This article on sustainability business drivers and actions is the third in a four-part series analysing how Irish Enterprise is responding to the challenge of delivering a climate resilient future. This series is based on a study of 106 sustainability action plans created mainly by large and medium sized organisations who participated in Skillnet Climate Ready Academy’s Sustainability Leaders Programme (SLP) between 2022 and 2023. SLP uses the UN Sustainable Development Goals (SDGs) as a framework to help businesses develop a sustainability action plan.

Part three of the series covers:

• Corporate Risk Management & Sustainability Drivers
• Analysis of Sustainability Business Driver Types
• Analysis of Sustainability Business Drivers and SDG Alignment
• Analysis of Sustainability Actions and SDG Alignment

For further context to this article, read part 1 and part 2 of this series.

Corporate Risk Management & Sustainability Drivers

Climate change presents companies with emerging enterprise risks such as continuity of operations, risks caused by the transitional process in responding to climate change and continued social licence to operate. Climate risk is business risk and can therefore serve as a key driving force behind corporate sustainability action. Adequate understanding and management of business risk categories is integral to protecting and safeguarding their functionality and stakeholders – be they owners, employees or shareholders¹. Traditionally, corporate risk management placed its focus on operational^{2 3} and financial⁴ risks upon its emergence from the 1950s onwards as a key tool in safeguarding business functionality. Whilst literature combining risk management with sustainability has emerged as a distinct discipline, the categories in which sustainability risk is defined is fragmented⁵. Settembre-Blundo et al.⁶ developed a risk management framework enabling risk assessment from the perspective of the SDGs. Below is a selection of risks outlined within Settembre-Blundo et al.’s risk management framework:

Figure 1: Selection of risk from settembre-Blundo et al. framework’⁷

This current study assesses sustainability-related business risk in four categories: operational, reputational, financial and compliance risks. Consideration of these risk categories presents an opportunity for businesses to both strengthen its operations in preparation for the future and become confident in their avoidance of ‘SDG-washing’⁸.

Analysis of Business Drivers for Irish Enterprise Sustainability Action Plans

As part of Sustainability Leaders Programme (SLP) (for more on SLP see part two), Irish enterprises are required to identify and categorise their business drivers against the four risk categorises. From an analysis of business driver types, as displayed in Figure 2:

• Reputation emerges as the most frequent category amongst drivers for change at 35%.
• Operational (24%) drivers were the next most frequently selected category, followed closely by Financial (23%) drivers.
• Regulatory is the least frequently selected business driver (18%).

Figure 2: Frequency of Business Driver Type

 

Analysis of Business Driver Alignment with the SDGs

Through completion of the Sustainability Leaders Programme between 2022-2023, enterprises collectively identified over 470 business drivers as key incentives for enterprise action across 106 actions plans. This section analyses the business drivers by their alignment with the Sustainable Development Goals.

Business driver content was analysed in terms of its alignment with the SDGs. As seen in Figure 4:

• As seen in Figure 3, 41% of the 477 business drivers listed by enterprise are linked to 12 – Responsible Consumption and Production, the most strongly aligned SDG with the identified business drivers. This is a significant decline in emphasis from the 65% of materiality statements that identified resource consumption as a key material concern for their business (covered in part two).
• Similarly, 15% of business drivers are aligned with SDG 13 – Climate Action, whereas 65% of materiality statements were aligned with this SDG, presenting a significant reduction in its presence when businesses translate material concerns into drivers for engaging in sustainability.
• (8%), SDG 7 – Affordable & Clean Energy (8%), & SDG 8 – Decent Work and Economic Growth (8%) jointly emerge as the next most frequently linked SDGs to business drivers.
• Whilst representation of these three SDGs is relatively low in comparison to SDG 12 – Responsible Consumption and Production (41%), their inclusion expands the focus of enterprise incentives from alignment with the environmental SDGs to an alignment with economic SDGs.
• Notably, a low number of business drivers can be aligned with environmental SDGs such as SDG 15 – Life on Land (5%), SDG 14 – Life Below Water (3%) and SDG 6 – Clean Water and Sanitation (3%).

 

Top 5 SDGs Linked to Business Drivers

 

	Responsible Consumption and Production covers the sustainable management and efficient use of natural resources; responsible management and reduction of waste including food waste and chemicals; and adopting sustainable practices and sustainability reporting.9
	Climate Action encompasses building knowledge and capacity to take mitigation, adaption and impact reduction measures for climate change; and the development of policies and planning inclusive of climate change measures.10
	Industry, Innovation and Infrastructure involves upgrading infrastructure and retrofitting industries; accelerating research into technological development; and upgrading industrial technologies.11
	Affordable and Clean Energy involves increased access to renewable and modern energy; improved energy efficiency, research and investment into the progress of clean energy.12
	Decent Work and Economic Growth includes job creation, decent work with equal pay, labour rights and safe working environments, sustainable economic growth and access to finances.13

 

Figure 3: Analysis of Top 5 SDGs Linked to Business Drivers

 

Analysis of Sustainability Actions

During the Sustainability Leaders Programme 2022-2023, 106 enterprises collectively committed to undertaking a total of 756 actions to drive sustainability in their organisations – an average of 7 actions per enterprise. This section of the article provides an analysis of the actions in terms of their associated business driver and captures alignment between the SDG framework and key action areas.

When businesses align their committed actions to drivers (Figure 4), it can be observed that:

• While reputation emerged as a top business driver, featuring in 35% of sustainability plans, actions that respond to operational drivers emerged as the most important for enterprise (35%), up 11% on its importance as a business driver. The data suggests that enterprise identify operational actions as tangible and key to meeting operational and non-operational drivers such as reputational and financial.
• 20% of actions have financial drivers behind them, inclusive of actions which focus on improving energy efficiency to address rising energy costs and general cost reductions.
• Actions driven by regulation (15)% were the lowest in frequency, representing actions centred on reporting requirements and reducing emissions.
• The timeframe of this study focuses on action plans created between 2022-2023, which coincides with the introduction of mandatory reporting requirement introduced at the end of 2022 through the Corporate Sustainability Reporting Directive (CSRD)¹⁴.

Figure 4: Analysis of business drivers Aligned with Actions

A further analysis of the proportion of business drivers aligned with action per plan provides a different view detailing how many businesses aligned each type of business driver with their actions. Additionally, cohort years ‘2022’ and ‘2023’ are added to this analysis to detect annual increase and decreases in frequency across enterprises aligning business driver types with their actions. As displayed in Figure 5:

• 76% of enterprises aligned their actions with Operational business drivers, followed 62% of enterprises which aligned their actions to Reputational business drivers.
• The total frequency of enterprises aligning Financial (36%) and Regulatory (26%) business drivers to their actions is much lower.
• A 10% decrease in Operational drivers from 2022 to 2023 gives way to an annual increase in regulatory drivers and financial drivers.
• There is a 6% increase in enterprises citing Regulatory drivers in alignment with their actions from 2022 to . This supports the assertion that perception of the importance of mandatory sustainability reporting is low but growing amongst Irish enterprises. This importance is expected to continue to grow over the coming years with a higher number of companies falling into scope of the CSRD annually¹⁵.
• Financial drivers increase to a lesser extent by 4% from 2022-2023. Nevertheless, this increase in actions backed by financial drivers aligns with a growing concern in 2022-2023 regarding rising inflation and an energy supply crisis, both identified as top global risks in 2023¹⁶.

 

Figure 5: Frequency of Business Driver Type Aligned with Action by Year

Through analysing alignment between actions and their alignment with the SDGS, it is evident that:

• SDG 12 – Responsible Consumption and Production (40%) is by far the most frequently linked SDG to actions, as seen in Figure 6. This is consistent with both the materiality assessments and business drivers in which SDG 12 – Responsible Consumption and Production has been a dominant feature across the 106 action plans.
• This is followed by SDG 13 – Climate Action, linked to 16% of actions. Actions which align with either SDG 13 – Climate Action or SDG 12 – Responsible Consumption and Production represent over half of the dataset (53%).
• SDG 7 – Affordable and Clean Energy is the third most frequently linked SDG to actions (15%).
• A lower proportion of the actions are aligned with economic SDGs such as SDG 11 – Sustainable Cities and Communities (7%) and SDG 9 – Industry Innovation and Infrastructure (6%). This suggests that while the economic prosperity of enterprises is certainly a factor within their action plans, it is not as prominent as actions which target the environmental pillar of the SDGs.
• However, there are environmental SDGs which are least frequently linked to actions, such as SDG 6 – Clean Water and Sanitation (5%), SDG 14 – Life Below Water (1%) and SDG 15 – Life on Land (8%). This is consistent across both the materiality assessments and business drivers.
• The most frequently linked SDGs to actions suggest that enterprises perceive the most tangible areas of action to be in responsible consumption and production, climate action and energy.

 

Top 5 SDGs Linked to Actions

 

	Responsible Consumption and Production covers the sustainable management and efficient use of natural resources; responsible management and reduction of waste including food waste and chemicals; and adopting sustainable practices and sustainability reporting.17
	Climate Action encompasses building knowledge and capacity to take mitigation, adaption and impact reduction measures for climate change; and the development of policies and planning inclusive of climate change measures.18
	Affordable and Clean Energy involves increased access to renewable and modern energy; improved energy efficiency, research and investment into the progress of clean energy.19
	Sustainable Cities and Communities includes sustainable transport systems, housing, inclusive urbanisation, inclusive green and public spaces, national and regional planning and risk reduction.20
	Industry, Innovation and Infrastructure involves upgrading infrastructure and retrofitting industries; accelerating research into technological development; and upgrading industrial technologies.21

 

Figure 6: Analysis of Top 5 SDGs Aligned with Actions

Actions relating to either SDG 12 – Responsible Consumption and Production or SDG 13 – Climate Action represent over half of the dataset. Of the 53% of actions relating to either SDG:

• Initiatives and training (20%) which enhance the knowledge and adoption of sustainable practices amongst employees and the wider community represent one fifth of actions linked to either SDG 12 or SDG 13.
• One fifth of actions relate to company policy, strategies and ISO certification are present in 20% of the actions relating either SDG.
• Monitoring and Reporting on Data/ KPIs is present in 16% of actions linked to either SDG 12 or SDG 13.
• Hence, there is a strong emphasis on capacity building present in actions relating to either SDG 12 or SDG 13, be it through knowledge sharing, or governance of company policies and data.

 

Figure 7: Frequency of cross-cutting themes in actions linked to either sdg 12 or sdg 13

Key Takeaways

• Most of the business drivers are Reputational (35%), followed by Organisational business drivers (24%) .
• Business Drivers are most frequently aligned with SDG 12 – Responsible Consumption and Production, SDG 13 – Climate Action and SDG 9 – Industry, Innovation and Infrastructure.
• Actions Drivers are most frequently Operational or Reputational, reflecting the effort of enterprise to translate their reputational drive into tangible impact on their operations, supported by reputational action.
• Whilst low, there is an annual increase in actions which are aligned with Regulatory business drivers (6% increase between 2022-2023). This coincides with the introduction of CSRD in the EU.
• Actions are most frequently linked to SDG 12 – Responsible Consumption and Production, SDG 13 – Climate Action and SDG 7 – Affordable and Clean Energy.
• One fifth of actions linked to SDG 12 and over half of the actions relate to either SDG 12 or SDG 13 (53%).
• Of the 53% of actions relating to either SDG 12 or SDG 13, a prominent number of governance related actions feature on knowledge building (20%), certification and policies (20%), and data monitoring and reporting (16%).

 
Engage with the authors of this series Aisling O’Connor, Maria Kelly and Colm Gaskin and the wider Academy team on Climate Action and Upskilling at climatereadyacademy@20fiftypartners.com