Irish family businesses excel at putting people first, but struggle with climate action, digital transformation and governance issues, a new PwC report reveals.
In a year where business has had to transform the way it meets the needs of society and the environment, many Irish family-owned businesses need to do more on climate action, according to PwC’s 2021 Irish Family Business survey
Nearly six out of ten (59pc) Irish family businesses feel they have a responsibility to fight climate change and its related consequences, but only (35pc) stated that reducing their organisation’s carbon footprint is a top priority.
“Family business owners want, above all, to create an enduring legacy and asset for future generations”
Irish family businesses lag their global counterparts in terms of climate action and have identified it as an area that requires more focus. Less than half (41pc) reported that they are ‘putting sustainability at the heart of everything they do’ (Global: 49pc). Only 32pc have a developed and communicated sustainability strategy in place (Global: 37pc).
A legacy for future generations
This comes despite the fact that Irish family owned businesses are highly likely to feel a responsibility to society. Over three quarters (78pc) engage in proactive social responsibility activity and do very positive work in this regard. For example, 71pc said they contribute to their local community (Global: 62pc). Irish family businesses are more likely to place a greater emphasis on their direct contribution to local communities rather than a strategic approach to building a sustainable business.
“Irish family businesses are telling us that the time is right to think differently about sustainability in its broadest sense,” said John Dillon, Leader, PwC Ireland Entrepreneurial & Private Business Practice.
“They feel that to be relevant and attractive to consumers, suppliers and employees, sustainability needs to be central to their business operations. They’re telling us it needs to be more than simply embedded within corporate giving activities. For Irish family businesses this is not just about stating a commitment to doing good, but about setting meaningful targets, measuring and reporting them so as to demonstrate a clear sense of sustainable outcomes when it comes to helping economies and societies. Family business owners want, above all, to create an enduring legacy and asset for future generations.”
The survey suggests that Irish family businesses have suffered as a result of the disruption brought about by the pandemic, but they remain resilient. Due to the pandemic, only 30pc expect to see sales growth in the last financial year with 48pc expecting sales to shrink. However, with the country’s reopening now slowly in progress, they are optimistic about their business’ abilities to weather the storm and future growth prospects. 58pc are confident about growth ambitions for 2021 (Global: 65pc). 87pc expect their businesses to grow in 2022 (Global: 86pc).
Your people are the business
To achieve this growth, Irish family businesses are taking a people-first approach, prioritising the well-being of their employees, more so than their global counterparts. For example, 81pc retained as many staff as possible during the pandemic (Global 71pc). 49pc topped up the wages of staff on government employment retention schemes (Global 21pc). 59pc provided emotional and mental health supports to staff (Global: 45pc). Family shareholders also made sacrifices: 42pc took a salary cut to support the business during COVID-19 (Global: 31pc).
Internationally, 41pc of family businesses businesses that describe themselves as digitally strong are 3rd or 4th generation and Next Gens have taken an increased role in nearly half (46pc) of digitally strong businesses.
“Although ahead of global peers, Irish family businesses are telling us that they’re still not doing as well as they want to on digital capabilities,” said Mairead Harbron, Director, PwC Ireland Entrepreneurial & Private Business Practice.
“There is clear evidence that being tech savvy enables agility and success, and the pandemic demolished any lingering doubts about the benefits of digital transformation. Irish family businesses acknowledge that they need to do more to accelerate their digital journey. This includes considering how they can engage the experience and fresh insight of the next generation when it comes to prioritising digital transformation.”
While Irish family businesses report good levels of trust, transparency and communication, the survey highlights the benefits of a professional governance structure. 84pc say they have some form of governance policy in place, however, there are clear gaps. For example, only 38pc have a Will in place, less than one in five (18pc) have conflict resolution mechanisms and only 16pc have a family constitution. 80pc of Irish family business respondents admitted that family conflict occurs within the business (Global: 77pc) – but is typically handled within the family without using third party resolution mechanisms. This may explain why levels of conflict remain high.
“It is vitally important that businesses take a lead on ensuring they have formal processes in place so they can ensure stability and continuity in the long run,” said Harbron.
Seven out of ten (70pc) Irish family business respondents confirmed that the family has a clear sense of agreed values and purpose as a business. However, fewer than half (47pc) have a documented vision and purpose mission statement for their business (Global: 51pc).
Succession planning is one of the most sensitive issues for family businesses and COVID-19 appears to have concentrated minds in this area. While still only 23pc (Global 30pc) of Irish family business leaders claim to have a robust, documented and communicated succession plan in place, this is up from 18pc two years ago.
“Family harmony should never be taken for granted and having proper governance structures are important. In my experience, adequate succession planning can be overlooked as short and medium term business needs take priority. However, as a result of the pandemic I’m seeing a lot of progress in this area,” Harbron concluded.
By John Kennedy (firstname.lastname@example.org)
Published: 19 May 2021