Week of 25 January 2021
A lot to accomplish in 2021 on sustainable business, including putting people at the centre of circular economy models
Not even a month in, 2021 is already ablaze with sustainable business activity—raising hopes for what can be accomplished this year in terms of protecting people, preserving our environment, slowing climate change and strengthening business’s leadership on all of these issues. According to GreenBiz’s 2021 State of Green Business Report, we can expect to see progress (and challenges) across ten key themes: 1) blue carbon; 2) disclosure on human rights alongside other ESG topics; 3) community investment; 4) aquaculture; 5) industrial decarbonisation; 6) nature-based accounting; 7) sustainable transportation; 8) low-carbon air travel; 9) protecting human rights in the circular economy; and 10) corporate advocacy.
Media and events company GreenBiz’s annual State of Green Business Report for 2021 highlights the top ten sustainable business trends for the upcoming year. Trends are identified and selected based on data from S&P Global in four categories: Natural Capital, Climate Risk, Positive Impact and ESG Performance. Data were aggregated for both the S&P 500 index of major U.S. companies and the S&P Global 1200, covering about 70 percent of global market capitalization.
Here are the ten trends and themes that GreenBiz expects to dominate the world of sustainability this year:
- “Ocean-Based Sequestration Heats Up”
- “Over the past few years, as companies have come under steadily increasing pressure to tackle climate change, nature-based solutions have emerged as a particularly exciting method for shrinking corporate carbon footprints. Investing in forests can be a win-win that both sequesters carbon and regenerates nature. That’s why one recent survey recorded almost $160 million spent on forest offsets in 2019. And a newer option, soil carbon, also is generating investment from multiple corporate sectors. Yet another natural sink absorbs about as much carbon dioxide as our planet’s soils and forests combined: the world’s coastal and ocean waters.”
- “Until recently, ocean sequestration, also known as blue carbon, attracted little attention outside academic and think-tank circles. We might be at a turning point, however, because 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 soon may be able to invest in ocean sequestration.”
- “The ‘S’ in ESG Gains Currency”
- “We have seen a rising emphasis on ESG issues in recent years, as customers, investors and other stakeholders look for more transparency on corporate strategies and their impact on society. Companies are making progress in disclosing their environmental impact and governance standards, but social factors have not been given the same attention — until now. Social factors include how a company manages relationships with its workforce, the communities in which it operates and the geopolitical environment. The COVID-19 pandemic has pushed “S” into the spotlight by highlighting a range of problematic societal issues as millions of people around the world found themselves suddenly out of work with little protection.”
- “Social sustainability factors are material issues for many industries, however, and their management is directly linked to a company’s reputation and brand equity. Companies are showing a growing awareness that good social performance can translate into improved business performance and better relationships with customers and local communities. The S in ESG is definitely gaining currency.”
- In particular, the report predicts that gender equality and human rights will take on greater significance for companies this year. “…[C]ompanies are expected to continue to report more extensively on their human rights due diligence going forward. Greater transparency in this regard will provide important information for their corporate decision-making.”
- “Community Investments Pay Dividends”
- “Corporate community investment historically has been the realm of philanthropy and volunteerism departments, but there are a growing number of examples where direct investment by businesses benefits operations as well as the communities in which they serve.”
- Companies—especially those relying on sourcing from farmers and other small suppliers—are focusing more on improving supply chains and responsible sourcing programs, and in turn are driving business benefit and positive social change
- “Aquaculture Becomes a Net-Positive”
- A new “wave of technology innovation and funding from an eclectic group of companies ranging from Google’s parent Alphabet, to the Seed2Growth fund linked to Lukas Walton (grandson of Walmart founder Sam Walton), to Cargill and Chevron Ventures (both focused on fish-feed ventures) is changing the tide again” towards an increase in aquaculture.
- The UN Food and Agriculture Organization predicts that “aquaculture will supply close to 60 percent of fish consumed globally by 2030” in an effort to ramp up sustainable food supplies while avoiding overfishing wild species. In particular, seaweed is projected to become a major aquaculture product, making up everything from food to sustainable packaging.
- “Industrial Decarbonization Picks Up Steam”
- “Increasingly, the stars are aligning for industrial emissions to take center stage, for three key reasons: demand for clean solutions is growing, technologies are maturing and the conditions for policy solutions are ripe.”
- “The emissions associated with manufacturing and other heavy industries could broadly be divided into three categories: indirect energy (from purchased electricity and heat, responsible for about 44 percent of emissions); industrial processes (such as the use of chemicals that release greenhouse gases, 19 percent); and onsite combustion (37 percent, usually for heat processing).”
- Moving forward, companies will focus more on reducing emissions from the third category, combustion, through investing in new thermal processing technologies and forming coalitions like the Renewable Thermal Collaborative to accelerate the development of better renewable thermal technology at scale.
- Per the report, there are four main pathways to decarbonise thermal energy: (1) Increasing energy efficiency; (2) Industrial-scale electrification; (3) Green hydrogen created from excess renewable energy; and (4) Capturing biomethane from “dairies, landfills and wastewater treatment facilities.”
- “Nature Takes Root on the Balance Sheet”
- “ESG issues continue to gain prominence, with climate change getting the most attention today. We see customers demanding action on carbon emissions, investment firms structuring new green products and governments developing regulations to support the transition to a sustainable future. This has led to a strong focus on two main sectors: energy and transportation.”
- As a result, the report predicts that “[t]his will have a tremendous impact on nature that, in turn, will affect businesses and the global economy. As with climate-related risks, nature-related risks need to be better understood and acted upon.”
- Companies and accounting firms are working to develop approaches to value the economic benefits of nature, in order to ensure that ecosystem services are not undervalued.
- “Sustainable Mobility Drives the Newest Perk”
- Companies are thinking about ways to reduce their employees’ carbon footprints during one of the most resource-intensive parts of the day—the commute to work.
- “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) are developing sustainable mobility offerings for employees. These programs can include an array of services, from on-campus EV chargers, access to carpooling programs, financial incentives for buying bikes, e-bikes and EVs, and — for the lucky few — rides to and from work in electric buses.”
- Companies are also focusing on providing sustainable transport alternatives as a way to increase employee engagement and attract new talent, especially millennials and Gen Z.
- “Aviation Plots a Sustainable Course”
- “Modern aviation had never seen a year like 2020. The COVID-19 pandemic led to a near-total halt in air travel, with airlines hemorrhaging billions of dollars and shedding hundreds of thousands of jobs. … That forced grounding provided airlines with a reckoning — and an opportunity for a reset. And it begs the question: Can sustainable aviation finally get off the ground? The answer is yes. But like modern planes themselves, a lot of moving parts are involved.”
- Airlines are working on reducing their climate impact through increased fuel efficiency; the use of more sustainable aviation fuel that can substitute for traditional jet fuel and is made of substances like fats, oils and agricultural waste; and investing in hydrogen technology and battery-powered planes over the mid-to-long term.
- “The Circular Economy Shows Its Human Side”
- “As the circular economy ramps up, we’ve seen impressive innovation in materials, products, models and processes — but innovation on how we treat people has been notably absent. However, as companies, cities and countries alike adopt a more holistic lens and embrace circular principles, they are recognizing the opportunity to drive social change in lockstep with an economic transformation that puts people at the center.”
- The report makes an argument for companies’ growing attention to the people making their circular supply chains possible: “In a circular supply chain, sourcing no longer focuses exclusively on virgin 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.”
- The same challenges are posed by other circular material supply chains, especially recycled plastics, which rely on “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. … [A]s a growing number of companies commit to recycled plastics targets and circular plastics aspirations, the opportunity and necessity of partnering with these communities is becoming increasingly clear.”
- At the same time, the circular economy can also bring new types of safe, dignified jobs in material recycling and recovery. Regardless, “[t]he circular economy is a means, not an end, offering strategies and frameworks to create economic flows on top of material flows in support of a more sustainable, resilient and prosperous system. It works only if it can transform systems, not reinforce existing ones. As human rights, economic inclusion and social equity come into focus within circular initiatives, the opportunity for a holistic understanding of what circular economies can enable is becoming increasingly clear.”
- “Corporate Advocacy Gets Louder”
- “More companies understand that their interests are directly linked to a clean environment, healthy citizens and a cohesive society. More recently, there has been a push for companies to do better. 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 administration in the United States, there may be room for companies to advocate for a national response to climate change that has been missing — or at least moving in the wrong direction — in recent years. […] But pro-climate policy changes won’t take hold without a bold push from companies.”
- The report anticipates that companies will no longer be able to sit quietly on the “sidelines of sustainability-related policy issues.” This will extend from issues like wages, to climate change, to carbon pricing—basically, everywhere where businesses realise that their long-term profitability is at risk as well as those issues that shareholders, customers and activists are pushing them to take a stance on.
You can download the full report here: GreenBiz, State of Green Business Report for 2021 (January 2021).