Markets, investors and regulators increasingly request businesses to act responsibly in their operations and along supply chains. The European Union (EU) has adopted legislation to promote climate neutrality, sustainability, and responsible business conduct (RBC). Future competitiveness depends on business capacity to adapt to this new legislative framework for sustainability and RBC.
In Ireland, businesses report difficulties in understanding obligations and preparing for compliance. Smaller businesses can notably lack internal capacity to navigate complexity and uncertainty and identify where to find support. Larger, well-resourced businesses have also signalled a need for clearer guidance and simplification. Clarity can also support national policymakers to identify where support is most needed, and where gaps and synergies could be found, to ensure policy coherence.
Ireland is not yet on track to meet its climate targets. Greenhouse gas emissions per capita are amongst the highest in the OECD area (13.2 tCO2e compared to an OECD average of 9.9 in 2022) and the potential of the circular economy to reduce emissions is underexploited. The circular material use rate, standing at 2%, is far below the EU27 average of 12.2% (2024). Greater efforts are needed for accelerating decarbonisation and promoting the circular economy to meet targets.
Structural economic features complicate the transition. Ireland’s large population of low productivity small and medium-sized enterprises (SMEs) is ill-prepared for the twin digital and green transitions. Growth and innovation are highly concentrated in a small number of multinationals, operating in few sectors. In 2023, foreign-controlled enterprises contributed to 71% of total value added and less than 30% of employment, compared with 24% and 16% respectively across the EU. Strong territorial disparities also persist between regions hosting multinationals and those dominated by Irish-owned SMEs. While stronger linkages with foreign firms could help grow local capacity through spillovers, Irish SMEs need first to meet value chains requirements, e.g. in quality, skills, data and RBC.
Against this backdrop, nine pieces of EU legislation were identified by Ireland as particularly relevant for promoting greater compliance. The OECD has categorised these into three groups: (1) Due diligence–related measures (Corporate Sustainability Due Diligence Directive, Corporate Sustainability Reporting Directive, Forced Labour Regulation, Deforestation Regulation, Batteries Regulation), (2) Product and consumer measures for the circular economy (Ecodesign for Sustainable Products Regulation, Empowering Consumers for the Green Transition Directive, Right to Repair Directive), and (3) Carbon emissions pricing (through the Carbon Border Adjustment Mechanism). Most are core components of the European Green Deal which aims to reduce EU greenhouse gas emissions by at least 55% by 2030 and achieve climate neutrality by 2050.
These measures variously cover a range of assessment, reporting, traceability, entity and product-level disclosure requirements. They include due diligence requirements in relation to environmental, human rights and labour impacts; prohibitions on the import, export or placing on the market of products made using forced labour; requirements to redesign products for circularity; requirements to provide enhanced consumer information and transparency; or the need to internalise carbon costs at the EU border.
Due diligence and reporting rules are primarily targeted towards large businesses, while other measures apply irrespective of size. SMEs, whilst not always in scope of the legislation, remain indirectly affected depending on where they sit in the supply chains of covered entities. Supply-chain coverage is generally broad, extending upstream and, in some cases, downstream. Several measures introduce product- or commodity-specific traceability conditions.
Implementation tends to rely on a combination of EU Member State enforcement, EU-level guidance, support and delegated acts. Responsibilities for Member States include preventative monitoring, investigations and sanctions, as well as providing informational and procedural assistance to businesses. Across measures, most obligations are phased in by 2030, with transitional periods and recent adjustments to timeframes that allows additional time for compliance.
For Ireland, supporting compliance will require co-ordinated policy, enforcement and support responses to help businesses adapt while maximising sustainability outcomes. While some businesses may have risk management systems in place that can be adapted to new requirements, the nature of the obligations may also require businesses to innovate to adapt product design, sourcing and production strategies. Ireland can leverage existing institutional capacities and business support instruments, financial and non-financial, to ease the transition.
Mapping EU legislation against Irish government’s institutions and business policy system highlights opportunities for synergies and risks of duplication. It shows that 13 Departments and agencies, operating at national and subnational levels and across enterprise, trade, investment, climate, consumer and regional development policies, propose over 50+ relevant measures to support businesses. Many institutions operate in the enterprise or regional development policy domains. Information platforms such as Climate Ireland Platform and National Enterprise Hub are instrumental. While measures are in place within Ireland in relation to each piece of EU legislation, the coverage remains uneven, in terms of number of initiatives potentially available and number of institutions in charge. The policy mapping also suggests a stronger focus within business support measures on environmental issues than other RBC challenges, such as human rights or corruption.
Recommendations for Ireland’s future Compass, building on a pilot tool tested with stakeholders, emphasise user‑centric design, robust data governance and sustained co-ordination. The Compass should be a trusted reference, providing clear, timely and tailored information to different users, consistent with global data quality standards. On the frontend, the Compass should combine intuitive, layered navigation, from high‑level overviews to deeper technical details, with consistency (in terminology, updates, visual identity) and accessibility (in plain English and Gaelic, and through assistive technologies). Online/offline guidance should be proposed. Business profiling could be considered, if aligned with existing platforms and legal and security standards. On the backend, a hybrid data architecture is recommended, supported by a relational and rule‑based data model base. Technology choices should factor cost, internal capacity and future maintenance. Finally, effective co-ordination is indispensable for co‑creation and maintenance. A future Compass would require sustained cross-Department, cross-agency and multilevel collaboration, with possible alignment of existing systems for greater interoperability. Ongoing engagement with businesses, civil society and academia will be key to ensuring long-term relevance and impact.