2023 trends – businesses face sustainability challenge

With busi­ness­es fac­ing head­winds from infla­tion to indus­tri­al action, it would be too easy for envi­ron­men­tal con­cerns to slip down the agen­da. But in 2023, sus­tain­abil­i­ty will be impos­si­ble to ignore.

Pres­sure has been build­ing in 2022, a year which looks set to be one of the hottest on record, marred by dozens of cli­mate dis­as­ters and dire pre­dic­tions about the dan­gers of busi­ness as usu­al. On top of this, lead­ers are grap­pling with the ever-increas­ing tan­gle of reg­u­la­tion and pres­sure on cor­po­ra­tions to dis­close even more about their ESG poli­cies and strate­gies.

Here are the key trends and changes you need to know for the new year.

Inflation and sustainable lifestyles

With the cost of liv­ing soar­ing across the UK and Europe, sup­port for sus­tain­able lifestyles could fall by the way­side. One recent sur­vey found that more than half of con­sumers have switched or plan to switch from sus­tain­able gro­cery prod­ucts to cheap­er but less eco-friend­ly alter­na­tives.

Jonathan Hall is man­ag­ing part­ner of Kantar’s sus­tain­able trans­for­ma­tion prac­tice. He says con­sumers might sac­ri­fice some of their beliefs and atti­tudes to cut costs. “We’ll see every­thing from peo­ple per­haps delay­ing pur­chas­es like elec­tric vehi­cles, right through to every­day items.”

But Nico­la Stopps, CEO of con­sul­tan­cy Sim­ply Sus­tain­able, thinks the pen­du­lum could swing in the oppo­site direc­tion. Eco-friend­ly options are often cheap­er, she notes, point­ing to the rise of ‘repair cafes’, which help peo­ple fix exist­ing appli­ances rather than buy new ones.

Those worst affect­ed by the cost-of-liv­ing cri­sis may already be liv­ing more sus­tain­able lifestyles. The wealth­i­est 1% of Britons pro­duce 11 times more car­bon emis­sions than those in the poor­est half of the pop­u­la­tion, Stopps says, cit­ing a 2020 Oxfam study.

Could bud­get pres­sures hit busi­ness­es’ abil­i­ty to push for pro-envi­ron­ment poli­cies? “I’m not see­ing that at all,” says Stopps. “It’s the oppo­site – com­pa­nies are see­ing this as a val­ue cre­ation oppor­tu­ni­ty and atten­tion-grab­bing in a good way. Sus­tain­abil­i­ty for busi­ness is a jug­ger­naut, it’s get­ting big­ger and big­ger.”

The rise of ‘greenhushing’

The UK’s com­pe­ti­tion watch­dog intro­duced a Green Claims Code in 2021 to clamp down on mis­lead­ing envi­ron­men­tal claims. Since then, aware­ness of green­wash­ing is grow­ing, spurred on by bans for ads by Oat­ly and HSBC that over­stat­ed their envi­ron­men­tal cre­den­tials.

Stopps believes this will force com­pa­nies to be more cau­tious with their green mar­ket­ing. “Because of social media and the speed of news, these days [a company’s] rep­u­ta­tion can be impact­ed dra­mat­i­cal­ly very quick­ly. The pub­lic and stake­hold­ers are def­i­nite­ly becom­ing more edu­cat­ed and aware and savvy… com­pa­nies need to take this a lot more seri­ous­ly.”

Hall pre­dicts ‘green­hush­ing’ will be a trend in 2023. This is when brands fear accu­sa­tions of insin­cer­i­ty so much that they avoid talk­ing about sus­tain­abil­i­ty at all, even when they’re tak­ing steps to improve. “That is obvi­ous­ly not a great devel­op­ment because it sug­gests to con­sumers that things aren’t being done. They may get increas­ing­ly irri­tat­ed at cor­po­ra­tions’ lack of activ­i­ty,” he says.

Increased focus on biodiversity

The UN Bio­di­ver­si­ty Con­fer­ence, COP15, runs in Mon­tre­al, Cana­da from 7 to 19 Decem­ber. Observers hope to see coun­tries adopt a new set of tar­gets to halt the glob­al decline of bio­di­ver­si­ty. Most notable is the 30x30 goal, which would see 30% of the world’s land and sea pro­tect­ed for nature by 2030.

Even if that isn’t suc­cess­ful, experts agree the issue will con­tin­ue to rise up the busi­ness agen­da in 2023. Swiss Re has cal­cu­lat­ed that more than half of glob­al GDP depends on a healthy nat­ur­al world. Hall thinks busi­ness­es will start to put more pres­sure on gov­ern­ments to pro­tect nature, par­tic­u­lar­ly where they see risk in their own sup­ply chains. “There’s a recog­ni­tion that we’re entire­ly depen­dent on nature… That in turn will start to feed through to a con­sumer nar­ra­tive.”

“Peo­ple have that urge to con­nect to nature and nature-based solu­tions,” says Ding Li, head of strat­e­gy at sus­tain­abil­i­ty con­sul­tan­cy Longevi­ty Part­ners. She believes investors are increas­ing­ly look­ing more broad­ly than net zero to exam­ine com­pa­nies’ bio­di­ver­si­ty poli­cies.

Many UK com­pa­nies could strug­gle to keep up. A recent ONS sur­vey found just 3% of busi­ness­es cur­rent­ly mon­i­tor nature and bio­di­ver­si­ty risks.

Transparency: more vital than ever

Li believes trans­paren­cy and dis­clo­sure will con­tin­ue to be top issues in 2023. “How a com­pa­ny com­mu­ni­cates their tar­gets, their method­ol­o­gy in achiev­ing reduc­tions and in mon­i­tor­ing progress will real­ly dif­fer­en­ti­ate them in terms of being a respon­si­ble com­pa­ny.”

The amount of reg­u­la­tion is con­stant­ly increas­ing, Li adds. For exam­ple, the EU’s Sus­tain­able Finance Dis­clo­sure Reg­u­la­tion (SFDR) recent­ly came into force. This oblig­es asset man­agers and oth­er finan­cial mar­ket par­tic­i­pants to dis­close the sus­tain­abil­i­ty impact and risk of their invest­ment deci­sions and process­es. The FCA wants to intro­duce sim­i­lar leg­is­la­tion in the UK next year.

Fol­low­ing the intro­duc­tion of manda­to­ry dis­clo­sure of cli­mate risks and oppor­tu­ni­ties for large busi­ness­es ear­li­er in 2022, the gov­ern­ment is set to extend the com­pul­so­ry report­ing to nature-relat­ed risks in 2023. “Com­pa­nies will soon find out that they need a prop­er ESG strat­e­gy to dis­close their progress because report­ing is ret­ro­spec­tive but devel­op­ing a strat­e­gy is for­ward-look­ing,” says Li.

The death of offsets?

The con­ver­sa­tion around car­bon neu­tral­i­ty is like­ly to mature, par­tic­u­lar­ly when it comes to car­bon off­set­ting.  “There’s a height­ened aware­ness that per­haps this is not such a legit­i­mate way for com­pa­nies to prove they’re sus­tain­able and meet their net zero [tar­gets],” says Stopps, adding that many now see focus­ing efforts on off­sets and car­bon cred­its as a dis­trac­tion from legit­i­mate action.

This extends beyond adver­tis­ing, she adds. “I’m see­ing more accu­sa­tions of green­wash­ing when com­pa­nies are just using car­bon off­sets.” We’ll see more of a back­lash against them in favour of “trans­for­ma­tion­al change in busi­ness­es to decar­bonise,” Stopps argues. For exam­ple, easy­Jet recent­ly announced it would stop off­set­ting car­bon emis­sions from its planes to focus on car­bon cap­ture and sus­tain­able jet fuel.

With businesses facing headwinds from inflation to industrial action, it would be too easy for environmental concerns to slip down the agenda. But in 2023, sustainability will be impossible to ignore.

Pressure has been building in 2022, a year which looks set to be one of the hottest on record, marred by dozens of climate disasters and dire predictions about the dangers of business as usual. On top of this, leaders are grappling with the ever-increasing tangle of regulation and pressure on corporations to disclose even more about their ESG policies and strategies.

Here are the key trends and changes you need to know for the new year.