Our experts offer actionable insights through first-person narratives, behind-the-scenes interviews and The Help Desk. At COP15, the 2022 UN conference on biodiversity, leaders decided on our collective goals for the post-2020 global biodiversity framework and businesses advocatedfor mandatory biodiversity assessments and disclosures by 2030. To that end, here are the top sustainable living trends to watch in 2023. We will go through the whole energy transition, and we will build a circular economy. Meanwhile, new human rights regulations will introduce additional requirements for company supply chain management. The goal is to agree on a post-2020 global biodiversity framework that builds on the Strategic Plan for Biodiversity 2011-2020. That said, we believe developing countries can only sustain so much debt to finance rising losses and lost revenues from physical climate risks. Carbon offsets have been criticized for. Affordable sustainability There is unanimous agreement that 2023 will be a challenging year across global markets. Companies have been struggling to communicate sustainability to consumers. ArtificiaI Intelligence, and specifically certain deep learning models such as those designed to process human language, requires huge amounts of energy. In the short term, businesses of all industries and sizes will look at energy-saving measures to reduce both costs and carbon emissions. Taking a stack of post-it notes, team members write down all the things that are concerning them from their personal and professional perspectives. These two events helped spotlight the links between two global environmental crises, climate change and biodiversity loss. In January, Sherry Frey, VP of Wellness at NIQ hosted our annual Look Ahead Webinar covering the top wellness trends to watch in 2023. Resilience & Adaptation: There will be further progress on loss and damage and the global adaptation goal. 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. Leadership is about being positive and seeing opportunities, and we are living in a time where climate leadership is critically important. The IMD Alumni Network is a widespread but close-knit global community in a tightly interconnected and complex business environment. Firms are advised to get ahead of the game and start accounting for biodiversity. These include Scope 3 emissions, those which do not come from their own operations but from their larger value chain. Sustainable solutions can, and should, be affordable, so consumers do not struggle when seeking more conscious habits. Collaboration will also be needed to accelerate the building of circular economies. , led by the Ellen McArthur Foundation and the United Nations Environment Program, through which 500 signatories such as Nestl, PepsiCo, Coca-Cola, Unilever, Mars, and LOral which together utilize 20% of all plastic packaging produced globally have committed to ensuring that all plastic packaging is reusable, recyclable, or compostable by 2025, among other circularity goals. Nevertheless, Here are a few of my predictions for trends that will shape sustainability in 2023. 2. 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. 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. What kind of regulation forecast mechanism is needed to be prepared for changes in standard setting at different levels (ISSB, EU regulation, etc.)? Via helps you navigate a fast-changing digital marketplace. In the longer term, this will likely lead to increased adoption of new types of energy and fuels. Published: April 26, 2023 at 10:09 a.m. Here are our top 10 sustainability trends we're expecting to see gain momentum and define sustainability in 2023: 1. Log in here to join in the conversation with the I by IMD community. Surely thats progress that will help us breathe a little easier and live longer. 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. That is not what makes for successful ESG governance. Beyond capturing new markets, transforming your business towards sustainability is also a way to address changing customer and investor needs, as well as to attract and retain talent. In the report that follows, we outline nine trends we see rising in prominence in the sustainability landscape during 2023. Many boards have responded to increasing ESG pressures by recruiting a sustainability specialist. In that journey, many are also realizing that it is impossible to achieve net zero without looking outside of their traditional business. 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. 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. 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. Essentially a digital thread, passports will track the products carbon footprint, waste, liability and risk, and more, sharing information company-wide and with suppliers and regulatory agencies. Vanina Farber, elea Professor of Social Innovation, Patrick Reichert, Term Research Professor and Research Fellow. The We Mean Business Coalition and the Voluntary Carbon Markets Integrity Initiative have continued moving towards better regulation and standards for carbon credits. For example, the ocean and food systems had their own dedicated pavilions. The State of Sustainability for Emerging Beauty. Supporting organizations with talent assessment, development and leadership progression. Discover our campus locations in Switzerland and Singapore. 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. Agribusinesses are particularly sensitive to water scarcity, leading to more expensive irrigation, crop damage and weak harvests, which may raise food security and supply concerns, already exacerbated by the Russia-Ukraine war. 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. A risk-focused mindset could be preventing businesses from developing the ambitious strategies they need to capitalize on the opportunities of sustainability 28 March 2023 by Etelle Higonnet in Sustainability. Our site uses cookies to improve functionality. 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). Building on the visibility of nature-based climate solutions at COP26, there was an enhanced profile for nature at COP27 too. Sharing emotions for healthy, sustainable high performance, Luxury developing sustainable supply chains, Board composition and responsibilities adapt to ESG purpose, Innovation, investment, and business transformation fuel climate hopes. Authors: Andrew Angle, Aiste Brackley, Justin Nelson, Laura Street, Mark Lee. Firms around the globe are shifting their focus on sustainability from talk to action. 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. Go on - they only take five minutes. They are developing sustainable products and services and supply chain practices to increase revenue, satisfy investors and regulators, and improve their reputation. Second, we are investing. 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. In the Deloitte 2023 Global Human Capital Trends survey, 84% of respondents acknowledge that understanding the impact of sustainability on their organization and defining ownership for driving progress and outcomes is important to their organizations' success. From net zero to climate-positive supply chains, Many companies are working hard to meet net-zero sustainability targetsby 2050 or other target dates. Progressive employment practices implemented in the wake of COVID-19 will be tested by cost-cutting related to economic uncertainty. 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. In order for companies to return to the environment more than they take from it, circular models are needed, as they provide resilient solutions with a triple impact on businesses, people, and the environment. Discover all upcoming events for IMD alumni! Economic and Political Challenges to Test ESG's Staying Power Recession, energy crisis and increased regulation are the. In this context, practical solutions that can accelerate progress on the SDGs will be urgently needed. Private-public alignment is necessary to accelerate the transition towards circular models. A personalized transformation journey that teaches you how to unlock the full potential of your leadership. In fact, 57% of global professionals mentioned their company is planning to develop products with carbon-neutral claims, according to Euromonitors Voice of the Industry: Sustainability Survey 2022, fielded January 2022. 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. First, the world is searching for new solutions. Building a digital ecosystem of partners offers you a powerful lever to accelerate growth. 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. For example, quite a few food companies cant achieve net zero without having their suppliers (farmers) planting crops that are of no use for the company supply chain, but which capture CO2. At the wake of the conflict that has stirred markets, Eco-Business rounds up six trends that could influence global sustainability in 2023. 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. New regulations drive sustainability strategy. 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. In turn, this has taken a heavy toll on the sea level rising, European glacier melting, and extreme weather events from . Source: Euromonitor's Voice of the Industry: Sustainability Survey 2022. Photo courtesy of Unilever. 2022 Sustainability Trends Report. Learn more about incorporating sustainability into your business operations to help create a future with zero emissions, zero waste, and zero inequality. IDC analysts predicted by 2024, 30% of organizations will use ESG data management platforms to steer ESG KPIs through a centralized system of record for reporting purposes and real-time operational decision-making support. For many years, sustainability has remained top of mind for food and beverage processors and consumers. In watches and jewellery, transformation started later, perhaps due to the longer life cycle of these products and their smaller volumes. According to the REN21 renewable energy community, we globally invested $366bn in renewables in 2021 alone. Despite this, biodiversity, essential to sustaining natural capital and ecosystem services, is declining. Discover more than 130,000 executives who are IMD alumni. 1) Changing Electric Infrastructure Inspiration, a mini-series with Lorange Network and IMD, Business transformation: incumbents must not assume the right to win, Executive pay: balancing sustainability with profitability, We need a realistic, fact-based approach to sustainability, Reframing sustainability: from risk to opportunity, Activists are not the enemy,so lets work together. So it is urgent to accelerate our progress towards this objective. 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. 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. Although Forrester analysts expected at least 10 companies to incur $5 million or more in greenwashing fines, the longer term outlook for meaningful environmental impact is far brighter. Considering all these pressures, its all too easy to stumble into the ESG reporting trap. Ecosystems & Resources: A new global biodiversity framework will set the stage for rising global scrutiny and collaboration on nature. In the period 2021-2022, product packaging and product claims rose 6.0 and 2.4 percentage points respectively in the share of global respondents, as efficient ways for businesses to communicate sustainability and improve their brand positioning. And the search for high-quality carbon credits, including those based on marine natural capital (so-called blue carbon such as seagrass, mangroves and tidal marshes), will accelerate. We forecast that total global bond issuance will increase modestly in 20231 as rate rises subside, but inflation risks remain, and global growth is set to stagnate or even tip into recession in some regions. Executive teams will increasingly have to address these emotional challenges. However, organizational transformation and readiness is needed to push the boundaries of the problems that private capital can address and solve. Finally, the need to draw down greenhouse gases already in the atmosphere will continue to gain momentum in 2023, with technological carbon-removal solutionsin addition to nature-based onesseeing unprecedented investment following the Biden administrations announcement to invest US$3.5bn in carbon-removal technology. This has resulted in calls for global convergenceto support consistency and avoid confusion and additional reporting workloads for companies and investors alike. Euromonitor International has identified five key trends affecting the global sustainability agenda in 2023. 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. Boards leading on ESG drive the ESG culture of the board through its composition. 6. Under increasing SEC scrutiny, Forrester analysts expected public companies to anchor their sustainability goals with corporate policies aimed at driving environmentally sustainable behavior. IDC analysts predicted that by 2026, regulations and sustainability-linked lending will drive over 60% of global manufacturers to adopt product carbon footprint as a key metric to operationalize sustainability beyond reporting. Read more about how we track global trends. Visit our Sustainability page and Sustainability store for further insights. 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. Building on the key insights from World Water Week 2022, the UN Water Conference in March will focus on the water-climate nexus. Environmental, social, and corporate governance (ESG) standards and regulations are becoming a dominant force in how organizations operate, touching every part of the business. In addition, products carrying carbon-neutral/reduced carbon claims globally increased by 38% during 2020/2021, according to Euromonitors Sustainability Opportunity Tracker (15 countries in seven industries). Julia Binder, Professor of Sustainable Innovation and Business Transformation. These are accelerating systems transformation by boosting multi-stakeholder innovation, thus reducing costs for players, surmounting obstacles, and advancing solutions adoption. 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. What are the new sustainability KPIs that are at the heart of your strategy execution? With most models still at an experimental stage, a tougher challenge is spreading solutions globally. In 2022, McKinsey & Co. found that while total compensation remained important, other factors, including workplace flexibility and meaningfulness of work, have become more instrumental in many workers decisions to stay at or leave a job. /esg/insights/featured/special-editorial/key-sustainability-trends-that-will-drive-decision-making-in-2023 However, they also face criticism because of their complexity and a continuing lack of global alignment. The latest biodiversity COP (or COP15) in Montreal discussed this new framework, but the hard work starts now: 2023 will see rising global scrutiny and collaboration to ensure momentum towards the new nature milestones for 2030. ET. COP27 failed to achieve any major breakthroughs in areas such as phasing out fossil fuels. Russias invasion of Ukraine disrupted energy supplies across Europe, creating energy insecurity, soaring costs, and a strong incentive for investment in renewable energy sources. Today, we have at least 13,000 large and medium-sized companies in Europe transitioning towards more sustainable operations by disclosing their climate footprint. As a result, 91% of the global economy and 810 out of the 2,000 largest companies have pledged to net zero. Proactively using renewable energy, reducing waste and reusing materials will not only help companies to be ahead of legislation, but also demonstrate their interest in being part of the solution. 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.. Prodded by consumer demands and impelled by increasingly stringent regulations, the business sector has taken notice and actions to create a more sustainable future. 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. Also, businesses should work with key stakeholders such as governments, suppliers, and competitors to build scale economies that allow the acceleration of the transition. Critical actions could accelerate the transition while enhancing energy affordability and supporting inclusive economic growth. Protecting and restoring biodiversity under the Convention on Biological Diversity (CBD) has been on the agenda since 2020. All rights reserved. Heres a summary of their investment priorities. 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. For example, the humanitarian sector is currently experiencing a $32.3bn shortfall between funding and what the UN says is needed. In the longer term, this will likely lead to increased adoption of new types of energy and fuels. Join us for daily exercises focusing on issues from team building to developing an actionable sustainability plan to personal development. What makes a great leader? 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. As new sustainability disclosure standards come into effect around the globe, stakeholders will have to grapple with the complexity and potential challenges regarding alignment of these initiatives. 2023 CDFI Sustainable Investing Trends. In fact, only 10% of global professionals consider that their company is very effective at communicating sustainability to consumers, according to Euromonitors Voice of the Industry: Sustainability Survey 2022. The luxury industries have continued in 2022 to accelerate innovation towards greater sustainability. This list builds on many of the trends we identified in 2022, several of which we believe will remain relevant in 2023. In 2023, we believe more investors and companies will seek to assess the social and financial costs associated with water scarcity and droughts. The MarketWatch News Department was not involved in the creation of this content. With the right approach, everyone can be a winner. All this will require considerably more investments and capability building. Automobile and fashion have had by far the heaviest adverse impacts on the environment and society, so actors operating in these two sectors have been ahead of the pack in reversing this trend. Thus, the need for sustainable trends will also possibly increase in 2023. Otherwise, if emissions continue to rise, meeting Paris Agreement goals could entail greater and more costly decarbonization efforts. Additionally, these practices help them reduce their environmental footprint while saving costs associated with waste and resource and energy consumption. What Recent Trends Say About Sustainable Shopping In 2023 More From Forbes Apr 27, 2023,10:15am EDT Embracing Humanity In The Age Of AI: The Importance Of Company Culture Apr 27,. More than 40,000 species are at risk of extinction in the coming decades, according to the UN progress report on the Sustainable Development Goals released in July 2022. Didier Cossin, Professor of Governance and Finance, Founder and Director of IMD Global Board Center, Sophie Coughlan, Associate Director, IMD Global Board Center. 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. One such law, the German Supply Chain Due Diligence Act, goes into effect in January 2023 and requires covered companies to conduct human rights and environmental due diligence to identify risks, remedy issues and establish grievance mechanisms, among other things. Economist Impact, through its Back to Blue Initiative, has put a spotlight on the need to tackle chemical pollution. 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.