Warnings made in 2021 will continue driving discussions in the new year. The most striking caution came from the Intergovernmental Panel on Climate Change (IPCC) report, which concluded that global warming had already produced irreversible effects on the environment. This warning was delivered weeks before the Climate Conference in Glasgow in an attempt to generate productive negotiations. Although important, the conference’s advances were unspectacular, increasing expectations for COP27 scheduled in November 2022 in Egypt.
The urgent need for meaningful action is driving society to turn to non-governmental actors and private companies to lead a global climate transformation. Following are five trends that companies can consider in 2022.
1. Rethink Sustainable Practices
Companies will be compensated or penalized for their choices. Their sustainable practices will be expected to directly address the impacts of carbon emissions. This was one of the key selection criteria for companies included in B3’s 2022 Corporate Sustainability Index. They were subjected to a new methodology that focused on the most pertinent climate trends in their respective sectors.
Our vision: Identifying the most salient negative impacts generated throughout a value chain and relating them to stakeholders’ expectations allows companies to prioritize investments and focus management’s effort on actions that mitigate the most serious risks and damage.
2. Climate Goal Credibility
Metric standardization is a prerequisite to measure whether companies’ climate programs are producing desired results. The International Sustainability Parameters Committee (ISSB) committed to presenting a proposal that will standardize global ESG measurement by June 2022. A coalition of financial institutions and companies, including HSBC, Deutsche Bank, and Swiss Re launched the ESG Book platform to make their commitment data more accessible.
Our vision: Many internationally recognized parameters can guide companies’ ESG performance. However, effective businesses will prioritize these goals and indicators to optimize program management and provide their commitments credibility and consistency.
3. Integrating the Green Economy into Business Models
The pressure for companies to base their business models on the green economy will grow even stronger. This includes the regenerative economy in which companies commit to eschew nonrenewable resources or consume resources more quickly than they can be restored. This business decision allocates resources to production process innovation. Learn more about how Danone and Natura are doing just that.
Industrial sectors are feeling pressure to expand the circular economy by optimizing manufacturing processes that reduce dependence on virgin raw materials. According to the Circularity Gap Reporting Initiative, doubling the current global recycling rate would produce zero greenhouse gas emissions by 2044.
Our vision: Beyond simply attempting to fit their business models into the green economy, companies can also build business models that reduce, ameliorate, and eliminate environmental and societal damage while generating shared value.
One hundred countries agreed to cut methane emissions by 30% and 30 countries promised to reduce deforestation by 2030. Brazil committed to halving emissions by 2030, becoming carbon neutral by 2050, and eliminating illegal deforestation by 2028. Both Mexico and Argentina committed to cutting methane emission by 30% by 2030, while Perú committed to a 20% cut. Meanwhile, Colombia stated that it will reduce its total 2030 greenhouse gas emissions by 51% compared to 2014.
4. Conscious Consumption
Companies in 2022 will encourage consumers to add socio-environmental criteria into purchasing decisions. The gap between will and action remains large. Ikea surveyed 34,000 people from 32 countries and found that only 39% include significant sustainable considerations in their daily routines. A GlobeScan and Akatu Institute global survey indicated that the world’s least trusted industries include the oil, mining, and alcoholic beverages sectors.
Our vision: inviting people to becoming part of the solution strengthens the innovation and improvement cycle. Communicating company sustainability engages and influences individual decisions that collectively benefit society.
5. Carbon Opportunities and Responsibilities
Investors will demand more reliable plans to reduce companies’ carbon footprints. The cost of carbon will place increased pressure on certain sectors while others may take advantage of new revenue opportunities derived from carbon market credits. Companies would be wise to monitor carbon pricing and credit initiatives around the world.
Our vision: Whether suppliers or credit buyers, all sectors will feel pressure to join to the low-carbon economy. The good news is that, beyond recognized frameworks, technologies and practices are being developed for fast-followers.
A few reading suggestions with provocative ideas to initiate a transformative future:
- In Cradle to Cradle: Remaking the Way We Make Things, authors William McDonough and Michael Braungart challenge the notion that human industry must harm the world and explore a model for how nature transforms garbage into nutrients.
- Jeffrey Hollender and Bill Breen explain that “less bad” is not the same as “positively good” in the book Responsibility Revolution: How the Next Generation of Business Will Win. It is based on interviews with leaders from many different industries. The authors call on and show entrepreneurs how to take on greater social responsibility.