Business and sustainability have transformed over 25 years

While some things feel familiar, the world of business and sustainability has transformed dramatically over the past 25 years. Johnny Meehan, head of sustainability consulting, Forvis Mazars, traces what has brought us to the current standpoint for business and environmental obligations and where we go from here. As Autumn begins, we notice the change in the weather, with renewed traffic congestion as workers return from holidays and students go back to school.

While some things feel familiar, the world of business and sustainability has transformed dramatically over the past 25 years. In the 1990s, many of us were starting our careers; emails were new, mobile phones were bulky and climate change was a distant concern. Today, the challenges of sustainability are more urgent than ever. Back in 1999, the Keeling Curve, which tracks CO2 levels in the atmosphere, recorded 368 parts per million (ppm).

By 2024, this figure had climbed to 426.7 ppm, and this year, global temperature rise due to human activity exceeded the critical 1.5-degree threshold. This lack of progress is reflected in Ireland as well. If anything, the emissions curve has steepened as economic growth remains tightly bound to fossil fuels.

For over 25 years, the Environmental Protection Agency (EPA) has tracked the state of Ireland's environment, and the data reveals a significant and persistent performance gap. Despite growing awareness and some efforts towards sustainability, Irish businesses have struggled to decouple growth from environmental impact, indicating that much work remains to be done. Sustainability in Ireland is shaped by EU and global contexts — in this we are not an island.

The hot topics of 2024 at policy and business level, if not on doorsteps during the European elections, are sustainability, the climate and biodiversity emergencies. The impetus for change, however, is not primarily driven by climate science, the declaration of national emergencies in 2019, or even by extreme weather events like heatwaves and storms across Europe. Instead, business is changing because the laws are changing and compliance on reporting (more so than action) is the overriding concern.

In July 2024, Ireland became one of only nine EU member states to enact the Corporate Sustainability Reporting Directive (CSRD) on time. Later that month, the Corporate Sustainability Due Diligence Directive (CSDDD) came into force across the EU. Additional EU regulations are set to take effect soon, covering areas such as product sustainability, circular economy, greenwashing, environmental, social, and governance (ESG) ratings and misrepresentation, green finance, nature restoration, energy and food security, built environment and transport. This extensive list is part of a regulatory and support system under the EU's Green Deal and Net Zero emissions strategy.

In Ireland, the Climate Action and Low Carbon Development Act 2021 established legally binding targets for net-zero emissions by 2050, with a requirement to be more than halfway there by 2030, guided by carbon budgets in two five-year periods and sectoral emissions ceilings. From now on, there is a new business case for sustainability: good actors will be rewarded, and bad actors penalised.

Economic and legislative pillars increasingly support the ESG pillars, illustrating a key lesson from the past 25 years — moving sustainability from voluntary to mandatory, and from a cost centre to a profit centre.

The growing urgency within the EU stems from the severe impacts, risks, and opportunities (IROs) related to climate change. Human-caused climate change is making Europe warm at twice the global average, posing escalating threats to food, water and energy security, human health, the economy, nature and political stability — especially given Europe's proximity to climate-impacted regions in Africa and Asia and the anticipated increase in climate refugees.

Recent European elections have already seen a rise in populism and the far-right, driven by even modest increases in migration. Nine years after the Paris Agreement, both Ireland and the EU are falling short, with the remaining carbon budget to stay within safe limits likely to be exhausted before 2030.

The delay in transitioning to renewables is also economically costly; Europe's dependence on imported fossil fuels has already jeopardised energy security, increased the cost of living and hurt business profitability, particularly since the war in Ukraine.

The year 2030 is significant for other reasons, including the need to achieve the UN Sustainable Development Goals set in 2015, where Ireland's progress has been lacking. Most critically, decisive action on climate is needed within the next five years to prevent cascading tipping points, such as the potential shutdown of the Atlantic Meridional Overturning Circulation (AMOC), which would significantly impact Ireland.

These issues were highlighted this summer when Eamon Ryan, Minister for Environment, Climate and Communications, briefed the Cabinet and former President Mary Robinson addressed Seanad Éireann. This level of discussion contrasts starkly with other jurisdictions, where climate and sustainability are scarcely debated or in programmes for government.

The conversation on sustainability in business has significantly evolved over the past 25 years. There has been notable progress, driven by initiatives such as Business in the Community Ireland (BITCI), established in 2000 following key international milestones in the late 1990s and into 2000. These included the Kyoto Protocol, the founding of the Global Reporting Initiative and the Carbon Disclosure Project, the introduction of the UN Millennium Development Goals and the UN Global Compact as well as the rise of corporate social responsibility and the Triple Bottom Line approach of planet, people, and profit.

Irish businesses continue to engage with State agencies responsible for sustainability, including the EPA and Sustainable Energy Authority of Ireland, while also building internal sustainability capabilities.

As the CSRD and CSDDD are already demonstrating, sustainability is now an outcome of everything a business does across its entire value chain. To achieve this, every actor within the value chain must contribute to sustainable value creation, and every stakeholder must have a voice.

Reflecting on the barriers to change over the past 25 years, one major mistake was treating sustainability as separate from the core business. Another was failing to recognise that sustainability is everyone's responsibility, starting with the chief executive.

In 2024, driven by a new business case and a stricter compliance environment, competitive sustainability can be leveraged to reposition businesses in the evolving economy. There is significant opportunity (greater upside from change) and considerable risks (greater downside from maintaining the status quo). Ultimately, it's important to businesses to remember that sustainability is more than just a report — it's about taking tangible actions now to make up for lost time and deliver real-world impact within the next five years, addressing the performance gaps of the past.

This article, written by Head of Sustainability Consulting, Johnny Meehan, featured on bizplus.ie in October 2024.