Why the world needs a sustainable mid-market
Momentum on the journey to a sustainable future within the mid-market is building. The mid-market is being pulled by the commercial opportunities presented by sustainability. Consumers want to support brands with strong credentials, while investors are increasingly conscious of the long-term value it can provide.
Despite being pulled by brand reputation and market competition, these firms are being pushed by the regulatory environment, and concerns around regulation occupy the mid-market. Heightened regulations can be considered a barrier to international business expansion, with a significant proportion of mid-market firms in North America (87%) and Europe (68%) viewing it as a concern.
Given the importance of the mid-market to global sustainability, understanding the obstacles that the mid-market face on their journey towards a sustainable future.
Read more on why the world needs a sustainable mid-market [ 8186 kb ], and how it’s vital to economies, societies and the planet.
The Irish landscape
The IBR research on sustainability shows that globally brand reputation is the most important factor impacting mid-market companies’ investment and focus on sustainability.
In Ireland, however, mid-market companies named access to finance as the most important (22%), followed by market competition (13%), and then regulatory compliance, purpose and brand reputation (11% each).
The biggest concern for businesses around compliance with ESG/sustainability regulations is the resources required to become compliant in terms of staff and time (38%), followed by the speed at which requirements change (33%) and the capital investment needed (29%). Twenty-two percent of Irish mid-market companies don’t know or aren’t sure what their biggest concern is.
The cost associated with building internal capacity, both human resources and data collection, increases significantly when there is a condensed timeline. Building up knowledge and process gradually will facilitate a smoother transition and allow for implementation challenges to be minimised.
Catherine Duggan
Head of Sustainability in Advisory Consulting
While 42% of Irish respondents have implemented strategy or ESG/sustainability targets (vs 75% globally), 41% of Irish businesses have not yet implemented ESG/sustainability plans such as strategy, policy, reporting, evaluation and data gathering, programmes, governance budget—compared to only 8% globally.
Moreover, 40% of these businesses have no plan to implement ESG/sustainability measures (policy/strategy/reporting etc) over the next 12 months. Lagging their European and North American counterparts, Ireland’s mid-market firms needs support to move forward on their sustainability journeys.
“In becoming more sustainable, mid-market companies can take advantage of a lot of commercial opportunity—access to new markets, product developments, talent retention, brand differentiation and the resilience of business models, to name a few.
However, in Ireland, many firms only see regulatory requirements, strategy development to access capital and stakeholder expectations as the drivers for compliance. They need guidance in realising the other opportunities that come from incorporating sustainability as a core part of the business,” explains Duggan.
However, with expansion of the Corporate Sustainability Reporting Directive (CSRD) requirements to small- and medium-sized enterprises in 2027, many mid-market firms will come in scope, and they should start preparing for these requirements now.
“To put together a sustainability strategy, firms should conduct a materiality assessment to determine the greatest impacts, risk and opportunities for the business,” says Duggan. “They should align their process for as much as possible to CSRD approach, tailoring it for the size and complexity of their business, which to help ensure that they’re prepared for compliance when they fall into scope.”
In Ireland, SMEs occupy a critical place in the business landscape, and even those that are exempt from direct reporting under the CSRD still have a role to play in compliance. Because the CSRD has a focus on value chain reporting, larger companies and listed SMEs will have to collect sustainability information from non-listed SMEs that supply or buy from them.
“As regulatory expectations grow in companies in Europe, actors in supply chains will need to begin to collect and report sustainability-related information,” Duggan explains. “Provisioning of this data as part of contractual agreements is one mechanism companies can use to assist in collection of this data.”
To learn more about the CSRD, check out: The CSRD, explained: What every company should know.
Grant Thornton’s five recommendations for mid-market firms
- Take action sooner rather than later when it comes to reporting requirements. Acting now will give you time to build up your knowledge and processes.
- Being sustainable can offer a competitive advantage for mid-market firms who get it right. Increasing your brand reputation helps drive business and investment.
- Speaking to an adviser can help simplify the process and plot the right course. Our job is to understand new requirements and help you navigate them.
- Larger companies need to work with their mid-market partners. Sharing expertise from navigating regulation can reduce risk and improve efficiency.
- The sustainability journey is not a sprint. It could take years to perfect a strategy, but the most important action is to take the first step.
