Tuesday, March 5, 2024

Top 10 sustainability trends to watch out for in 2024

A recent survey by PWC found that ESG has become a deal breaker for investors, 79% of investors surveyed consider ESG management of a company as an important factor in investment decisions. Companies that fail to comply on ESG standards risk losing investors, the same survey found 49% investors willing to divest from such companies.

 Here are the top 10 sustainability trends to keep an eye on in 2024:

1. Rise of ESG investing

Environmental, Social, and Governance (ESG) investing has become more than a buzzword; it’s a pivotal aspect of modern investment strategies. A PWC report predicts a substantial increase in ESG-focused institutional investment, reaching $33.9 trillion by 2026. Companies that prioritize ESG concerns are seen as lower-risk and high-return investments. They often boast higher employee satisfaction and are less likely to face regulatory fines or penalties. This trend reflects a broader societal shift towards more responsible and sustainable business practices.

2. ESG focused products and communication

The consumer market is experiencing a significant shift towards sustainable products. This trend is driven by a growing awareness of the environmental impact of consumer choices. A McKinsey survey found that a majority of US consumers are willing to pay a premium for products with sustainable packaging. Similarly, a Bain & Company survey indicated that a significant portion of Indian consumers are planning to increase their spending on sustainable brands. Companies that offer products made from recycled materials or that are responsibly sourced are finding a competitive edge in the market. This trend is exemplified by tech giants like Apple, who have committed to making all their products carbon neutral by 2030.

3. Regulations and policies for accelerating ESG

The regulatory landscape for ESG reporting is becoming more stringent. The EU’s Corporate Sustainability Reporting Directive (CSRD) is set to transform the ESG reporting arena, requiring around 50,000 companies to report on sustainability aspects from 2024. Similarly, the BRSR Core reporting will mandate sustainability reporting for top listed Indian companies, affecting thousands more. These changes reflect a global movement towards greater transparency and accountability in corporate sustainability efforts.

4. Renewable energy integration and microgrids 

Renewable energy is at the forefront of the fight against climate change. The goal is to substantially increase the current capacity of renewable energy sources. Countries like India are leading the way, with ambitious targets for non-fossil electricity capacity. India boasts of 168.96 GW worth of installed renewable energy capacity, and has set a target of 500 GW of installed electricity capacity from non-fossil sources by 2030. Over 3 million units of electricity was generated from renewable energy sources during FY23, which is equal to powering approximately one third Indian households.

The focus is not just on increasing renewable energy production but also on integrating it into the mainstream power grid and developing smart, localized microgrids. These microgrids could potentially enable households to sell surplus green power back to the grid, creating a more resilient and decentralized energy system.

5. Tackling Scope 3 practically

Scope 3 emissions, which include indirect emissions from activities like supply chain operations, are notoriously difficult to measure and manage. As per an IBM report, only 38% companies are measuring their Scope 3 footprint. However, they are gaining increased attention. Companies are beginning to recognize the importance of tracking these emissions to achieve a comprehensive understanding of their environmental impact. This involves extensive engagement with suppliers, regular monitoring, and thorough data collection. Technologies like AI are being leveraged to analyse and manage emissions data more effectively. A recent report released by BCG & Google suggests that Artificial Intelligence (AI) has the potential to mitigate 5-10% of global greenhouse gas emissions by 2030.

6. AI and digital technologies for sustainability

AI is playing a critical role in advancing sustainability goals. Its applications range from improving energy efficiency and tracking emissions to predictive modelling for biodiversity threats. AI is also being used in precision agriculture to optimize resource use. Startups are emerging with innovative AI-based solutions for carbon accounting and ESG management. The potential of AI in environmental applications is vast, with predictions that it could contribute significantly to the global economy and create millions of new jobs by 2030.

7. Quantifying nature biodiversity loss

At least half of the global economic output is dependent on nature as per the World Economic Forum estimates. Owing to this indispensability of nature to economy and livelihood, nature restoration and biodiversity loss are increasingly featuring in global climate agendas. 2023 saw the discussion and emergence of biodiversity metrics like Species Threat Abatement and Restoration (STAR), EII (Ecosystem Integrity Index) and others. 2024 will potentially witness a critical turning point in the further streamlining of metrics and standards to measure nature and biodiversity loss and methods to avert it. The Taskforce on Nature-related Financial Disclosures (TNFD) has also announced the setting up of a working group in 2024 on incorporating nature loss into corporate and financial institutions transition plans.

8. Nature based solutions for ESG

Nature-based solutions are emerging as cost-effective strategies for climate adaptation and community empowerment. These solutions, such as rainwater harvesting and sustainable agricultural practices, offer practical and low-cost alternatives to traditional approaches. They are gaining traction among businesses looking to invest in sustainable practices that also benefit local communities.

9. Designing for sustainability

Sustainable design is becoming a fundamental aspect of product development and real estate. This involves designing for long-term use, responsible sourcing, and considering the lifecycle impact of materials. Sustainable design is not just about minimizing environmental impact; it’s about creating products and spaces that are efficient, resilient, and adaptable to changing environmental conditions.

10. Indigenous knowledge systems

Indigenous communities, often the first to experience the impacts of climate change, possess unique knowledge and wisdom in nature conservation. Their involvement in sustainability initiatives is expected to increase as businesses and communities seek to collaborate on climate adaptation strategies. Indigenous knowledge systems play a vital role in preserving biodiversity and offer valuable insights into sustainable living practices.

In conclusion, 2024 promises to be a year of significant advancement in sustainability. From the rise of AI and sustainable investing to new approaches in ESG reporting and renewable energy integration, these trends reflect a growing recognition of the interconnectedness of environmental, social, and economic factors. Businesses and investors alike are seeing sustainability not just as a responsibility but as a strategic advantage and a necessity for long-term success in an increasingly complex global landscape.

Ramnath Vaidyanathan is AVP & Head – Environmental Sustainability at Godrej Industries Ltd and associate companies.

 

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