Climate change and associated topics such as water scarcity and biodiversity loss are likely to dominate stakeholder discussions, with long-term climate goals potentially reevaluated to address near-term urgencies. featured With this in mind, we think that adaptation will become as material as climate transition in terms of protecting lives, assets and the productive capacity of the economy over time. According to Deborah Kaplan, global head of sustainability at SAP Customer Success, corralling and understanding tons of disparate data is the biggest challenge for organizations regardless of where they sit on the sustainability preparedness spectrum. Companies need data transparency with detailed precision along the entire value chain. Ocean-related climate solutions will be crucial to making progress on global climate and nature targets in 2023, following the 2022 UN Ocean Conference. Since 2019, the number of people affected by food shortages has more than doubled to 345 million, roughly 4% of the world population, from 135 million, as reported by the World Food Programme. The proposals from the ISSB, EFRAG and SEC all use the TCFD framework as a reference for climate-related issues, but differences remain in their specific requirements and how they treat wider sustainability issues. New regulations drive sustainability strategy. Log in here to join in the conversation with the I by IMD community. These trends are expected to impact a wide range of stakeholders, from companies, investors and workers to communities, regulators and policymakers. The call at COP27 for multilateral development banks to scale up the use of blended finance to attract more private capital, and the push to boost adaptation finance, will underscore how GSSSBs can contribute to closing the climate finance gap. This could help maintain investment momentum in key technologies and ultimately deliver a faster energy transition with increased energy security for countries and companies alike. Asia as a key supplier of fossil fuels Russia, the world's largest fossil fuels exporter in 2021, has thrown global energy markets into turmoil by its invasion of Ukraine. Finnair Chairman Jouko Karvinen values age and background diversity as part of the airlines emphasis on sustainability, shifting the scope of the dynamics and the discussion in the process. In addition, ESG investors and rating agencies are holding firms accountable for their sustainability records. Source: Euromonitor's Voice of the Industry: Sustainability Survey 2022. A personalized transformation journey that teaches you how to unlock the full potential of your leadership. However, companies need to back-up their announcements and messages on certified claims, considering upcoming stricter regulation, as governments and savvy consumers are demanding transparency and accountability. The IMD Alumni Network is a widespread but close-knit global community in a tightly interconnected and complex business environment. Otherwise, if emissions continue to rise, meeting Paris Agreement goals could entail greater and more costly decarbonization efforts. In the report that follows, we outline nine trends we see rising in prominence in the sustainability landscape during 2023. Do you need charisma? It simplifies data visibility, allowing companies to record, report, and act on quality data across the value chain with built-in assurance and audit capabilities.. Russias invasion of Ukraine disrupted energy supplies across Europe, creating energy insecurity, soaring costs, and a strong incentive for investment in renewable energy sources. I by IMD is produced by the Institute for Management Development, Unleashing the Power of Data and Digital Ecosystems (Management on the Cutting Edge), Lifelong learning. 5 Sustainability Trends for Businesses in 2023. In 2022, efforts to integrate ESG into corporate policies and investment decisions faced diverging pressures, either for lack of or inadequate action or for going too far. Therefore, communicating sustainability through specific claims will still open up opportunities for companies to penetrate and improve their positioning in 2023. Peter Vogel, Professor of Family Business and Entrepreneurship, Ivan Miroshnychenko, Research Fellow and Term Research Professor. Resilience & Adaptation: There will be further progress on loss and damage and the global adaptation goal. Data in your Equity, Inclusion & Diversity strategy: friend or foe? Our site uses cookies to improve functionality. 2. Download this insight brief to learn about the top eight ESG and sustainability trends you should expect to see in 2022 and beyond. Meanwhile, the number and duration of droughts globally have risen by almost a third since 2000, according to the U.N. But we need to look beyond short-term benefits and keep an eye on the long-term implications of scaling AI too. Error: Something went wrong, try again in a few minutes. content They are developing sustainable products and services and supply chain practices to increase revenue, satisfy investors and regulators, and improve their reputation. Lead authors: Lai Ly, Global Head of ESG Research, S&P Global Ratings | Lindsey Hall, Head of ESG Thought Leadership, S&P Global Sustainable1 Co-authors: Bruno Bastit, Terry Ellis, Paul Munday, Bruce Thomson, and Dennis Sugrue, S&P Global Ratings; Esther Whieldon and Jennifer Laidlaw, S&P Global Sustainable1 This report neither addresses views about credit ratings on individual entities nor constitutes a rating action. Economist Impact, through its Back to Blue Initiative, has put a spotlight on the need to tackle chemical pollution. Against a backdrop . In addition to more substantial legal, operational, reputational and financial consequences of violations, companies may need to consider costs associated with adapting their sourcing models and managing higher input and production prices. An agreement reached at the U.N. climate change conference, known as COP27, for a loss and damage fund will seek to address adaptation and resilience challenges of developing countries. 2 Consumers still want to positively impact the environment, and expect companies to play their part in democratising sustainability; therefore, understanding the sustainability landscape will help companies to identify risks and seize new opportunities. We believe that these initiatives, among others, will serve as catalysts for greater reflection by stakeholders about the impact, risks and opportunities associated with nature and biodiversity. Considering all these pressures, its all too easy to stumble into the ESG reporting trap. The COP27 climate conference was a mixed bag. In the short term, businesses of all industries and sizes will look at energy-saving measures to reduce both costs and carbon emissions. But, in order for circular models to succeed, there is a need for collaboration. Copyright The Economist Newspaper Limited 2023. Here are the top six trends that are shaping a more sustainable future for our planet. 2023 Euromonitor is privately owned & trademarked. Trends that were driving innovation before the COVID-19 pandemic may have stalled for the past couple of years, but many now appear to be making a comeback. These include Scope 3 emissions, those which do not come from their own operations but from their larger value chain. All stakeholders will bear the impacts from physical risks related to climate change. To save on energy bills, firms will renovate buildings to prevent heating loss and implement digital solutions for temperature controls, shut off lighting and equipment when not in use, and replace less efficient outdated equipment. The 2023 Global Sustainable Development Report will be launched as the world approaches the half-way point of the 2030 Agenda and struggles to rebuild in the aftermath (or in the midst) of the COVID-19 pandemic. Along that path, they are now asking themselves if they could push even more and transform their supply chains to become CO. negative, going beyond net zero. On the one hand, developed countries finally agreed to set up a loss and damage fund to compensate developing countries for the climate chaos that industrialised countries have mainly causedalthough there is no money in it, for now. Discover all upcoming events for IMD alumni! Social Sustainability: The cost-of-living crisis intensifies, but offers opportunities for more-inclusive climate action. They have to act quickly as ESG frameworks and standards evolve, embedding into every business process sustainability metrics that are aligned with the company strategy, said Kaplan. Yet only 21% believe that their organizations are very ready to address such issues. Follow this link to learn more about our cookie policy and how we use cookies. Results-based climate finance was presented by the World Bank and others as an effective method to drive financing to projects that could generate such credits. 2023 Post-filing season update; Electric vehicle federal tax credit rules tightened as of April 18, 2023; From net zero to climate-positive supply chains, Many companies are working hard to meet net-zero sustainability targetsby 2050 or other target dates. Ecosystems & Resources: A new global biodiversity framework will set the stage for rising global scrutiny and collaboration on nature. While this tick-box approach demands an incredible amount of data, it does not provide insight on how to seize the enormous opportunities that the sustainable transformation will open up across all sectors. 25 April 2023 by Arturo Bris in Sustainability. Can development organizations, governments, firms and private financial institutions work together with the humanitarian sector to fill the gap? In 2023, we believe more investors and companies will seek to assess the social and financial costs associated with water scarcity and droughts. In that journey, many are also realizing that it is impossible to achieve net zero without looking outside of their traditional business. Executive teams will increasingly have to address these emotional challenges. She has worked in sustainability management, consulting, and education for more than 15 years. Despite economic uncertainty, consumers keep demonstrating interest in sustainable products to remain true to their values, opting for products that use inputs such as water and energy more efficiently, which consequently helps them reduce costs. . The following issues are key in that discussion: Answering those questions and going beyond just complying with mandatory sustainability reporting standards is key to gaining and maintaining competitive advantage in the future. Along that path, they are now asking themselves if they could push even more and transform their supply chains to become CO2 negative, going beyond net zero. Florian Hoos, Professor of Sustainability and ESG accounting. 2023 Sustainability Trend - Transition to Net-zero Countries and companies have taken responsibility for climate change and raised their carbon emissions reduction ambition. This was billed as the first Africa COP, and a focus on developing-country issues, as well as the agreement on loss and damage, illustrated the vital need for inclusive communities and considering the impact of climate on the most vulnerable communities. What are material sustainability issues for your company above the standard setters guidelines? Intergovernmental Panel on Climate Change (IPCC) experts argue in their latest climate change mitigation report that, to mitigate climate change and avoid a rise in global temperatures over 1.5C-2.0C, offsetting carbon solutions are not enough, and urge the need for carbon-negative (or climate-positive) strategies to accelerate global economies transition towards low-carbon systems. However, meeting these objectives will require actors to undergo organizational transformation: NGOs will need to be receptive to more market-based approaches, governments will need to provide stable policies and backstop the riskiest initiatives, development finance institutions will need to identify opportunities to provide additionality (i.e., focus on interventions that would have not occurred without their participation), and corporates will need to be willing to collaborate with traditional non-market actors. esgSubNav, Discover more about S&P Global's offerings, we think that adaptation will become as material as climate transition, call at COP27 for multilateral development banks. Organizational readiness for sustainable transformation, The next generation in family business will power data-driven sustainability, War and energy shortages accelerate adoption of energy efficiency and renewable energy. Natalia Olynec is the Chief Sustainability Officer at IMD, where her work focuses on research, program development, strategy, governance, reporting and advisory. For this to be achieved, companies need to measure direct (scope 1) and indirect (scope 2 and 3) emissions. Building on the visibility of nature-based climate solutions at COP26, there was an enhanced profile for nature at COP27 too. These macroeconomic and market conditions could constrain issuer appetite for GSSSB offerings. Valuable flows of goods (such as food and commodities) and ecosystem services (such as the climate regulation that occurs when oceans and forests store carbon) support economic growth and human wellbeing. We will go through the whole energy transition, and we will build a circular economy. They also involve measures to enhance the working environment, supply chain emissions, employee well-being, and ethical reporting. But actions speak louder than wordsand progress in areas such as food sustainability and reversing deforestation has been mixed over the past year. The final drafts of these standards should be adopted in 2023. Against this backdrop, we anticipate that 2023 will test companies and investors on the strength and depth of their sustainability commitments and the priorities they support in light of a growing risk of ESG-related litigation. Euromonitor International has identified five key trends affecting the global sustainability agenda in 2023. It is not enough to just claim that the products are better for the planet or more sustainable, if there is no arguable evidence behind these claims. One of the main reasons for that is the cost-of-living crisis in many countries, exacerbated by the war in Ukraine and rising energy and food prices. The EU took a leadership position in creating the fund, but now it must be operationalised and made viable. There is an urgent need for private capital to enter frontier markets to help solve systemic grand challenges. Although Forrester analysts expected at. Although the number of climate-related deaths has decreased threefold in the last 50 years thanks to early warning systems and better disaster management and preparedness, climate-related disasters are now nearly five times as frequent, according to the World Meteorological Organization. Vanina Farber, elea Professor of Social Innovation, Patrick Reichert, Term Research Professor and Research Fellow. Company executives and boards of directors have become more attuned to the external reporting aspects of sustainability. Additionally, these practices help them reduce their environmental footprint while saving costs associated with waste and resource and energy consumption. In that journey, many are also realizing that it is impossible to achieve net zero without looking outside of their traditional business. The picture looks especially complicated in Europe, where new investment in liquefied natural gas and a slower phaseout of coal could challenge decarbonization plans. 2022 was a hot year for the climate. Consequently, many companies introduced new incentive structures, benefits, workplace culture initiatives (flexible work, DEI strategies and efforts to improve work-life balance) and career development opportunities to promote the employee experience and better attract and retain talent. ArtificiaI Intelligence, and specifically certain deep learning models such as those designed to process human language, requires huge amounts of energy. These are accelerating systems transformation by boosting multi-stakeholder innovation, thus reducing costs for players, surmounting obstacles, and advancing solutions adoption. The challenge to reduce scope 3 emissions (ie, indirect emissions by suppliers or consumers in an organisations value chain) will accelerate in 2023 as companies focus on their supply-chain partners and on how their products and services are used by customers. In 2023, we believe companies and investors will have to prepare for reporting under a number of new and complex sustainability disclosure standards and adapt as they continue to evolve. Empowering senior teams to identify opportunities for growth and transformation. For many years, sustainability has remained top of mind for food and beverage processors and consumers. As a result, we think more companies, particularly those in industries with the greatest exposure to working conditions risks, will face greater costs associated with building the systems and capacities needed to comply with new requirements. Enabling organizations to meet their learning objectives, in a more impactful, convenient and flexible way. 1. Develop fully customized programs that reflect the unique opportunities and challenges of your organization. This push-and-pull dynamic could be a hallmark of sustainability discussions and decisions throughout 2023.

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