  With c.25% of actions from the 2021 version of the Irish Climate Action Plan currently not meeting their targets and current emissions rising rather than falling, this plan has been described by Micheal Martin as a “blueprint for radical change”.

Emissions reductions focus on six high-impact areas: electricity, construction/residential, industry, transport, agriculture and land use. Ramping up onshore (9GW), solar (8GW) and offshore (5GW) electricity supply will be core to the plan, as well as achieving a 45% emission reduction in commercial buildings and 40% in residential through full compliance with NZEB and ZEB standards and retrofitting 500,000 properties by 2030. 

A 35% reduction in emissions is required across industry, with an increase in carbon-neutral heating, a 30% reduction in embodied carbon in construction materials and growth of circular economy central to this. A “modal shift” in transportation to achieve a 50% reduction in emissions has been one of the most controversial elements, with a focus on driving uptake of electric vehicles and increasing use of public transport.

Key Considerations:

A full annex of the CAP 2023 outlining more detail on the Plan’s actions is expected to be published early this year but organisations can continue to utilise existing resources such as the Climate Action Roadmap (for public bodies). The Climate Toolkit 4 Business allows organisations to get an estimate of their carbon footprint and a personalised plan to reduce it. It will also help to identify bodies, such as the Sustainable Energy Authority of Ireland (SEAI), who can support with funding and efficiency-improvement schemes. 

What is it?  

As the world transitions to net zero, a new category of worker is evolving - the Green Collar workforce.

The required mix of skills, knowledge and experience is new, complex and in high demand. Sustainability does not necessarily require new skills, because many of these skills are available today (such as data analytics, reporting, strategy, financial impact). However, it will require knowledge of ecosystems, carbon emissions, societal impacts - which may not exist in all organisations.   

What to expect?

Increased demand for Science, Technology, Engineering and Mathematics (STEM) expertise but also the requirement to upskill the existing workforce and establish green teams.   

Key considerations:

  1. Roll out baseline technical knowledge for your staff – at Deloitte, we have rolled out e-learning for our 400k staff globally related to climate change
  2. Perform a skills gap analysis for your organisation
  3. Look to avail for upskilling grants where possible - the Sustainable Finance Skillnet has been established to promote the development of these skills. To date, they have secured funding for climate action-related upskilling across the economy, including via the government’s 2020 July stimulus. 

Work Towards Net Zero. Read more >

What is it? 

Biodiversity means the variety of plant and animal life throughout the world. We are increasingly aware of the damage that human activity is doing to our ecosystems, with 1m species globally threatened by extinction. In Ireland alone, 90% of our protected habitats are classified as being in ‘poor’ or ‘bad’ condition. 

The economic importance of biodiversity is clear, with the WEF stating that >50% of global GDP is dependent on nature and various analyses showing that $tn in economic activity is exposed to material risks from ecosystem collapse. 

What to expect? 

A historic agreement, the Kunming-Montral Global Biodiversity Framework, was struck in December to halt and reverse biodiversity loss by 2030, and has been compared to the Paris Agreement in terms of significance. 

The Taskforce on Nature-related Financial Disclosures (TNFD) has also followed the example of the influential Taskforce on Climate-related Financial Disclosures (TCFD) and launched the beta version of the TNFD framework, which is designed to help businesses understand and disclose their biodiversity risks and opportunities. 

Key Considerations:

Engage with TNFD or initiatives run by the Science Based Targets Network to help stakeholders fully understand the biodiversity risks and opportunities for your organisation. Immediate steps include mapping biodiversity risks throughout the value chain and adopting biodiversity-friendly practices, which may also lead to funding opportunities in the near future as banks expand their green funding offerings.  

Starting the business journey to nature positive. Read more >

What is it?

In 2023, it’s not just about setting targets but also outlining just how you’re going to achieve your ESG targets and identifying successes and challenges to date.

ESG and climate-related disclosures will be central to policymakers’ efforts to incentivise transition, and transition planning forms an important component of regulation such as CSRD and TCFD (the latter being mandatory in certain jurisdictions). In the UK, firms will soon have to publish standalone transition plans every three years, building on disclosure and reporting standards.

What to expect?

Regulators will scrutinise not only net zero targets, but transition plans to achieve those targets. These plans can demonstrate how commitments will drive action and provide a roadmap for businesses towards achieving its sustainability ambition.

Key considerations:

Organisations with net zero targets should develop a transition plan. This should include short term (up to 3 years), medium term (3-10 years) and long-term targets on how to transition to net zero by 2050 at the least. It is important to note that developing and implementing the transition plan should be a significant transformation project, rather than just a disclosure exercise. 

Transition Plan Taskforce consultation on “gold standard” transition plans. Read more 

What is it?

The term ‘greenwashing’ became so commonly used in 2022 that was officially added to the dictionary, closely followed by ‘greenhushing’ and even ‘greenblushing’. But while it may be seen as a secondary consideration to other sustainability factors, it carries huge reputational risk for businesses as standards and scrutiny grow.

Examples of greenwashing can include the obvious (such as fossil fuel companies announcing net zero ambitions for 2050 while still expanding production and backing new coal, oil and gas developments) to the more subtle (green colour coding or FSC certified packaging of products that do not align with sustainability practices).  

What to expect?

This year’s COP27 heard a warning that net zero pledges must be “about cutting emissions, not corners” and companies would be wise to take note. Increased regulatory scrutiny on sustainability claims and the need to report on their validity is expected to expand across geographies and sectors.

Key considerations:

Companies and marketing teams must reassess their sustainability claims to ensure they are justified. The EU is working to achieve this change in approach through the Corporate Sustainable Reporting Directive (CSRD), the EU Taxonomy and, in the case of financial products, the Sustainable Financial Disclosure Regulation (SFDR). The UK has a similar objective with their greenwashing regulation ‘Green Claims Code’ and the anticipated Sustainability Disclosure Regulations (SDR).  

The Greenwash Gambit. Read more > 

What is it?

ESG data is rapidly becoming as important as financial data in order to drive strategy and meet reporting requirements. In November 2022, European Parliament and The Council of Ministers approved the final text for a Corporate Sustainability Reporting Directive (CSRD) that radically improves the existing reporting requirements of the EU’s Non-Financial Reporting Directive (NFRD). 

What to expect? 

All EU large companies, EU listed SMEs and certain non-EU companies will be required to report information necessary to understand their impact on sustainability matters (including environmental, social and human rights, and governance factors) and how sustainability matters affect their development, performance and position. These disclosure requirements will be subject to mandatory limited assurance. 

Key considerations: 

Given the substantial regulatory change triggered by the CSRD, preparation for implementation should commence now. Companies are required to put processes in place to assess and measure a wide range of sustainability matters, in order to report under management, board or supervisory body responsibility.

In the near future, focus areas for entities may include;

  • Regulatory reporting roadmap
  • EU Taxonomy eligibility (and alignment) assessment
  • Materiality (double) assessment
  • Risk and opportunity assessment
  • Scenario analysis
  • Control environment review
  • Development of accounting policies
  • Regulatory gap analysis
  • Assurance readiness assessment

Integrating ESG data into decision-making can also enable organisations to manage risks and seize opportunities to innovate in their products and services. While collecting and managing ESG data may be in its infancy, Finance often has the capability and technologies to integrate these new data sets into new and existing reporting and decision-making processes. 

Using Sustainability Reporting to drive behavioural change. Read more >

What is it?

The term ‘gender pay gap’ refers to the difference in the average hourly wage of men and women across a workforce. The mean Gender Pay Gap in Ireland is 11.3% and there is increasing pressure both at a societal and governmental level to address this.  Key drivers of the Gender Pay Gap are more men holding senior roles and long-tenured roles, which are paid more based on the market rates and time in position, as well as lack of female representation throughout the organisation.    

What to expect?    

Following the publication of the Gender Pay Gap Information Act 2021 and the subsequent Gender Pay Gap Regulations 2022, reporting is now mandatory for all businesses in Ireland with over 250 employees. This threshold will reduce to 150 or more employees in 2024 and 50 or more in 2025.  

Relevant employers will have to pick a snapshot date in June of each year and will be required to calculate and publish their gender pay gap data on the same date in December. The calculations are to be based on those relevant employees' remuneration for the 12-month period that precedes the snapshot date. There are a range of metrics to report on including mean hourly wage gaps, bonus pay gaps and the proportion of women and men in different pay quartiles.  

Employers had to disclose their Gender Pay Gap Reports via their own website in December 2022, with an online government portal expected to be in place in 2023.   

Key considerations:    

The reporting goes beyond just numbers. Companies are also required to explain the reasons for their Gender Pay Gap and the measures being taken, or proposed to be taken, by the relevant employer concerned to eliminate or reduce such differences. The legislation aims to drive female participation in the workforce and can be a useful tool to engage with employees in a meaningful way and identify outstanding issues.   

Common solutions that companies’ implement for their Gender Pay Gap include: 

  • Leadership taking accountability to address gender pay gap in organisations 
  • Building a strong pipeline of diverse talent throughout the business
  • Offering internal and external female mentoring and sponsorship programmes, and introducing female employee resource groups
  • Introducing policies such as flexible work hours and work week, gradual return from maternity leave, paid maternity and paternity leave (regardless of gender)

Full details on how to report and calculate gender pay gaps is available on the Government website.    

Gender Pay Gap Reporting. Read more >

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