2020 has shaken the world and its confidence. If before we hadn't realized how urgent change was, the route is now becoming clearer. Nature has proven how impactful our human activities are. During the first lockdown, the rapid improvement of air quality in major cities was a sign no one could ignore. “The virus has reminded us of what we’ve unwittingly lost: nature critical not just for personal pleasure, but for sustaining the global economy” (MCSI). Two leaders of WWF France explain how this correlation isn't a political opinion anymore. Deforestation has additional unintended consequences, including the potential to lead to zoonose diseases, e.g. covid-19. Climate change and its main causes are now a common concern to the general stakeholder. According to the “Global Trends 2020: Understanding Complexity” (Ipsos Research) the number-one-trend of 2020 has been “Climate emergencies and antagonism”. We hence speak of Climate Emergency.
After 2015, when the UN made the Sustainable Development Goals (SDGs), The Cambridge Institute for Sustainable Leadership (CISL) summarized the SDGs’ agenda into 10 specific tasks addressed to the three pillars of our economic system: Government, Finance, and Business (“Rewiring the economy”, Cambridge).
It may have been more or less acknowledged within the past 5 years, but the world post Covid-19 outbreak is somehow aligning on these tasks, and cards are being redealt more quickly than expected.
The two main issues that will dictate the global mindset this year are carbon emissions and biodiversity protection. “To achieve climate goals, we must act both for a massive decarbonization of the economy, and also strengthen the protection of ecosystems” (Aleksandar Rankovic, Le Monde). Our political leaders seem to have begun taking the issue with the seriousness it deserves. The One Planet Summit gathered leaders from around 30 countries on Jan 11th and made biodiversity protection a priority. Much is expected from the COP15 that will take place in China in May 2021.
The year 2050, with its enormous goals for net-zero carbon set by the SDGs and the Paris Agreement, is coming fast.
We will analyse the 2021 trends using the CISL task canvas. What did we do and what is ahead of us in the Sustainable agenda?
Governments are going to show unprecedented support to any sustainable initiatives. They even might be the leaders to better and quicker change. For instance, the European green deal aims to “redirect capital flows to sustainable investments which led to a flood of new regulatory proposals.”(ING).
In order to do so, the entire economy will have to commit to strong extra-financial reporting, so that we may develop a more common language of sustainable impact.
“One of the key requirements of the regulation is that companies must include in their non-financial statement information about the extent their activities are environmentally sustainable” (ING).
Whereas governments are setting up measures to evaluate the global economy, on a smaller scale, companies must prove their commitment and outcomes to get support: “as the private sector is considered key to financing the green transition, the European Commission intends to adopt a renewed sustainable finance strategy (...). This will keep familiar topics such as the integration of sustainability into corporate governance frameworks, the increased focus on long-term developments and sustainability aspects and the climate and environmental disclosures by companies and financial institutions high on the agenda” (ING).
Europe is a clear leader in Sustainability regulation that will lead to change. The US ESG movement is led by public opinion and investors as we will discuss later on. They are expected to catch up under Joe Biden’s Presidency that already re-joined the Paris Agreement.
Those two tasks are well illustrated by the fact that “more lenders will walk away from fossil fuels—and not just coal”(Eco-Business). Finance has been gradually removing coal from portfolios, but now, fossil fuels are being treated in the same way, with an accelerated rate compared to what was expected pre-covid. The virus is the catalyst that brought Financial institutions to aggressively restructure their portfolios for 2021.
This trend goes beyond fleeing the most obvious environmentally unfriendly industries. Larry Finck, CEO of Blackrock investors encouraged companies to better disclose their ESG results by committing to standardized measurements and reporting (SASB Keynote speech November 2020). “ESG rating and SASB Standards are increasingly popular to provide information in a manner that is most relevant to their financial stakeholders and investors.” (Center for Sustainability and Excellence). Outpacing government regulations, he provided guidance for 2021 and imposed new criteria to get investors attention. In fact, “the trend towards increasing ESG coverage will lead to disclosures, checks and data points. (...) ESG issues are increasingly the focus of investors and regulators in North America.” (Center for Sustainability and Excellence).
Sustainable innovation and disruptive business models, often driven by Startups, may require a new eye, meaning different ROI and a clearer vision on ESG factors. Dawn Lippert, CEO of Elemental Excelerator explains what they ask of new businesses, “What does your product mean for the communities you work in? How do you ensure that you’re creating mutual benefit? Do you understand the unintended consequences of your technology?”. Businesses will have a stronger purpose and will build on ESG from start to finish.
Many business models have proven to be sustainable and profitable when getting out of the traditional ROI calculation and including ESG criteria. One seems to stand out from the crowd and lead the focus for 2021.
The circular economy is slowly entering every industry and it is starting with clear targets (Standard Chartered). A good example, the fashion industry (10% of global carbon emission and 20% of wastewater) (World Economic Forum) is trying to reinvent itself and pull away from very wasteful processes and a very unsustainable image. H&M, one of the main fast-fashion actors, is also betting on circularity to be the key for the near future. They strongly believe that circularity and digitalisation will lead the way (McKinsey & Company).
Another strong example that is signaling 2021 as a turning point is the tourism industry. A business that we thought immutable will need to adapt its activities to the future landscape. We have been given strong tangible proof of how mass tourism is shaping the face and the life of locals, for the good as well as the bad. We are already talking about new formats of travel and “regenerative tourism” (local supply-chain, clean energy and mindful tourists) (Eco-Business).
We are seeing new wind in the sails of sustainability and a true desire to drive change. As it became apparent for Governments and Finance, the first step to achieving our common goal is to set up a strong measurement system that will bring uniformization for the sustainability language and transparency for all stakeholders. Businesses also have a crucial role to play. Sustainability reporting is not new for businesses. In 2018 the Harvard forum on Corporate Governance reported that “Sustainability reporting for large public companies around the world has become the norm. Si2’s research (2018) found that 78 percent of the S&P 500 issued a sustainability report for the most recent reporting period, most with environmental and social performance metrics”. While Europe has a head start in regards to skillset, North America has been exponentially taking interest in ESG reporting within the past few years.
We are a step closer to taking real action. 2021 will bring the level of global conscientiousness we need for proper sustainability decision-making. Being sustainable is no longer a subsection in a political program to appear “in the right” but a requirement to ensure healthy human life.
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These facts show how unsustainable the fashion industry is. (s. d.). World Economic Forum. Consulté 17 Dec 2020, à l’adresse https://www.weforum.org/agenda/2020/01/fashion-industry-carbon-unsustainable-environment-pollution/
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