There has been an element of pushback against the sustainability agenda in recent months, most notably in the United States but also, to a lesser extent, in Europe. The early days of the second Trump administration saw a ramping up of sceptical sentiment about climate change, withdrawal from the Paris Agreement and renewed support for the fossil fuel industry.
Nonetheless, the reality is that all businesses will be required to decarbonise and reduce their impact on the planet. While most Irish family businesses will not be directly in the scope of the Corporate Sustainability Reporting Directive (CSRD) because of their scale, many are part of the supply chains of companies that are, and will need to provide verifiable sustainability data to those customers.
“Family businesses of a certain size will have formal reporting obligations. Others will need to respond to requests that they receive from their value chain for information to assist in their reporting. This can create a reporting burden as the information needs to be accurate and timely,” says Fiona Gaskin, partner and ESG leader, assurance and reporting, at PwC Ireland.
For companies outside the scope of the CSRD, the European Commission will adopt a voluntary reporting standard, based on the current Voluntary Sustainability Reporting Standard for micro, small, and medium-sized enterprises (VSME), Gaskin explains.
The VSME will act as a shield, by limiting the information that companies or banks falling into its scope can request from companies in their value chains with fewer than 1,000 employees. This standard is expected to act as a useful framework for family businesses to adopt when considering reporting and therefore taking the time to read and consider it would be worthwhile, she adds.
In terms of both becoming more sustainable and meeting the new reporting requirements, there are a couple of key challenges.
“The first challenge for a family owned business is to identify resources to focus on this area. To address this, there needs to be a focus on creating the understanding that sustainable business is simply good business – it is considering core business strategy through another lens to identify opportunities and differentiate your brand. Once sustainability is discussed in practical business terms, then dedicating time and resources is not as difficult a task,” says Gaskin.
“Secondly there is a need to identify the areas of focus, including having an understanding of what information your value chain is likely to ask you for. This can be completed by way of a double materiality assessment, or a less formal materiality assessment.”
Grants are available from Enterprise Ireland and the Sustainable Energy Authority of Ireland to support baseline reviews and planning, and to enable a business to get expertise to point the best way forward.
While the business case drivers for sustainability vary per sector, they generally include meeting legal compliance obligations, tender and customer demands, costs savings, reputation, and attracting and retaining talent, says Dorothy Maxwell, head of sustainability advisory at Davy Horizons. Family businesses, Maxwell points out, are typically vested in the long term and their legacy, which aligns well with protecting both people and the planet. If a business is at an early stage regarding sustainability, there are some key steps they can take to manage their ESG risks and opportunities, she says.
“Firstly, identify what the impacts of your business are on the environment and society. Identify what the legal obligations are and look at peer performance and good practice for your sector,” says Maxwell. “A champion in the business is a good way to get the ball rolling. Engagement with senior leaders across all business functions is also critical to success, as is dialogue with trusted customers and suppliers to ascertain how you can work together to improve performance.”
Secondly, Maxwell suggests agreeing a strategy and action plan with business team leaders. Include a priority to measure key impacts and manage them with credible KPIs to track performance, she advises.
“Go for low hanging fruit to save carbon and cost, like renewable electricity and zero carbon fuels for transport such as HVO for HGVs or electric for vans,” she says. “Consider incentivising your senior leaders, as this activates change quickly. Provide training as you go to inspire and build capability.”
One family business that knows a lot about sustainability is Down2Earth Materials, a sustainable packaging firm and sister company of Southern Tapes & Packaging. Established by the Lee family in 2009, the firm was an early mover in compostable, recyclable and reusable food packaging in Ireland, helping cafes, restaurants and businesses to move away from single-use plastics long before government regulations caught up. Aisling Lee took over the running of the company from her father Tony two years ago and a number of other family members are part of the 40-strong workforce.
“Many family businesses have deep-rooted processes, supplier relationships and product lines that may have been in place since their establishment and we found shifting towards more sustainable operations can be a significant cultural change. In our experience, the key is to frame sustainability as an evolution rather than a revolution,” she says.
“Rather than discarding the core practices and values that have brought success over the years, we encourage other family-run companies to integrate sustainability in ways that complement their business’s heritage. This might mean starting with smaller pilot projects or working closely with a trusted set of suppliers to source more eco-friendly inputs, allowing stakeholders across different generations to see positive outcomes first hand and gradually build confidence in larger changes.”
Lee notes that sustainability regulations are becoming more stringent and wide-reaching each year.
“Businesses that thought they were beyond the scope of certain EU directives often find themselves indirectly impacted when their larger partners insist on robust environmental credentials across the supply chain,” she says. “Navigating these regulations, figuring out reporting requirements or waste management obligations, or sourcing certifications for packaging materials can feel overwhelming without a dedicated legal or compliance team.”
