Businesses concerned about cost and benefit of sustainability – KPMG

Businesses want more clarity on the costs and benefits of investing in sustainability, KPMG’s annual enterprise barometer has shown.

Seven in 10 Irish businesses say they are “actively pursuing” sustainable measures in their businesses, with 83 per cent supporting the need for more action on climate change. However, three-quarters say none of their stakeholders are pressing the issue and more than half worry that an increase in green initiatives will lead to a rise in costs for their business.

Just under two-thirds said they were concerned about the lack of clarity on the costs and benefits of measures such as reducing emissions, green energy, supply chain issues, increasing regulatory demands, access to green finance and understanding market demand. Against a backdrop of high interest rates and rising costs, the report notes that businesses need to fully understand the positive and negative financial implications and to develop the business case for action.

Only 9 per cent of customers and 6 per cent of regulators actively request enterprises to develop a decarbonisation strategy, a survey of domestic business found. But Russell Smyth, head of sustainable future at KPMG, said the voluntary approach to sustainability in business is likely to change.

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“While to date much activity has been voluntary, from 2026, many businesses will have to comply with mandatory EU regulations for the first time,” he said. “Proactive companies that lay the groundwork now and prepare for these regulations will be at an advantage and avoid unnecessary pressure down the line.”

Among other issues, recruitment to key positions was cited as a problem by six in 10 businesses, with close to half saying the tax regime in Ireland is a disadvantage when it comes to recruiting and retaining skilled staff.

“The challenge for Ireland’s personal tax system is to strike a balance between generating tax revenues and incentivising employees to continue to upskill and take on new roles,” said Olive O’Donoghue, tax partner at KPMG.

More than three-quarters also point to ongoing difficulties in sourcing accommodation that could impact recruitment and competitiveness.

With an eye on Budget 2024, fewer than a quarter of respondents said they believed Ireland’s tax regime encourages entrepreneurship and growth. Three-quarters feel it is less friendly to domestic business compared with multinational organisations.

More than half (57 per cent) expressed concerns about the administrative burden attached to the Irish tax regime, particularly for smaller businesses and entrepreneurs, and three-quarters say that increasing the rate of employers’ PRSI would significantly impact their businesses.

The top three tax measures businesses would like to see in Budget 2024 are the introduction of tax measures to encourage sustainable behaviour; reform of capital gains tax rules to encourage investment in Irish companies; and a reduced tax rate for dividends for entrepreneurs.

Despite the challenges, the report finds that 55 per cent of domestic businesses expect to increase turnover over the next 12 months and close to four in 10 expect to increase staff numbers.