When it comes to combating climate change, everyone has to do their bit. That includes all kinds of businesses, from microenterprises to multinational behemoths. Ireland’s Climate Action Plan (CAP) has set a target of a 35 per cent reduction in emissions for the enterprise sector by 2030. SMEs and microenterprises in particular are endeavouring to improve their sustainability without breaking the bank and undermining the viability of their business models.
Russell Smyth is a partner in KPMG Ireland and leads the firm’s energy advisory business. He says the target for SMEs in Ireland’s Climate Action Plan is “ambitious”, noting that while large corporations may have the resources and stakeholder pressure to overhaul their operations, for small and micro enterprises the challenge lies in balancing sustainability with commercial viability.
Derarca Dennis, EY Ireland assurance partner and sustainability services lead, agrees. “The CAP requires businesses to act, reducing their carbon emissions and transitioning to more sustainable business models, but the massive scale of change required can be daunting for small businesses,” she says.
Dennis says an SME should first reflect on its business ambition and then seek to build on already existing practices within the company. “The question to ask is ‘What is important to us and what can we do with what we have?’” she suggests. She urges smaller businesses to set “realistic” targets. “Targets should be based on their business size and resources and key performance indicators (KPIs) should be set to track progress,” she says. “As the sustainability function gains traction, progress should be monitored over time.”
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SMEs should utilise resources available within the company to gather sustainability data, Dennis advises, noting that some of this may be available from their suppliers.
“As much as possible, efforts should be made to obtain clear, coherent and accurate data that can be verified by external parties,” she explains. “Starting to gather data on carbon emissions would be a typical first step and will be vital as the company starts to report their targets to reduce these emissions. Next steps vary by industry but are often waste management, water conservation and recycling initiatives.”
The good news is that improving sustainability can often increase profitability. A 2021 KPMG study, for example, found that the average dairy farm in Ireland could reduce its emissions by 13 per cent per year while actually increasing farm profitability by €5,100 per year, simply by adopting existing, proven measures such as on-farm energy efficiency, fertiliser optimisation and adoption of multi-species sward crops.
Free tools offered by the Sustainable Energy Authority of Ireland (SEAI) and Environmental Protection Agency can also be utilised to establish baseline emissions – this will allow SMEs to refine and track their progress. Smyth says one of the easiest and most affordable ways to cut emissions is through energy efficiency, given that SMEs have seen significant increases in their electricity bills over the past 24 months.
“LED lighting, smart heating controls and energy efficient appliances can significantly reduce energy consumption,” he says, adding that grants are available from the SEAI for energy audits. “These help SMEs identify inefficiencies without a hefty upfront cost.”
And, although coming with an initial capital investment requirement, installing solar photovoltaic (PV) panels should be considered by SMEs that have their own premises. “Due to the increase in the unit rate of electricity in Ireland, the payback on solar PV can now be as low as three to four years for SMEs, which is driving strong deployment,” Smyth notes.
Grants are also available for PV installation and indeed, SMEs should seek to leverage Government support at every opportunity, Smyth says. “Ireland offers a range of supports to help SMEs on the sustainability journey. Grants, training and tax incentives such as the accelerated capital allowance reward investment in energy-efficient equipment.”
Last year Business in the Community Ireland (BITCI) held its All-Ireland Climate Action Pilot Programme, a collaborative effort aimed at supporting small and medium enterprises in reducing carbon emissions.
The pilot was a huge success, says Eadaoin Boyle Tobin, sustainability adviser with BITCI. “It came about because BITCI recognised that our members wanted support on decarbonisation and on supplier engagement more broadly,” she explains.
The pilot brought around 40 individuals together from BITCI member companies and SMEs in their value chain to complete carbon literacy training, understand their business carbon footprint better and develop a climate action plan.
A second phase will take place this year and will see a scaling up of the numbers participating from both members and SMEs, says Boyle Tobin: “The outcome we are working towards is better engagement between our members and the SMEs in their value chain to drive decarbonisation.”
We are all in this together, says Smyth, and businesses should adopt that mentality. “Sharing targets, climate objectives and progress with your stakeholders can build trust and loyalty with your employees and consumers,” he notes. “Sustainability is a journey. SMEs should start with modest targets and build.”
