The EU Taxonomy came into force in 2020 but its first reporting provisions applied in 2022, and further disclosure requirements related to the Sustainable Finance Disclosure Regulation (SFDR) for financial market participants will become effective in 2023. AI: a friend and a foe for sustainability? 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. For many years, sustainability has remained top of mind for food and beverage processors and consumers. 2022 was a hot year for the climate. Inconsistent ESG data availability and quality hinder corporate ESG efforts and impact. Sustainability is good for business, and not just because it mitigates regulatory compliance risk. A New Era for Sustainability Accountability Last year we saw an influx. 25 April 2023 by Arturo Bris in Sustainability. In the longer term, this will likely lead to increased adoption of new types of energy and fuels. This includes swapping packaging materials . The social dimension of the challenges of climate change, climate action and sustainability has often been an after-thought, but in 2023 this dimension will rise further up the sustainability agenda. Were seeing customers replace time-consuming, inaccurate manual approaches with a holistic steering and reporting solution like SAP Sustainability Control Tower. An infographic based on the latest Climate Watch data highlights that energy usage contributes to 73.2% of global greenhouse gas emissions. Many companies will see an opportunity to accelerate the green energy transition, and the plans that were put in place before the war in Ukraine, as renewables become more cost competitive. In addition, ESG investors and rating agencies are holding firms accountable for their sustainability records. Apr 26, 2023 (3BL Media via . Florian Hoos, Professor of Sustainability and ESG accounting. Gartner researchers said that by 2027, 50% of the top 10 consumer goods manufacturers will have digital product passports for at least one of their product categories. I have ordered these by the five pillars of Economist Impacts Sustainability Project: Net zero is the ambition to reduce greenhouse-gas emissions as much as possible towards zero, and to counter any remaining emissions with carbon-negative solutions, whether nature-based (for example, planting trees or restoring mangroves) or technological (such as direct air capture). Not only are they asking those questions, but they are also planning how to pay back the CO2 debt that the company has created since its creation. Considering all these pressures, its all too easy to stumble into the ESG reporting trap. Our global experts keep pace with sustainability trends providing timely insights on shifting consumer preferences and the latest innovations, strategies and investments shaping governments and business agendas. In 2022, Cartier and Kering formed the Watch & Jewellery Initiative 2030 which, like the Fashion Pact, aims to drive progress on sustainability in its sector. The topics in this report on today's emerging sustainability trends are selected for their high growth across sites including Google, TikTok, Instagram, Reddit, Twitter, YouTube, and Amazon. In that journey, many are also realizing that it is impossible to achieve net zero without looking outside of their traditional business. We also note that some regulators and central banks have already made the case as to why and how financial institutions should respond to rising risks and biodiversity losses. In 2022, the European Financial Reporting Advisory Group (EFRAG), the U.S. Securities and Exchange Commission (SEC) and the newly formed International Sustainability Standards Board (ISSB) drafted various proposals for disclosure standards relating to sustainability and/or climate-related issues. With all the regulatory changes ahead, 2023 will be a year dominated by managing ESG risks. COP27 in November 2022 was quickly followed by the U.N.'s Convention on Biological Diversity, known as COP15. Stakeholder pressures on companies keep rising. Corporates investing in their own energy generation may find projects cost more in the short term. This is why specific claims such as natural, organic, and vegan enjoyed outstanding momentum during 2021, according to Euromonitors Sustainability Opportunity Tracker. All rights reserved. The current approach to sustainability is underpinned by guilt. From net zero to climate-positive supply chains, Many companies are working hard to meet net-zero sustainability targetsby 2050 or other target dates. By their nature, they process huge amounts of data, and all those data centers carrying out storing and processing tasks require a lot of energy for cooling. 2 These include Scope 3 emissions, those which do not come from their own operations but from their larger value chain. The goal is to agree on a post-2020 global biodiversity framework that builds on the Strategic Plan for Biodiversity 2011-2020. Setting up a loss and damage fund at COP27 was only the first step. The sustainability trends in 2023 are predicted to plunge beyond eco-friendliness. Water is likely to play a central role on the global agenda in 2023 following major water-related disasters such as the floods in Pakistan and the droughts in Europe. Nevertheless, we think companies will be pressed in 2023 to invest more resources into managing the resilience and sustainability of their supply chains in the face of a more rigorous regulatory landscape governing corporate responsibility around the impact on human rights. What kind of regulation forecast mechanism is needed to be prepared for changes in standard setting at different levels (ISSB, EU regulation, etc.)? 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. Sustainability trends to look out for in 2023 Michael Wilkins on December 30, 2022 There's an unpredictable year ahead and my futuristic thinking can only pierce so far into the haze. We also think attention will shift to water ahead of the inaugural U.N. Water Conference in March 2023, where governments and other stakeholders will review the objectives of the International Decade for Action on Water for Sustainable Development, 2018-2028. Girod, Professor of Strategy and Organizational Innovation. These trends are expected to impact a wide range of stakeholders, from companies, investors and workers to communities, regulators and policymakers. All Trends Business Sustainability Our hand-picked collection of the top sustainability trends of 2023 & 2022. COP27 failed to achieve any major breakthroughs in areas such as phasing out fossil fuels. We are the independent guide to sustainability, helping our audience cut through the noise and supporting them as they achieve sustainability goals and reach outcomes with actual business value. However, the need to bring citizens and workers on board with the climate-action agenda will remain a challenge. Forrester expected five Fortune Global 200 firms to announce policies limiting travel for sustainability this year. As a result of COVID-19 and the intense competition for talent amid a period of exceptionally high employee turnover, employee expectations around health, well-being, culture, flexibility and benefits have evolved over the past two years. Insights on Sustainability Article Toward a more orderly US energy transition: Six key action areas January 12, 2023 - The US drive to decarbonize is at an inflection point. The MarketWatch News Department was not involved in the creation of this content. The luxury industries have continued in 2022 to accelerate innovation towards greater sustainability. Most companies struggle to measure scope 3 emissions, as they still need to work more closely with their suppliers. Although Forrester analysts expected at. 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. 1. Yet collaborations are difficult to orchestrate as they demand systemic changes in clear contrast with the linear and profit-driven mindset prevailing in business. As we head out of COP27, many are disappointed to see climate deterioration going much faster than any governmental moves to address the crisis. All content is available on the global site. How do you inspire your team? Build your core leadership skills, accelerate your career and harness your full potential as a leader. As we become more aware of the impact our actions have on the environment, there is a growing need to find ways to operate in a more sustainable way. Money matters are also driving sustainable business norms. Here is a preview of a few of Forrester's 2023 predictions for sustainability: Carbon offsets and credits will be back in fashion but with less fraud. Article The Russian attack on Ukraine and subsequent surge of refugees, growing inflation, and lingering concerns about the COVID-19 pandemic also raise doubts about governments ability to ensure an inclusive society. For the same reasons, we expect that company and investor lobbying activities will come under greater scrutiny to ensure that they are consistent with public commitments to both sustainability and fiduciary mandates. Download Transcript (PDF, 106 KB) The large-scale trends shaping the ESG investing world have become well recognized: Climate change risk and the road to net zero, the growing existential threat of biodiversity loss, social inequalities, regulation and, lately, debate and controversy over greenwashing and what ESG should be. Experience IMD for yourself, join one of our upcoming events. Do you need charisma? In 2023, we believe more investors and companies will seek to assess the social and financial costs associated with water scarcity and droughts. Several initiatives, such as the Global Reporting Initiative and ISSB collaboration or Net Zero Guidelines from the International Organization for Standardization, may play a role in harmonizing the various standards. Litigation risk has also given rise to a new trend named by some as "greenhushing", whereby companies may refrain from disclosing details of their sustainability goals and practices for fear of being penalized for the information released. Go on - they only take five minutes. Circular Economies: There will be momentum on tackling plastic and chemical pollution. Many corporate leaders find sustainability also helps deepen their organizations sense of purpose to engage and retain a new generation of employees. The final drafts of these standards should be adopted in 2023. The Intergovernmental Negotiating Committee (INC) will hold workshops over the course of 2023, with the aim of adopting the treaty in 2024. 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. These instruments will have to increasingly address investor questions about the effectiveness of targets and incentives. Therefore, companies may face more scrutiny on appropriate board oversight and the maturity of their sustainability strategies and processes. Dedicated to the advancement of knowledge on world competitiveness. That is the hardest part, as usually 90-99% of a companys greenhouse gas emissions are Scope 3. These include Scope 3 emissions, those which do not come from their own operations but from their larger value chain. Economic recovery after the pandemic has not been as fast as expected, while the Russian invasion of Ukraine has put extra pressure on consumer and business budgets due to supply chain and energy disruptions. With challenges such as global economic, The pandemic, cost-of-living crisis and high inflation continue to have an unprecedented impact on affluent consumers, their wealth, and their shopping habits. For example, long-term energy transition goals will be weighed alongside nearer-term considerations such as energy affordability and security. Both crises call for increased focus on energy efficiency and acceleration of investment in renewables, suggesting alignment. Foodservice innovation drivers in 2023 include health and wellness, nostalgia, sustainability, and a desire for adventure. Mind the ESG reporting trap! All too often, companies and business leaders are not getting any insights from ESG analyses, as they approach ESG reporting solely as a required disclosure exercise. The Taskforce on Nature-related Financial Disclosures (TNFD), which should finalize its recommendations in September 2023, will provide frameworks to identify, measure and disclose nature-related risks and impacts. Published: April 26, 2023 at 10:09 a.m. COP27 has confirmed the need for stronger co-operation on key issues such as climate finance and corporate net-zero commitments. 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. These new rules and disclosure standards aim to enhance transparency and consistency on sustainability-related issues and mitigate the risk of misrepresentation, perceived as greenwashing, in financial markets. Grow your network and explore the latest thinking on todays critical business challenges and opportunities. The durability of sustainable employment practices, implemented in recent years in response to significant shifts in workforce expectations, will be challenged by recessionary risks in many markets. We believe that dynamic could change as companies adjust in the face of economic uncertainty and changing labor market dynamics. The top strategic technology trends for 2023 are: Sustainability Sustainability traverses all of the strategic technology trends for 2023. Supporting organizations with talent assessment, development and leadership progression. We tend to think about collaboration as an external challenge but the key to success lies in redesigning organizations that can align incentives around impact and mobilize complementary resources to achieve it. Read more about how we track global trends. Learn more about our world-class faculty team. Workers increasingly demonstrate willingness to adjust the time and effort they dedicate to their job or leave their positions for new opportunities if workplace culture does not align with their values and expectations. Therefore, it is important for companies to align with international standards and get advice from experts, such as the United Nations or the Ellen MacArthur Foundation, to pave the way to efficient and impactful implementation. Stphane J.G. It will likely grow even more, especially in most of North America, Europe, and in fast-growing countries in the Asia-Pacific region and the Middle East. The Growth Summit 2023 is taking place on 2-3 May at the World Economic Forum's headquarters in Geneva, Switzerland. The COP27 United Nations Climate Change Conference in Egyptand the UN Biodiversity Conference COP15 in Montreal stressed the need for business to create action plans to mitigate human influence on the climate and on nature. In the longer term, this will likely lead to increased adoption of new types of energy and fuels. Policy incentives will also continue to emerge to stimulate innovation, help tackle climate change and fund the shift to clean energy. Corporate This has resulted in calls for global convergenceto support consistency and avoid confusion and additional reporting workloads for companies and investors alike. The Summit brings together leaders from business, government, civil society, and academia to shape a new future of work that is inclusive, sustainable, and equitable. 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. The new generation of business owners and leaders care deeply about the environment and are striving towards more sustainable and equitable business practices. Net-zero pledges have become mainstream in companies sustainability reports, as a way to demonstrate environmental commitment. 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. Also, several AI giants such as Google and Microsoft have already pledged to become carbon negative soon. 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. An opportunity lens on sustainability. This year's forecast of sustainability trends looks like the perfect storm (in a good way) of purpose-minded, yet business opportunity-led progress. This interconnected challenge presents a timely opportunity for companies that are getting serious about ambitious climate targets to account for nature and biodiversity protection in their climate targets as a means to net zero. The provisional agreementin the EU for new regulation for deforestation-free supply chain will mean many companies will have to better understand biodiversity risk. Within three years, these analysts said ESG performance will be viewed as a top three decision factor for IT equipment purchases; over 50% of RFPs will include metrics regarding carbon emissions, material use, and labor conditions. The need for stronger collaboration shines through the five key sustainability and climate trends I expect to see in 2023. How do you incentivize the C-level and senior managers? Powerful business networks. . With Scope 3 emission regulations on the rise and continuously changing, organizational leaders have realized the value of connected data to track, report, and reduce climate impact. Affordable sustainability There is unanimous agreement that 2023 will be a challenging year across global markets. The picture looks especially complicated in Europe, where new investment in liquefied natural gas and a slower phaseout of coal could challenge decarbonization plans. However, we still anticipate GSSSB issuance to grow to between $900 billion and $1 trillion in 2023 compared to nearly $850 billion in 2022 as the asset class capitalizes on various initiatives to fill the climate financing gap. 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. Many boards have responded to increasing ESG pressures by recruiting a sustainability specialist. 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. It appears increasingly challenging to meet the Paris Agreement goal to limit warming to 1.5 degrees to 2 degrees Celsius relative to preindustrial levels, as emissions should reach all-time highs in 2023. Board members and top executives can make a choice today between just complying with the new standards and using this one-time change in mandatory reporting as an opportunity to prioritize sustainability even more as a key component of their strategies. The three trends IEEE Standards Association (IEEE SA) expects to see in 2023 in the energy sector pertain to the following topics: changing electric infrastructure, the water-energy nexus, and more broadly, energy efficiency. The U.S. Customs and Border Patrol is enforcing 55 active Withhold Release Orders and targeted over 3,500 inbound shipments from 2021 to 2022. From net zero to climate-positive supply chains Recent research reinforces the link between increasing drought frequency and severity and climate change, which has made Northern Hemisphere droughts in summer 2022 at least 20 times more likely. For example, the humanitarian sector is currently experiencing a $32.3bn shortfall between funding and what the UN says is needed. All stakeholders will bear the impacts from physical risks related to climate change. Companies have been struggling to communicate sustainability to consumers. Authors: Andrew Angle, Aiste Brackley, Justin Nelson, Laura Street, Mark Lee. Curious about how we partner with you to help you solve your complex modern-day business problem? Established under the Paris agreement, the GGA aims to create an adaptation equivalent to the global mitigation goal of limiting the global temperature rise to 1.5C. Storytelling and expertise from marketers, SAP BrandVoice: Green Customer Experiences Drive Ongoing Growth For Midsize Businesses. During COP15, the International Sustainability Standards Board (ISSB) announced that it will research the link between climate and nature. Natalia Olynec is the Chief Sustainability Officer at IMD, where her work focuses on research, program development, strategy, governance, reporting and advisory. This interconnected challenge presents a timely opportunity for companies that are getting serious about ambitious climate targets to account for nature and biodiversity protection in their climate targets as a means to net zero. Against a backdrop . Regulation. What is your plan to transition into the low-carbon era under different scenarios? Sustainability-linked bond issuance fell sharply over the second half of 2022 as investors raised concerns about issuer ambitions and incentives to achieve sustainability targets. Unilever Hearts of Palm Ceviche. Also, businesses should work with key stakeholders such as governments, suppliers, and competitors to build scale economies that allow the acceleration of the transition. In 2023, we think continued geopolitical turmoil, persistent inflation, looming recession and worsening physical impacts of climate change will create new tensions between managing near-term risks and making meaningful progress on longer-term sustainability goals. With the right approach, everyone can be a winner. To that end, here are the top sustainable living trends to watch in 2023. But that wasnt really the expectation at what was dubbed an implementation COP, where the focus was on how to turn pledges and commitments into real-world actions and solutions. Peter Vogel, Professor of Family Business and Entrepreneurship, Ivan Miroshnychenko, Research Fellow and Term Research Professor. Circular solutions such as second-hand and previously owned products are also gaining traction amongst global consumers as, according to Euromonitors Voice of the Consumer: Sustainability Survey, fielded January to February 2022, 34% of global respondents mentioned their willingness to buy these products. 5 Sustainability Trends in 2023 and Beyond 07 April 2023Save Article Save Article In recent years, sustainability has become an increasingly important issue for businesses and individuals alike. However, the continued lack of a global climate finance taxonomy remains a challenge to bringing transparency and comparability to the space. Carlos Cordon, Professor of Strategy and Supply Chain Management. In June 2021, the International Organization of . If the current trend continues, the number of disasters could rise to 560 per year by 2030, up 40% from 2015. Many report feeling overwhelmed, experiencing increasing anxiety, frustration and irritability, as organizations face a multitude of challenges in a world dealing with ecological collapse, biodiversity loss, social division and economic decline. 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. 2023 Sustainability Trend - Transition to Net-zero Countries and companies have taken responsibility for climate change and raised their carbon emissions reduction ambition. Download this insight brief to learn about the top eight ESG and sustainability trends you should expect to see in 2022 and beyond. Many companies will see an opportunity to accelerate the green energy transition, and the plans that were put in place before the war in Ukraine, as renewables become more cost competitive. The impacts from climate change will not be evenly distributed, with lower- and lower-middle income countries more at risk than higher-income peers and less ready to cope. Data in your Equity, Inclusion & Diversity strategy: friend or foe? We will scale new technologies to gradually disrupt our carbon economy. Here are four key trends from the ERM Sustainability Institute's 2023 Trends Report that are driving this transition: Corporate ESG disclosure will become more standardized across geographies and sectors. Euromonitor International has identified five key trends affecting the global sustainability agenda in 2023. Consequently, in 2023, we anticipate the durability of new employee-friendly workplace practices will be tested. Some facts are encouraging: So, there is a real case for a glass half full view on climate. Of particular note was how consumers are approaching healthy living in the Beauty & Personal Care category. The increasing risk of environmental, social and governance (ESG)-related litigation, including over sustainability disclosure, will be another challenge for companies and investors to navigate. According to the REN21 renewable energy community, we globally invested $366bn in renewables in 2021 alone. Meanwhile, institutional investors under pressure to deploy capital are turning to still-developing voluntary carbon offset markets to meet climate commitments while continuing to finance assets and companies linked to fossil fuels. Sustainable solutions can, and should, be affordable, so consumers do not struggle when seeking more conscious habits. 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. This shift has been fueled by increasing energy insecurity, rapidly changing regulatory and reporting standards, and investor appetite for environmental, social and governance (ESG) performance. 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. Susan Goldsworthy, Affiliate Professor of Leadership, Communications and Organizational Change. 1. By next year, IDC analysts predicted a quarter of organizations worldwide will demonstrate responsible leadership by increasing their sustainability-related digital technology spend by more than 25% from 2022 levels.