Sustainability Trends 2023
Sustainability has become an essential component of modern business operations, with companies recognizing the importance of incorporating environmental, social, and governance (ESG) considerations into their strategies. As we move into 2023, sustainability continues to be a critical issue for businesses, governments, and society as a whole. In this article, we will explore the top sustainability trends that are likely to shape the business landscape in 2023.
In 2023, the circular economy trend is expected to continue gaining momentum, with increased adoption of circular economy principles by businesses across various sectors. The circular economy is a model that aims to minimize waste and maximize the use of resources by keeping materials in use for as long as possible. Companies will be looking to design products that are more durable, recyclable, and reusable while seeking ways to recover and reuse materials, reduce waste, and minimize their environmental impact.
To embrace circularity, companies will be taking more strategic action, including integrating circularity as a key operational sustainability initiative, investing in recycling technology and reusable packaging options, and adopting the principle of not taking more than nature can offer. The EU Circular Economy Action Plan, a building block of the European Green Deal, has been in force since 2020, and the EU Sustainability Reporting Standards have recently referenced it in disclosure requirements for companies’ resource use and circular economy. Additionally, the EU taxonomy on sustainable activities will include the circular economy for the first time, accelerating the incorporation of circularity in the investment community’s scrutiny of corporate activities. It is crucial to reduce emissions, enable more resilient value chains, and promote a healthier planet, which can be achieved by embracing circularity. Companies that have not already taken steps to adopt the circular economy model should do so now, especially as the topic of the circular economy is being incorporated into reporting legislation.
Renewable energy sources, such as solar, wind, and hydro power, are becoming increasingly affordable and accessible. In 2023, we can expect to see more businesses and governments adopting renewable energy sources as a means of reducing their carbon footprint and energy costs. Companies will be looking for ways to integrate renewable energy into their operations, and governments will be implementing policies to encourage the development and adoption of renewable energy sources.
While many organisations are getting more receptive to sustainability subject matter, in 2023, we will continue to see organisations adopting sustainability goals that are fit for their organisation purposes. Technology will play a entrant role in many more matured organisations that have started adopting ESG initiatives. These organisations are usually governed in regulated industries and technology is used as trackers to monitor ESG performance of organisations via indicators reporting. And many organisations may adopt a risk transfer approach to go heavy on cloud computing capabilities to manage their enterprise assets. So, another trend that I anticipate will pick up pace will be third party cloud service providers adopting ESG initiatives heavily due to their heavy infrastructure backend to power organisations’ needs.
– Jenny Tan, President, ISACA Singapore Chapter and Global Internal Audit Leader, Capitaland
Many people believe that renewable energy will continue to grow in popularity in 2023 due to the accessibility of new technologies and sustainable systems. Switching to a heat pump or installing solar panels not only helps reduce environmental impact but also lowers energy bills. Renewable systems can create an independent energy source for homes, reducing reliance on fossil fuels and combating carbon emissions. By choosing a heat pump, which can instantly reduce carbon emissions by around 80% and operate three times more efficiently than a gas boiler, homeowners can make a significant impact on climate change while saving money on energy bills.
Sustainable Supply Chains
The sustainability of supply chains has become a significant concern for businesses and consumers alike. In 2023, we are likely to see more businesses focusing on sustainable supply chain practices, including responsible sourcing, ethical labor practices, and reducing the environmental impact of transportation and logistics. Consumers are becoming increasingly aware of the social and environmental impact of their purchases, and businesses that fail to address these concerns may face reputational damage.
Carbon neutrality is the state of balancing carbon emissions with carbon removal or offsetting. In 2023, we are likely to see more businesses committing to carbon neutrality and taking steps to reduce their carbon footprint. This includes implementing energy-efficient practices, using renewable energy sources, and investing in carbon offsetting projects. Governments may also introduce policies to encourage businesses to reduce their carbon footprint and work towards carbon neutrality.
Green buildings are designed to minimize the environmental impact of construction and improve energy efficiency. In 2023, we are likely to see increased demand for green buildings as more businesses and governments prioritize sustainability. Companies will be looking for ways to reduce their energy consumption and environmental impact through the design and construction of green buildings. Governments may also introduce policies to encourage the development of green buildings and retrofitting of existing buildings.
Greater Transparency and Disclosure Pressure
Businesses must be willing to take an honest look at their sustainability impact, despite how difficult it may be. Understanding where a company stands and the impact they create is crucial in creating and inspiring change. Furthermore, sustainability disclosures are now not only a nice-to-have but a legal obligation for some companies. Last year, there was an increase in new sustainability laws and regulations worldwide, and 2023 may bring even more. Governments and agencies are cracking down on corporations, making sustainability and ESG reporting a must.
While Europe is currently leading the way in sustainability regulations, passing the Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD), and EU Sustainability Reporting Standards (ESRS), not all companies have taken these laws and regulations in stride. In 2022, there was an uptick in climate-related lawsuits against corporations, which businesses should aim to avoid. In 2023, companies and investors will be tested on the strength and depth of their sustainability commitments and the priorities they support, especially in the face of growing ESG-related litigation risks. To ensure compliance with sustainability and climate-related legislation, transparency and traceability are crucial, and third-party data processors and auditors can be easily incorporated into data and reporting processes using SustainLab’s shareable dashboards with customizable user-viewing permissions.
Climate change is a crucial issue that affects everyone, and its impact is expected to cause a surge in natural disasters. Despite the reduction in climate-related deaths through early warning systems and better disaster management, these disasters are becoming increasingly frequent. Estimates predict up to 560 disasters per year by 2030, a significant increase from previous years. Unfortunately, we are not investing enough in the technology and interventions needed to adapt to climate change. The UN Environment Programme has estimated that we require $340 billion per year of adaptation finance by 2030. Luckily, the UN is addressing the issue with a ‘loss and damage’ fund that focuses on supporting developing countries with adaptation and resilience. Adaptation is essential to safeguarding our lives, assets, and economy from the effects of climate change. Expect to see more grants, loans, and creative financing options, like debt-for-climate swaps and special bonds for adaptation and resilience. Although the UN’s ‘loss and damage’ fund is a step in the right direction, more recommendations for action and real work are necessary to combat the problem.
Sustainable investing, also known as socially responsible investing, involves investing in companies that exhibit a commitment to sustainability and ESG principles. With increased recognition of the importance of incorporating ESG considerations into investment strategies, we are likely to see a rise in demand for sustainable investing in 2023. This shift in investment landscape may lead to more capital flowing towards sustainable businesses and projects.
More People Working From Home
Since the onset of the pandemic, remote work has rapidly gained acceptance among most businesses. The numerous benefits associated with this work style have led many businesses worldwide to adopt it even after the pandemic. As per our contributors, this low-carbon trend of remote work is likely to continue from 2023, regardless of whether one is a fan of this work style or not. It is undeniable that working from home has significant environmental benefits. For instance, it reduces greenhouse gas emissions by an amount equivalent to 600,000 cars in the U.S (State of Telecommuting). The reduction in road travel by cars and public transport resulting from remote work has significantly contributed to this decrease in carbon emissions. Additionally, advancements in technology have enabled remote communication and information storage, leading to reduced energy consumption in office buildings.
“The subject matter expert is a key person resource that many businesses are facing challenges with. Heavy infrastructure invested over the years are not easy to unwind. The feasibility study of adopting sustainability initiatives is not well carried out i.e. do not switch course for the purpose to be branded as “sustainability adopters” only. The initiative has to make business sense too. Like cybersecurity, how the Boards of organisations support the sustainability efforts make a difference too. Lastly, like risk responsibility, sustainability effort is also everyone’s responsibility.“
– Jenny Tan, President, ISACA Singapore Chapter and Global Internal Audit Leader, Capitaland