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 and plan to do more on climate action, according to our Irish Family Business Survey 2021.
Nearly six out of ten (59%) Irish family businesses feel they have a responsibility to fight climate change and its related consequences, but only (35%) stated that reducing their organisation's carbon footprint is a top priority. 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 (41%) reported that they are 'putting sustainability at the heart of everything they do' (Global: 49%). Only 32% have a developed and communicated sustainability strategy in place (Global: 37%).
This comes despite the fact that Irish, family-owned businesses are highly likely to feel a responsibility to society. Over three quarters (78%) engage in proactive social responsibility activity and do very positive work in this regard. For example, 71% said they contribute to their local community (Global: 62%). 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.
John Dillon Leader of PwC Ireland Entrepreneurial and Private Business Practice said, "Irish family businesses are telling us that the time is right to think differently about sustainability in its broadest sense. 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 30% expect to see sales growth in the last financial year with 48% 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. 58% are confident about growth ambitions for 2021 (Global: 65%). 87% expect their businesses to grow in 2022 (Global: 86%).
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, 81% retained as many staff as possible during the pandemic (Global 71%). 49% topped up the wages of staff on government employment retention schemes (Global 21%). 59% provided emotional and mental health supports to staff (Global: 45%). Family shareholders also made sacrifices: 42% took a salary cut to support the business during COVID-19 (Global: 31%).
Even though 90% of Irish family businesses adapted to the challenges of the COVID-19 pandemic by enabling home working for employees (Global: 80%), there are concerns about their overall strength when it comes to digital transformation.
Less than half (42%) of Irish respondents described their digital capabilities as 'strong'. While this compares favourably with global counterparts (38%), there is significant room for improvement. There is recognition that more investment is needed - 48% reported that improving digital capabilities is the second greatest priority for Irish family businesses for the next two years (Global: 52%).
Internationally, 41% of businesses that describe themselves as digitally strong are 3rd or 4th generation and Next Gens have taken an increased role in nearly half (46%) of digitally strong businesses.
Mairead Harbron Director at PwC Ireland Entrepreneurial and Private Business Practice said, "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. 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. 84% say they have some form of governance policy in place, however, there are clear gaps. For example, only 38% have a Will in place, less than one in five (18%) have conflict resolution mechanisms and only 16% have a family constitution. 80% of Irish family business respondents admitted that family conflict occurs within the business (Global: 77%) - but is typically handled within the family without using third party resolution mechanisms. This may explain why levels of conflict remain high.
Mairead Harbron says "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".
Seven out of ten (70%) Irish family business respondents confirmed that the family has a clear sense of agreed values and purpose as a business. However, fewer than half (47%) have a documented vision and purpose mission statement for their business.
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 23% (Global 30%) of Irish family business leaders claim to have a robust, documented and communicated succession plan in place, this is up from 18% two years ago.
Mairead Harbron concluded: "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".
"The pandemic has triggered both an economic and health crisis and therefore, minds have been focused on the downside of not having an adequate succession plan in place. In addition, with lockdown restrictions, people have found themselves at home with more time to think about strategic objectives like succession planning".
"Perhaps not surprisingly, during the pandemic the number of respondents to our survey who have formalised succession planning has increased this year and we have also seen a marked increase in family business owners' desire to protect their business and create a legacy."
The Irish survey is based on 79 Irish family businesses who were interviewed across all key industry sectors; 38% having a turnover of greater than €100 million. Globally, 2,801 interviews were conducted with family business leaders and decision-makers across 87 territories including Ireland, taking place in November and December 2020.
At PwC, our purpose is to build trust in society and solve important problems. We're a network of firms in 155 countries with over 284,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at pwc.com.
PwC refers to the PwC network or one or more of its member firms or both, each of which is a separate legal entity. Please see pwc.com/structure for further details.
© 2021 PwC. All rights reserved