Tie Down Sustainability Gains To Meet Expectations
Companies should establish clear KPIs and metrics to measure sustainability gains achieved during the pandemic period, according to Mike Hayes and Russell Smyth of KPMG
One of the key objectives of the COP26 climate change conference in Glasgow is to provide a forum to create a globally co-ordinated climate response, where all nations commit to ambitious carbon emission reduction plans, including the creation of an internationally agreed carbon market. Ireland has joined a select few countries in enshrining its climate goals in law. The Climate Action Act 2021 commits to a 51% reduction in emissions by 2030 relative to a baseline of 2018. Nonetheless, Ireland remains an outlier in the EU, with the third highest carbon emissions per capita.
STAKEHOLDER PRESSURES
KPMG’s recent CEO survey shows that 40% of Irish business leaders are concerned that not meeting climate change expectations will result in investors shying away. Mike
Hayes, KPMG Ireland’s Dublin-based Global Head of Renewables, says that corporates are facing pressure from stakeholders. “It’s not just investors who are applying the pressure – it’s employees, customers, and the whole supply chain,” says Hayes. “Companies face a very real financial risk. Investors may walk away, customers may not buy their products, and employees want to work for companies with purpose.”
CEOs in Ireland and worldwide indicate that a multifaceted approach will be required to address climate change. Four in five Irish chief executives surveyed believe that government stimulus is required to turbocharge their goals of reaching net zero. “There is a clear message there that the majority of corporates believe they will not get to net zero alone,” Hayes adds.
The same KPMG research showed that over 80% of Irish business leaders want to lock in the sustainability and climate change gains made during the pandemic.
Russell Smyth, who heads up KPMG’s Sustainable Futures team in Ireland, says the findings are consistent with KPMG’s experience with clients.
“These issues have moved from niche CSR activities to strategic reporting items for CEOs, and that shift is continuing to accelerate,” says Smyth. “Covid provided a unique test bed for accelerating and testing new ways of working, and it’s hard to see how we can revert completely to where we were beforehand. Furthermore, a lot of organisations will be consciously working to ensure that they don’t slip back to the old ways.”
MEASURING GAINS WITH KPIs
According to Smyth, companies that wish to hold onto sustainability gains achieved during the pandemic period need to know what it is they want to lock in. “They need to set out clear KPIs and metrics for those gains,” Smyth advises. “Many companies implemented some really good ad hoc climate initiatives during Covid, but the absence of a structured framework or programme means many of the gains made are unlikely to persist.
“Organisations should therefore put governance structures in place to realise long-term gains. KPMG research shows that the vast majority of executives feel pressure to deliver returns on investment inside a two-year timeframe. If you move to a 15-year timeframe, that aligns with long term sustainability thinking. Organisations with that outlook have outperformed those that take a short-term view.”
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