Sustainability a key issue for the manufacturing sector

August 10, 2022

Spanning everything from successful indigenous Irish companies to global companies of huge scale, manufacturing is one of the high performing engines of the Irish economy.

On several fronts, this is shaping up to be a pivotal decade not just for Ireland, but globally. Having successfully emerged from the economic crash of the noughties, we’ve now encountered a pandemic; the great challenge of climate change; changes to the global tax regime; and, for Ireland and Europe, the challenge of Brexit. In isolation, each of these challenges is great, together, they require even deeper levels of resilience and adaptation.

Overall, there are 260,000 people employed in the Irish manufacturing sector, accounting for over 12% of total employment in the economy. In 1950, Ireland’s main exports were live cattle, racehorses, fresh eggs, and stout. By 2021, Ireland is a leader in Europe across a broad range of products including pharma, tech and medtech, and food and dairy products. 60% of Ireland’s final manufacturing exports are now part of global supply chains, one of the highest such ratios in the world. According to OECD studies, about half of Irish private sector employment is sustained by this foreign demand, the second highest rate in the OECD.

As the global economy grapples with the major challenge of our era, climate change, and in a world where investment, consumers and talent increasingly follow environmental integrity, Ireland must break the link between economic and demographic growth and environmental harm. Ireland’s commitment to break away from a dependency on fossil fuels and a take-make waste economy to a zero carbon, circular, and environmentally sustainable society by 2050 is as much an economic objective as it is an environmental obligation.

The very real threat of climate change around the globe requires flexibility and agility from Governments and industry, collaborating to reduce the dependency on carbon and manage industry activities in more sustainably. We know from a recent survey of members in the manufacturing sector that the immediate challenges over the next six months elate to increasing costs and supply chain issues. But we also know that they have been very focused on tackling sustainability issues in recent years, and this focus will increase into the future. Ibec fully supports the Government’s ambition to achieve a 51% reduction in emissions by 2030 and carbon neutrality by 2050. This is substantially more ambitious than the 2019 Climate Action Plan, but it needs to be so in order to deliver the radical transformations that are mandated in the EU Green Deal legislative package, and the IPCC assessment report. We know from engaging with our members in the manufacturing sector that sustainability is a priority for them. By adopting a smart evidence-based approach, we believe Ireland can emerge better off, and a global leader in sustainable enterprise, products, and services. However, there are risks. Poor decisions and a failure to reinforce our climate ambition with adequate investment and policy supports could lead to missed targets, higher energy costs, a weakening of national energy security, and reduced industrial competitiveness.

Ibec’s Low Carbon Roadmap is continually being updated to ensure industry ambition and recommendations are fully in line with Government initiatives, for example, the Climate Act 2021, Green Deal targets and the Carbon Budgets that will help set the agenda going forward. We see four priority themes for industry, namely: Water and Wastewater; Climate action; Circular Economy; Air Quality. To make impact on these issues, we recommend a number of practical actions including adopting a cost-effective sectoral approach to emissions reduction; ramping up public investment, bolstered by PPPs where appropriate, and provide regulatory certainty to underpin novel sustainable heating and transport technologies; strengthening financial and advisory supports for Irish firms that are committed to the low carbon transition; securing a more sustainable long-term supply of drinking water for Dublin and the Eastern region; support from Government for businesses seeking to develop more circular products and services; and as part of the Climate Action Plan, incentivising the phase out of diesel, promoting the switch to cleaner energy carriers such as bio-methane, bio-LPG, renewable electricity and renewable hydrogen.

Government and industry will need to work together to identify workable solutions to enable Ireland to meet its targets in a way that is fair, cost effective, and good for the economy.

Sharon Higgins, Director of Membership and Sectors, Ibec