Why now is the time for business to really act on climate change

2021 is the year for businesses to turn words into action towards addressing the climate crisis. And those that do will reap the benefits.

We are extremely proud of our global sustainability ambition, to be carbon negative in 2021 and to achieve net zero carbon emissions in 2025. This ambition is a true example of living of our EY purpose of Building a Better Working World and sets us up as leaders in tackling this critically important issue.

Until recently, decisive action on climate change has been firmly focused on governments and the scientific community. Scientists produced the evidence and governments were expected to lead the response in a manner to balance economic wellbeing with the demand for long term action – what some might read as “slowly”.

Many commentators would say that 2020 was the inflection point where increasing risk and rising potential rewards combined to create a potent driver for business to take its position in the vanguard of climate action. Businesses and governments can no longer afford to wait. This year is the year in which companies and government really must take the bold moves and be brave.

The risks to business associated with climate change represent a clear and present danger. Take the desire to place an increasing cost on carbon. In Ireland, the Climate Action and Low Carbon Development (Amendment) Bill 2020 very clearly sets out rising carbon tax costs faced by industry. The tax currently stands at €33.50 per tonne CO2 and this is set to rise incrementally to €100 per tonne in 2030.  Carbon tax could be considered in the same manner as any other tax exposure thus businesses should plan to mitigate that exposure accordingly.

While the current carbon tax policy is known and can be planned for, business face a significant risk exposure to additional political and policy changes as the need to take further and further dramatic actions increases over the coming decade. Carbon taxes could well be increased overnight in response to new data or evidence that we may be continuing to miss our targets, for example. But it is the risk posed by the changing attitudes of investors and customers that will drive the most fundamental behavioural change requirements for businesses.

There is an opportunity for Ireland to embrace innovation and new ways of thinking. How could we change our planning and development policies to encourage the repurposing and reusing of existing buildings rather than new builds? Can we incentivise the redevelopment of older sites over greenfield development? How can we integrate later repurposing into the building design process? All food for thought, and topics we should explore without delay.

Even where there is a pathway to a net-zero carbon future for companies, they still face significant transition risk. Long term value needs to be central to the approach. Businesses must consider their customers’ needs and their supply chain requirements and strike the balance that exceeds customer expectations while also continuing to deliver what the market needs at an affordable price.

The other key climate risk facing business is reputational. Previous generations may have put price ahead of planet in their purchasing choices, but this is most certainly not the case with Millennials and Gen Zs. Environment, social and governance (ESG) factors are front of mind when making consumption and career choices for many members of these generations.

Mere compliance will not be enough for businesses seeking to protect and burnish their reputations in the new era. They must be visible leaders and innovators in the battle against climate change.

Rich rewards await those companies who tackle these risks proactively. Not only will they reduce costs, become more future-proofed and more marketable to new generations of customers, they will also be far more attractive to investors.

Business is in the fortunate position where it can see the perfect storm approaching. Companies that take timely action to understand, plan for and take action to mitigate the risks of climate change and embrace the opportunities of sustainability and long-term value creation will also be best positioned to succeed in the coming decade and beyond.

Organisations that wait risk being overwhelmed by the rising cost of inaction while those that take leadership positions will benefit from new market opportunities, a supportive investment community, and the operational efficiencies that flow naturally from sustainable policies.

We are committed to doing whatever we can to support as many organisations as possible on their sustainability journeys. This is a truly important issue that impacts us all. 

Working together we can make a difference.