GreenBiz has released its highly anticipated State of Green Business Report 2021 which details the top 10 sustainable business trends for the year ahead. Contributors S&P Global Trucost report on progress 2,000 U.S. and global companies have made towards meeting sustainability goals.
Overall, 2020 was a good year for the sustainability field. The global pandemic, natural disasters, and an unemployment crisis, did not keep companies from meeting their sustainability goals. Instead, those companies committed to ESG goals weathered the economic storm better than others. The reason: companies that have committed resources towards ESG tend to be better managed and governed.
There is always room for improvement and many commitments still fall short of making a real difference towards slowing down greenhouse gases, protecting nature, and conserving natural resources.
S&P Global Trucost found that:
· 90 percent of U.S. companies are publishing a sustainability report, up from 86% in 2018, and 20% in 2011.
· 53% of revenues of major U.S. companies and 49% of revenues of major global companies are generated in business activities that support the United Nations Sustainable Development Goals.
· For the first time major global and U.S. companies reported year-over-year declines in water use: 6% and 8% respectively.
· Companies that supported the Task Force on Climate-related Financial Disclosures (TCFD) framework will have more informed and more efficient allocation of capital and help facilitate the transition to a lower-carbon economy.
· In 2020, more than 1,500 companies supported the TCFD framework, half of which are in the financial sector.
However, there is still a long way to go.
· Major global companies are on track for >3ºC warming, falling 72% short of required emissions reductions to achieve the Paris Agreement.
· Major global companies face $284 billion carbon pricing costs in 2025, representing 13% of earnings.
· Nearly 95% of major U.S. companies and 80% of major global companies will face moderate physical risk due to wildfires, water shortages, and sea level rises by 2050.
With so much heavy lifting needed by the corporate sector to alter the current climate trajectory, here are the 10 ten trends to watch for in 2021.
1. Ocean-based Carbon Sequestration
Until recently, ocean sequestration, also known as blue carbon, attracted little attention. However, a handful of forward-looking corporations, conservation organizations and startups recently have accelerated efforts to store carbon in marine systems. Thanks to their work, companies of all sizes may be able invest in ocean sequestration.
For example, Shopify invested in Running Tide, a company that will build kelp-growing platforms in ocean current systems. The platforms will be kept afloat by buoys designed to biodegrade once they reach the deep ocean, at which point the kelp will fall to the ocean floor, taking its carbon with it. According to the company’s calculations, the process can capture and store 40 kilograms of carbon dioxide for every kilogram of hydrogen produced.
2. S in ESG Gains Currency
Social has often been overlooked in companies’ ESG programs. But in 2021, two important areas will be given more attention: gender equality and human rights.
Gender diversity enhances corporate governance, talent attraction and human capital development— all important factors driving long-term competitiveness. However, according to the International Monetary Fund, women earn 63 percent less than men, and the resulting loss of economic output is staggering. It ranges from 10 percent of GDP in advanced economies to more than 30 percent in South Asia and the Middle East and North Africa.
ESG is also focusing on human rights. Driving this shift includes internationally recognized standards, such as the U.N.’s Guiding Principles on Business and Human Rights (UNGPs), as well as the growing interest of asset owners and managers in the U.N.’s Sustainable Development Goals. As part of their responsibility to implement the UNGPs, companies must have systems and practices in place enabling them to know and show that they respect human rights.
3. Community Interests Pay Dividends
The purpose of companies is no longer only to drive profit for its shareholders. In 2019, the Business Roundtable redefined the purpose of a U.S. corporation as being “to promote an economy that serves all Americans.” In a survey of 2,511 registered U.S. voters by Real Clear Opinion Research, 77 percent of respondents agreed: “The purpose of a corporation is to maximize financial returns for its shareholders, but also to deliver value to customers, invest in employees, deal ethically with suppliers, and support the communities where they work.”
4. Aquaculture Becomes a Net Positive
Support for aquaculture is growing with a wave of technology innovation and funding from companies ranging from Google’s parent Alphabet, to the Seed2Growth fund, to Cargill and Chevron Ventures (both focused on fish-feed ventures).
In 2018, worldwide aquaculture production reached an all -time high of 114.5 million metric tons in “live weight,” representing a market value of almost $264 billion, according to a 2020 report by U.N. Food and Agriculture Organization (FAO). That amount accounted for 52 percent of global fish consumption.
The FAO projects aquaculture will supply close to 60 percent of fish consumed globally by 2030.
5. Industrial Decarbonization Picks up Steam
The industrial sector produces the materials that build everything from cities to phones. It’s also a significant contributor to the climate crisis: Industrial processes — from the creation of raw materials to chemicals — are responsible for more emissions than any other sector, making up a third of greenhouse gas emissions globally.
Companies are pushing for industrial decarbonization outside their four walls. For example, Apple is working towards carbon-neutrality target throughout its entire supply chain. As more organizations follow suit, corporations can leverage their market influence to help accelerate the deployment of cleaner industrial processes.
6. Nature Takes Root on the Balance Sheet
As with climate-related risks, nature related risks need to be better understood and acted upon. The World Economic Forum analyzed 163 industry sectors and their supply chains and found that over half of the world’s GDP is moderately or highly dependent on nature and its services. Despite this reliance, human behavior continues to push species into extinction, reduce the world’s acreage of forests and deplete the water supply.
A Task Force on Nature-related Financial Disclosures will be launched in 2021. The aim is to translate nature-related risks into financial terms and help redirect flows of finance towards nature-positive activities.
Valuing the economic benefits of nature is a complicated undertaking, but some firms have been taking steps to tackle the challenge. Without question, nature is an even bigger issue than climate change. After all, climate change accelerates as nature is harmed.
7. Sustainable Mobility Drives the Newest Employee Perk
Companies around the world, from Sweden’s Inkga Group (the holding company for the IKEA retail chain) to Clif Bar (with operations in the Bay Area and Twin Falls, Idaho) to pharmaceutical manufacturer Genentech are developing sustainable mobility offerings for employees. These programs can include on-campus EV chargers, access to carpooling programs, financial incentives for buying bikes, e-bikes and EVS, and rides to and from work in electric buses.
For most companies, tackling the carbon emissions associated with employee travel is a big part of the decision to offer these perks. And attracting and retaining employees remains a solid byproduct of overarching corporate sustainability goals.
8. Aviation Plots a Sustainable Course
Aviation is a hard to- abate sector, that isn’t easy to decarbonize through redesign or electrification. Regardless, pressure has been on aviation to join other sectors in dramatically cutting greenhouse gas emissions.
In 2016, the International Civil Aviation Organization (ICAO), a U.N. body, set a course for airlines to offset emissions of international flights above a 2019-20 baseline. Research has found that robust implementation of CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation) could significantly reduce aviation’s climate impact, and that aviation’s contribution to future warming could be cut by roughly 90 percent if the sector aggressively pursued decarbonization.
There is also progress in sustainable aviation fuel, which can be made from used fats, oil and agricultural waste. A so-called “drop-in fuel,” it can directly substitute for 50 percent of regular jet fuel.
9. Circular Economy Shows its Human Side
In a circular supply chain, sourcing no longer focuses exclusively on raw materials. As companies take responsibility for the entire lifecycle of their products, hazardous conditions in which a child disassembles a smartphone is as problematic as cobalt sourced using forced child labor in a conflict zone to make the smartphone in the first place.
Waste collectors — skilled entrepreneurs in the informal economy that gather, sort and sell used bottles, caps and other valuable materials, sometimes culling them from landfills — have filled in a necessary gap to slow the leakage of plastic waste into waterways. And as a growing number of companies commit to recycled plastics targets and circular plastics aspirations, there is an opportunity and necessity in partnering with these communities.
10. Corporate Advocacy Gets Louder
Fred Krupp, president of the nonprofit Environmental Defense Fund (EDF), said the business world needs to “unleash the most powerful tool they have to fight climate change: their political influence.”
And now, with a new U.S. Administration, there is an opportunity for companies to advocate for a national response to climate change. In some cases, shareholders are pushing companies to use their influence on policy issues. In November, the Interfaith Center on Corporate Responsibility (ICCR), a coalition of shareholder advocates who push for social change, called on businesses to lobby in support of pro-climate policies.
To access the full State of Green Business 2021 report, click here: https://www.greenbiz.com/report/2021-state-green-business-report