In October 2021, the Department of Enterprise, Trade and Employment entered into an agreement with the Economic and Social Research Institute (ESRI) to embark on a joint research programme, titled “The Productivity Challenge and Its interaction with Climate, Digitalisation and Human Capital”. Productivity is hugely important as it is the driver of economic growth in the longer term, and as such is key to improvements in living standards, associated with growing and sustainable wage levels, good public services, and improved wellbeing. The Chair of the NCPC, Dr Frances Ruane, is a member of the Steering Committee for this joint research programme.
Today, 25 January 2023, the ESRI have published the first working paper as part of the joint research programme titled “Firm-level attitudes and actions to the “Twin Transition” challenges of digitalisation and climate change”. Mitigating and adapting to climate change is a central global challenge that may incur costs for many businesses but also one that could bring opportunities in terms of productivity and new markets. Increased use of digital technologies is an area where the challenge of climate adaptation and promotion of productivity growth may be bridged.
The research published today uses firm-level evidence from Ireland to examine firm attitudes and the determinants of firm participation in one or both of the “twin transition” elements. The data is drawn from the Annual Business Survey of Economic Impact (ABSEI), carried out by the Department of Enterprise, Trade and Employment, including novel questions on energy use, climate adaption priorities and digital strategies along with a wide range of firm characteristics. Larger and more productive firms are more likely to have higher degrees of digitalisation and to have climate action plans in place. Firm productivity is also positively linked to active steps such as measuring CO2 emissions.
The authors also find considerable overlap between having a climate and a digital plan in place across firms while controlling for a range of other firm characteristics. At the same time, they find a reasonably large share of firms that have positive attitudes to the importance of climate planning but without reporting corresponding concrete actions, suggesting a gap for policy to address.
As part of the ongoing work of the joint research programme, the ESRI will undertake further research on issues related to productivity which will assist in developing a deeper understanding of the processes which drive, or inhibit, enterprise productivity growth in Ireland. The output from the joint research programme will provide valuable evidence that will inform the Department and the NCPC’s analysis of productivity issues and will assist in identifying productivity-enhancing reforms and interventions.
The working paper can be found here.
Further details can be found on the ESRI website here.