December 2023
Sometimes I wonder if people working outside the Sustainability space fully realize what explosive growth this sector is experiencing, and the changes it will bring to all of our ways of working. It is almost a guarantee that your business will be, if it is not already, impacted by Sustainability trends in the next few short years. As a sustainability professional I’m always keeping my eye on the latest trends. Read on to hear my perspective on the biggest ones.
COP28
The beginning of the end of the fossil fuel era
There is now a new narrative on fossil fuels. Oil & gas companies will come under increasing scrutiny from all stakeholders to set out how their business strategy is compatible with the landmark agreement to “transition away from fossil fuels” during “this critical decade,” “in line with 1.5°.”
At a minimum, this means recognizing their role in the move to net zero and demonstrating their contribution to the “deep, rapid, sustained emission reductions” required for an “accelerating” shift towards a net-zero energy system by 2050.
The transition to net zero is accelerating; every government is to submit new climate plans by 2025.198 governments will produce new, enhanced national plans focused on closing the gap to 1.5°C, with global emissions required to peak by 2025.
What does this mean for your business? Companies will come under intensifying pressure to step up and show progress against their own near-term targets and transition plans, with more than 250 financial institutions expected to publish theirs next year. This means your business will likely need to baseline their greenhouse gas emissions in the next 1-3 years.
California passes GHG disclosure law
California’s Climate Corporate Data Accountability Act, or SB 253, applies to companies that have annual revenue of at least $1 billion. Under this regulation, companies must disclose their Scope 1, Scope 2 and Scope 3—or value chain—emissions. According to Politico, approximately 5,400 companies will need to comply with SB 253.
Another bill—Greenhouse Gases: Climate-Related Financial Risk, or SB 261—will require climate risk reporting using the framework from the Task Force on Climate-related Financial Disclosures (TCFD). This act will apply to companies with at least $500 million in revenue. It’s estimated that 10,000 companies will fall within the scope of this rule.
What does this mean for your business? GHG reporting is now part of legislative compliance if your business meets the requirements. Even if it doesn’t though, the Scope 3 requirement will ensure that smaller businesses beyond California’s borders will also need to baseline and report THEIR greenhouse gas emissions. This law is the tip of the iceberg, as the SEC sits on similar legislation set to be enacted next year. Emissions reporting requirements will likely trickle down to smaller businesses in the next 3 years.
Building decarbonization and efficiency
Electrification is one of the key trends shaping the global energy transition. And due to recent geopolitical developments, favorable economics, and the demand for decarbonization, the pace of this trend is set to accelerate.
Regulatory updates and a variety of utility, municipal and federal incentives are coming online to make near-term electrification feasible. The most recent Title 24 update effectively requires all-electric heating systems up to a moderate capacity, the Inflation Reduction Act has prioritized electrification via many of its available incentives, states are taking refrigerant regulations into their own hands absent a more federal push, and initiatives like the U.S. Department of Energy’s Cold Climate Heat Pump Challenge have been pushed out to the industry to bridge the current technology gap.
What does this mean for your business? Assess your fuel use in your operations. Assess your electricity use and capacity. Make a plan for energy efficient improvements and act on them in the next 1-5 years. Install or go Power Purchase Agreement to cover your current electrical use with solar. Take advantage of grants and tax rebates for these types of projects- literally hundreds of millions of dollars has been made available. Full electrification may yet be too capitally intensive for some businesses, but you will want to be ready with a maximally efficient building envelope/operations (and saving your company $$ in utility costs) as this transition matures and costs come down in the next few years.
Circularity legislation: Product design and recyclability including packaging, and reporting
New regulations targeted at achieving circular economy goals are addressing both product design and end-of-life management.
In the packaging context, several jurisdictions have begun to impose legal requirements for source reduction or recycled content that will help shape these efforts going forward. Notably, Washington, California, New Jersey, Maine and Connecticut have all passed laws mandating certain levels of post-consumer content in packaging products, and administrative rulemaking to further define requirements is underway in all of these states.
Increasingly, producers will also need to take responsibility for products at the end of their life after they have been in the hands of consumers. Several states have passed or proposed extended producer responsibility (EPR) legislation for single-use packaging, often in combination with recycled content requirements. These programs have broad applicability and may affect companies that sell products in many different industries.
What does this mean for your business? Many companies have already been reporting on circular economy efforts under voluntary reporting standards. Now, the shift to mandatory reporting has begun. In July 2023, the European Commission, acting in accordance with the EU’s Corporate Sustainability Reporting Directive, adopted a Sustainability Reporting Standard on Resource Use and Circular Economy known as ESRS E5. Companies subject to ESRS E5 will need to report on company policies, goals and actions related to circular economy efforts, such as use of recycled resources, transition away from virgin materials and sustainable sourcing. So far, there has not been push toward mandatory reporting for circular economy efforts in the US Companies operating in the US.
Composting
The U.S. Department of Agriculture (USDA) announced the availability of up to $9.5 million for Compost and Food Waste Reduction (CFWR) pilot projects for fiscal year 2023. The cooperative agreements support projects that develop and test strategies for planning and implementing municipal compost plans and food waste reduction plans.
What does this mean for your business? Composting organic matter from cafés or even production waste could now be a more viable option as local composting programs gain popularity. Composting waste will up your total recycling rate, since this is no longer going to the landfill, and moves us towards a more circular economy.
Water Scarcity
The world is facing an imminent water crisis, with demand expected to outstrip the supply of fresh water by 40% by the end of this decade (2030!)
What does this mean for your business? The first step in mitigating any risk is understanding its scope – a task that has traditionally been difficult or low-priority for large companies given the hyperlocal, relatively low-cost nature of water resources. For businesses in the U.S., mapping their water risk could soon be legally mandated. This year, the SEC proposed new rules that would require disclosure of the percentage of assets located in areas of water stress along with those assets’ total water usage. See the WWF Water Filter Risk link at the bottom of this article.
Once you assess your water usage and risks, next step is to mitigate. For many, modernizing equipment can be a first step. Ford, for example, reached a goal of using 30% less water per car by 2014 by installing updated equipment that included water meters, a dry paint system, and a waterless lubricant. When appropriate, some companies have begun using recycled, or “gray water,” for industrial uses and irrigation. Even offices can join in on water conservation by installing water meters and modern appliances to reduce water usage or recycle gray water for uses like toilet flushing. Addressing the energy mix employed by businesses of all types can also have an impact on water conservation; the production of traditional fuel sources uses up to four times the amount of water than the production of renewables, and switching to renewable sources can reduce a company’s overall water footprint throughout its supply chain.
Green Jobs
The gargantuan challenge of drastically reducing greenhouse gas emissions demands a whole-of[1]economy shift — across industries, roles, and geographical regions. With every challenge comes opportunity: If we take the right approach, we can leverage our efforts on behalf of the environment to catalyze growth throughout the global economy.
Around the world, only one in eight workers has one or more green skills. Put another way, seven in eight workers lack even a single green skill. LinkedIn found that the increase in demand for green skills is outpacing the increase in supply, raising the prospect of an imminent green skills shortage. Between 2022 and 2023 alone, the share of green talent in the workforce rose by a median of 12.3% across the 48 countries we examined, while the share of job postings requiring at least one green skill grew nearly twice as quickly — by a median of 22.4%
What does this mean for your business? Perhaps you’re reading this and thinking, how do I keep up? Who can I hire? Well, you’re not the only one. Think about how the roles you need and folks you hire can evolve, incorporating greater numbers of green skills in deeper, more impactful ways. Jobs from fashion designer to fleet manager to financial analyst can be performed in a more sustainable way if those who hold them use green skills. If you do need to add headcount, don’t just hire for “environmental specialist”- this likely isn’t the role you need. Instead, look for folks with skills in sustainability reporting, energy/building efficiency, product design, responsible sourcing, renewable energy purchasing.
REFERENCES for Further Reading
FREE TOOL ALERT: WWF Water Risk Filter
After COP28: Nine Key Implications for Business | Brunswick Group
Unraveling the complexities of electrification | U.S. Green Building Council (usgbc.org)
Technical Assistance for the Adoption of Building Energy Codes | Department of Energy
Opportunities from industrial electrification | McKinsey
USDA Announces Cooperative Agreements for Compost and Food Waste Reduction | USDA
Water Scarcity: Growing Risks to Your Business | Insights & Events | Bradley