Environmental performance – where businesses measure their impact on the environment – is becoming increasingly important for organisations.
“Environmental performance can be thought of as doing whatever it is your business is designed to do – in a manner that has the least impact on our natural environment, including our air and water quality, biodiversity and lands,” says Stephen Prendiville, head of sustainability, EY Ireland,
“It means using the minimum amounts of raw materials needed in your processes, ensuring you have minimum waste, and in all things you do, ensuring that your impact on the natural environment is minimised.”
Leisha Daly, head of government affairs and policy, EMEA supply chain initiatives and campus Ireland at Johnson & Johnson, says, “The World Health Organisation has called climate change one of the greatest threats to global public health in the 21st century,” and as the company believes that “the health of people is inextricably linked to the health of the planet,” improving the business’s environmental performance is key.
“We are doing our part to tackle climate change, with an ambition to reach net zero emissions across our value chain, aligned with climate science.”
Chris Collins, country president for Schneider Electric, Ireland, explains why businesses need to measure and improve their environmental performance. “The need for a low-carbon future is undeniable and the time to act on a climate change strategy is now. To do this, organisations must look at their environmental performance.
“This measures a combination of factors that can give an idea of an organisation’s environmental impact and can provide a framework for the reduction of pollution, waste, and emissions.”
Organisations are then able to “calculate their carbon footprint and establish a roadmap to become carbon- neutral.”
There are three scopes that businesses must measure for: Scope 1: Emissions the businesses are directly responsible for. Scope 2: Indirect emissions generated via purchased electricity, steam, heat and/or heating. Scope 3: Indirect emissions generated by a company's upstream and downstream value chain, including the emissions created by use of a company's products, end-of-life product emissions, the transportation of goods, business travel and employee commute and waste management.
Performance
In Ireland, as in many other countries, environmental performance was usually only measured by large installations regulated by the EPA, says Conor Linehan, partner, environment and planning projects, William Fry.
“An important change in the last 20 years has been the increased incidence of voluntary environmental and climate impact measurement, with many companies commissioning environmental audits of their business operations and setting year-on-year targets and setting and measuring progress against ‘key performance indicators’.”
As a result, some companies now voluntarily implement internationally recognised “environmental management systems” such as ISO 14001.
Fernando Vicario, chief executive, Bank of America Europe DAC, says that environmental performance is “fundamental” to business. “Research demonstrates that there is a strong correlation between Environmental, Social, and Governance (ESG) performance and financial performance.
“We recognise that our investors are increasingly watching companies’ benchmarking performance on environmental and other ESG indicators, meanwhile identifying sectors where they see themselves reducing exposure,” he says.
“More than one out of 10 dollars invested globally by investors use some kind of ESG approach – so there is an intense competition for investors, particularly with more ESG-focused products being designed to capture any outperformance.”
Provision
Linehan says: “One important way the overall system of environmental measurement can be improved is through financial reporting systems.
“Many countries’ financial reporting systems have, for some years, already made provision for environmental performance, costs and risk profiles to be reflected in annual filings and reporting, directors reports and in their financial statement and accounts; but the extent to which this is practiced is very limited.”
Collins says: “Many businesses lack the expertise or technology to accurately map their Scope 3 footprint, and access to external consultants may not be attainable to assist with this either. This is where industry partnerships can play a bigger role to ensure no organisation navigates the sustainability challenges alone. Only when the total footprint has been calculated can you develop a plan to tackle emissions and decarbonisation commitments.”
Vicario agrees. “We need to work towards the harmonisation and standardisation of a framework for reporting and disclosing ESG data – this will enable the market to discern between the companies doing a good job and those that could do more.
“The benefit of a standardised framework would enable industries and sectors who invest significant resources into their reporting, to compare the same information like-for-like and learn from best practice,” he says.
Penalties
Prendiville says that systems must be put in place to make it “very unfavourable to pollute. Current systems are focused on ‘after the fact’ compliance and penalty – these need to be made more robust and stringent to act as a more effective deterrent to poor performance.
“Better consistency and standardisation of legislation and standards in everything from waste management to water quality and biodiversity will support better outcomes in environmental performance.”
While there are existing fines and penalties, he believes that more enforcement – and the resources for enforcement, regular audit and assurance, and a process for continuous improvement should be incorporated into regulation.
“In addition, more ‘restitution’ or ‘clean up’ rules could be considered, much like those that exist to ensure abandoned oil wells and the like are actually capped and the surrounding lands remediated. A sinking fund provision for polluters might also be a means of placing monetary and government discipline on environmental performance.”
Siobhan Horan, head of industry engagement at Knowledge Transfer Ireland, says that businesses should look at the available expertise to help them make the necessary changes.
“As companies seek to examine, evaluate and improve environmental performance, they should consider the wealth of expertise available to them in third level and State research performing organisations.”