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. In the report that follows, we outline nine trends we see rising in prominence in the sustainability landscape during 2023. 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. Leadership is about being positive and seeing opportunities, and we are living in a time where climate leadership is critically important. Didier Cossin, Professor of Governance and Finance, Founder and Director of IMD Global Board Center, Sophie Coughlan, Associate Director, IMD Global Board Center. Promoting a strong employee experience can contribute to sustained competitiveness over the long term. 7 sustainability trends to watch in 2023 1 In 2023, consumers will be holding brands responsible for progressing the world's state of sustainability. A New Era for Sustainability Accountability Last year we saw an influx. 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. 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. Also, several AI giants such as Google and Microsoft have already pledged to become carbon negative soon. These trends are expected to impact a wide range of stakeholders, from companies, investors and workers to communities, regulators and policymakers. 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. In June 2021, the International Organization of . Our experts offer actionable insights through first-person narratives, behind-the-scenes interviews and The Help Desk. Companies have been struggling to communicate sustainability to consumers. Outlook 2023, Sustainability: five trends to watch. Were seeing customers replace time-consuming, inaccurate manual approaches with a holistic steering and reporting solution like SAP Sustainability Control Tower. By next year, IDC analysts predicted 80% of G2000 companies will capture their carbon data and report their enterprise-wide carbon footprint using quantifiable metrics compared with 50% today. Russias invasion of Ukraine disrupted energy supplies across Europe, creating energy insecurity, soaring costs, and a strong incentive for investment in renewable energy sources. Access and download reports and data purchased through Euromonitor.com. Some governments have responded with new packages such as the U.S. Inflation Reduction Act and Europes REPower EU to incentivize clean energy adoption and energy efficiency. The UK also intends to bring forward sustainability-related disclosure requirements at the entity and product level. ArtificiaI Intelligence, and specifically certain deep learning models such as those designed to process human language, requires huge amounts of energy. We need a more constructive engagement between the US-led West and non-Western countries. 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. Economist Impacts Martin Koehring highlights why stronger collaboration will be required to accelerate progress in 2023, Head, World Ocean Initiative & Senior Manager, Sustainability at Economist Impact. But, in order for circular models to succeed, there is a need for collaboration. The provisional agreementin the EU for new regulation for deforestation-free supply chain will mean many companies will have to better understand biodiversity risk. 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. Carlos Cordon, Professor of Strategy and Supply Chain Management. Environmental catastrophes are becoming more frequent, so stricter regulations, such as extended producer responsibility (EPR), and waste management and recycling policies, are expected to be seen in more markets to channel efforts towards governments long-term sustainable targets. Here are the top 5. 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. Unilever Hearts of Palm Ceviche. Companies need data transparency with detailed precision along the entire value chain. We will go through the whole energy transition, and we will build a circular economy. For example, the ocean and food systems had their own dedicated pavilions. These instruments will have to increasingly address investor questions about the effectiveness of targets and incentives. 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. The IMD Alumni Network is a widespread but close-knit global community in a tightly interconnected and complex business environment. Progressive employment practices implemented in the wake of COVID-19 will be tested by cost-cutting related to economic uncertainty. Family businesses will adopt new digital capabilities to manage sustainability data that guide sustainable business practices. They didnt see companies returning to business travel as usual, writing that some are using the [post-pandemic] restart to reevaluate existing travel practices by tracking travel emissions data.. The goal is to agree on a post-2020 global biodiversity framework that builds on the Strategic Plan for Biodiversity 2011-2020. Private-public alignment is necessary to accelerate the transition towards circular models. 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. What kind of regulation forecast mechanism is needed to be prepared for changes in standard setting at different levels (ISSB, EU regulation, etc.)? Five Key Trends Shaping the Sustainability Agenda in 2023, Our premier global market research database with detailed data and analysis on industries, companies, economies and consumers. COP27 has confirmed the need for stronger co-operation on key issues such as climate finance and corporate net-zero commitments. Sustainable solutions can, and should, be affordable, so consumers do not struggle when seeking more conscious habits. 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. Susan Goldsworthy, Affiliate Professor of Leadership, Communications and Organizational Change. At Economist Impact we will continue to create momentum for building a sustainable ocean economy, at our World Ocean Summit in February/March and through the World Ocean Initiative. Carbon-negative means generating environmental benefits by removing more CO2 from the atmosphere than what is produced. 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. In that journey, many are also realizing that it is impossible to achieve net zero without looking outside of their traditional business. 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 EU took a leadership position in creating the fund, but now it must be operationalised and made viable. All stakeholders will bear the impacts from physical risks related to climate change. They place them all on the wall, acknowledging and accepting them. 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. Curious about how we partner with you to help you solve your complex modern-day business problem? Our site uses cookies to improve functionality. Scope 3 typically accounts for the vast majority of emissions, so reducing those that companies have direct control over (scope 1 and 2) can only go so far in reaching net zero. Stphane J.G. According to new NielsenIQ survey data, 46% of consumers are looking to brands to take the lead on creating sustainable change. The final drafts of these standards should be adopted in 2023. Carbon offsets have been criticized for. Regulatory trends point to a hardening of what were largely voluntary frameworks for how companies manage human rights in their upstream operations. Photo courtesy of Unilever. ET. Another trend in sustainability that's gaining traction in restaurants is eco-friendly packaging. Resilience & Adaptation: There will be further progress on loss and damage and the global adaptation goal. Therefore, for companies to remain competitive and relevant in such fast-evolving sustainability environments, proactive collaboration with key stakeholders is crucial. What are material sustainability issues for your company above the standard setters guidelines? Some sectors, including utilities, oil and gas, and agribusiness, are more exposed to water stress than others and will face greater operating and financial challenges. estimated that the transition to net zero alone will provide business opportunities of $12trn per year. According to HolonIQ we already have 47 climate unicorns worth more than $1bn. Confrontation was always seen as an essential weapon for campaigners, but a new era of cooperation is proving equally effective. The MarketWatch News Department was not involved in the creation of this content. By circulating products and materials, eliminating waste, and regenerating nature, circular models can help businesses to overcome some of the barriers to investment in sustainability, such as high costs, lack of internal knowledge, and implementation difficulties. 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.
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