Where now for sustainability?

2025 has proved challenging for sustainability in Ireland and beyond. Whilst the European Commission (EC) Competitiveness Compass seeks to tackle the barriers to growth, some uncertainty remains, particularly in relation to the EC Omnibus simplification package, writes KPMG’s Head of Sustainable Futures, Russell Smyth.

Although the reduction of sustainability reporting requirements is broadly welcomed, it has sparked concerns that the simplifications may go too far, leaving businesses disengaged and at risk of taking no action at all. Furthermore, the growing anti-ESG sentiment that has arisen from a global shift of the political landscape to the right is further influencing business commitments on sustainability. So the question is: where now for sustainability?

Russell Smyth

Partner, Head of Sustainable Futures and Corporate Finance

KPMG in Ireland

mail
call

The cost of climate change on business cannot be ignored

Despite prevailing political sentiment, and ongoing pressure on economic competitiveness and drivers for growth, environmental indicators clearly demonstrate the ongoing impact of climate change.

In the most recent EPA Climate Change Risk Assessment, Ireland in 2050 is predicted to experience warmer temperatures with more heatwaves, summer drought conditions, wetter winters with more extreme precipitation, fewer but stronger windstorms, rising sea levels, warmer oceans, and greater ocean acidification.

In Europe, natural disasters destroyed assets worth $31 billion last year, of which $17 billion were not insured. The risks to the built environment, food production, supply chain, biodiversity, and energy are vast. These are the same systems that Irish organisations are wholly dependent on to do business.

On this basis, resilience should not rely on regulation – it is about making commercially sound decisions that ensure your business exists profitably into the future. Businesses cannot afford to regress on sustainability – regardless of the regulations.

Transition planning is fundamental to resilience

While much corporate activity to date has been on measuring environmental impact, particularly greenhouse gas (GHG) emissions, a key trend we are now seeing is a move beyond measurement and into tangible action.

For example, the review of 650-plus published CSRD reports by the European Financial Reporting Advisory Group (EFRAG) highlights that the majority of preparers now have a transition plan in place (State of Play 2025 Report).

Best practice in relation to transition planning is to incorporate climate adaptation and mitigation, integrate nature considerations, and adopt a just transition. This is particularly evident in sectors such as agriculture, transport, and energy.

A credible transition plan will improve operational excellence, reduce supply chain exposure, drive up business value, and ultimately build resilience. Regressing on sustainability means walking away from tangible value, and the social licence to operate that has become a fundamental part of doing business to win contracts and access cheaper forms of capital – making progress on sustainability is not optional.

Diagnose
- Assess your readiness against the Transition Plan Taskforce (TPT) guidance and reduced ESRS requirements under the CSRD.
- Develop a robust GHG emissions baseline across your Scope 1, 2 and 3 GHG emissions.
- Perform a comprehensive double materiality assessment (DMA) to identify your material sustainability topics.
- Complete a climate scenario analysis to understand your key climate risks and opportunities.
Strategise
- Identify and prioritise current and emerging decarbonisation levers, using cost benefit analysis, factoring in what is achievable.
- Determine your funding strategy and the role of sustainable finance.
- Set clear targets and metrics used to track progress (considering both your climate transition plan, as well as the wider material topics emerging from your DMA process – likely extending into other environmental and social topics).
Transform
- Set out your target operating model to drive action on your transition plan.
- Establish a governance structure, assigning responsibility to manage impacts, risks and opportunities to Management or the Board.
- Review internal incentives to driver operational change (e.g. internal carbon pricing).•Upskill with training across all levels of the organisation.
- Analyse sustainability performance metrics for insights, ensuring you have the right IT solution to enable this.
Report
- Develop a reporting strategy to think through what will be disclosed and how it will be communicated to the market.
- Map out data flows for metrics reporting and assess controls in place ahead of future disclosure, or potential limited assurance obligations.
- Prepare a sustainability report setting out the policies, actions, metrics and targets being taken on your climate and sustainability objectives.

The building blocks for progression

The key question front of mind for all organisations is: whilst we are navigating uncertainty in relation to regulations, where do we go from here? The EC Omnibus proposal brings a welcome simplification to what was becoming an increasingly complex reporting burden.

The key task is to leverage the time gained and embrace the focus that is brought by simplification. Here, focus means to work on the double materiality assessment, policies, targets, and metrics for material topics.

The opportunity is there to go back to basics on the fundamental strategic drivers of sustainability – operational excellence. So, what does good look like?

KPMG can support you end-to-end on your climate and sustainability journey

KPMG Sustainable Futures is at the forefront of sustainability, working collaboratively with our clients to address the toughest challenges across decarbonisation, energy, biodiversity, sustainable finance, strategy, and reporting.

Contact any of our team from the ‘Who’s who’ section of this book, to support you on the next stage of your climate and sustainability journey.