In it together

We kick off this year’s regular monthly focus on actions businesses can take to be more sustainable, by looking at risk. Time to put on a metaphorical hard hat. From where I sit, the outlook is intensely depressing, whether in Eastern Europe and the Middle East or further, from the South China Sea and beyond.

Even more sobering is this year’s Global Risks Report from the World Economic Forum, published in January. Both its two-year and ten-year outlooks are markedly more negative than previously. Topping the list of respondents’ immediate worries is extreme weather, next is AI-generated misinformation, followed by some 20 other concerns. WEF’s contextual analysis identifies four structural forces at play, with climate change being one. Our writers this month advocate techniques such as scenario planning and carbon pricing to mitigate or at least anticipate this. Our guest post highlights help on transition planning.

Our year examining priority Actions for Business ends this month with a look at alternatives to the traditional economic model of take-make-waste, then repeat.

Of all the topics we’ve addressed, this is the one where, for me at least, the gap between opportunity and reality is most frustrating. We’re actually going backwards, according to data from the Circular Economy Foundation cited by one of our contributors here.

On the good news side of the equation, one positive outcome of the COP28 summit – behind the roller coaster will-they-won’t-they final text agreement – was nature-based solutions being put centre stage. We looked last month at just how much of world economic output is based on nature, with food supply accounting for a third of GHG emissions.

With COP28 fast approaching as I write this, all eyes are on climate. So you might wonder why this month we’re focusing on nature. No surprise, really, as in Actions for Business, we try to think a few steps ahead – read on to learn more – but in any event, climate change and biodiversity are intrinsically connected. 

Sustainability practitioners in business are pretty familiar now with the whole architecture around net zero, with its targets, timetables and seemingly new language, or at least new acronyms – TCFD, SBTI, CSRD and the rest. 

Fast approaching, in fact already firmly here, is a new set of tongue-twisters – TNFD, NBS, GBF, FLAG, to cite a few. It’s time to buckle up and get ready to ride the next wave of initiatives that are addressing arguably the more pressing crisis we face, on biodiversity. Underpinning all of this is the stark reality that more than half the world’s GDP is directly dependent on nature, according to the World Economic Forum. If climate still feels like a theoretical or long-term threat for some, dependence on agricultural raw materials is a present-day reality.

This month we’re looking at how social and environmental factors can align and reinforce each other. Such win-win outcomes have long been at the heart of the sustainability and responsible business agendas – the proposition that it’s not a binary choice between profit on the one hand and people and planet on the other; on the contrary, getting the latter right can drive successful, enduring businesses.

We have a practical example of this in a case study from EDP, the integrated energy utility with major markets in Portugal, Spain and Brazil. It is tackling access and inclusion, supporting communities affected by closed thermal power stations, and promoting efficiency in use, not just switching supply sources to renewables.

Our focus this month is on human and labour rights – earlier this year our forward-looking Actions for Business report anticipated growing interest in the topic. This has proved timely, given the evident challenges in switching to a “green tech” future at the speed governments say they want.

A case in point is accessing essential metals and minerals in the volumes implied in transition plans: we report on the labour rights issues in mining for cobalt in the Democratic Republic of the Congo. On the wider human rights agenda, our guest contributor is scathing about how few companies have gone beyond platitudes, to the extent of examining their business models – the result being that soft expectations among stakeholders are turning in hard law regulations by governments (such as the coming EU due diligence directive). In response, my colleagues offer a four-step approach for practitioners wanting to get a grip on this agenda.

We take a look at another of our big trends this month – deglobalisation and the implications for supply chains. The topic first came to prominence during the pandemic; now mounting geopolitical instability and superpower rivalry make it even more pressing.

The starting point, however, is to recognise that the global economy is and will remain massively interconnected. Progress on business responsibility and sustainability therefore depends crucially on how extended supply chains are managed, from raw materials, through manufactured goods, to business services. That’s why the European Union is moving forward with its plans to mandate a ‘due diligence’ approach on such issues as forced labour and biodiversity loss. Our briefing this month explains what’s involved and when you need to take action, especially if you are in a high-risk sector such as textiles, food, or metals and minerals.

This month we look at climate solutions and how to go beyond simplistic “net zero” rhetoric, at a time when public scrutiny of green marketing is escalating. In the US, the Federal Trade Commission is extending public comment for its Green Guide review, while in the UK the Advertising Standards Authority was last week reported to be toughening up its act too.

One thing is for sure – simply buying carbon offsets is no longer the get-out-of-jail-free card it was once seen as. However, as my colleagues explain, mitigation does still have a role to play, if done right. Given how far we are off achieving net-zero targets, that is welcome news.

The key is to be directly involved in genuine reduction projects, and our guest contributor this month sets out a useful five-step plan for doing that authentically.

Our topic this month is ESG Backlash, the second of the themes for the year we identified in our Actions for Business Report 2023.

That backlash is coming from two directions, not one. The first source is noisy and grabbing the headlines. It originates in the US political and culture wars, now being echoed on this side of the Atlantic. The second, more thoughtful, source is not external opponents but insiders, those in the sustainability movement worried both about lack of ambition and underperformance, and about overreach, aka greenwashing.

Concern about overclaiming is not restricted to company behaviour. Governments are implicated too, with the UN Secretary-General describing COP climate change targets as having “loopholes wide enough to drive a diesel truck through”. Whatever the aspect, sustainability remains firmly in the spotlight. 

Despite the seeming ubiquity of the term ESG, understanding of one of its key components remains sketchy.

Let’s be frank. For many in the investment management world, S means snooze when it comes to ESG. They’ve more pressing concerns – like pandemic-induced crashes in value or exceptional volatility from the no-deal Brexit cliff-hanger – than to be worried about the soft stuff (as others might define the S).

Anyway, they might think, we understand the E, the environment is mainstream now. Governments are in the driving seat, literally, phasing out the internal combustion engine in less than a decade. Now that’s a big deal, when cars have dominated our lives, clogged our streets and driven economic growth for more than a century. In the UK alone 990,000 people earn their living in the automotive sector according to the SMMT. And maybe there’s an upside to this E. Last year $250 billion worth of green bonds were issued worldwide, linking borrowing to decarbonising the economy and creating new jobs in growth sectors. Some are predicting that will grow to $1 trillion by next year and the UK government is getting in on the act. That’s a serious lot of noughts to win a slice of.