EcoAct CEO and Managing Director of Net Zero Transformation Practice at Atos, Stuart Lemmon look at the key climate and sustainability trends for the year and explains why he is choosing to stay stubbornly optimistic.
Trying to predict the future is not without risk, especially given the global context of the past few years. However, I like to reflect on trends in climate change – what we hear from our clients, what new legislation and best practice is emerging, the results of our own research etc. – to kick off the year with positivity.
The road to net-zero will without doubt be challenging but emerging regulation, new technology and the growth in corporate climate awareness is changing the landscape and providing a way forward.
Here are some of the climate change trends on my radar that I hope will shape the coming year.
Better corporate accountability on the net zero journey
This year it is crucial for organisations to turn their net-zero pledges into credible strategies to reach their goals. With the SBTi’s Net-Zero Standard and ISO’s Net Zero Guidelines, companies now have frameworks to align to. While the requirements of these standards are rigorous, they ensure organisations align to climate science and help them avoid making unfounded claims that may be perceived as greenwashing. Disclosure is becoming more demanding. I expect to see more companies setting long-term, as well as near-term science-based emissions reduction targets, improve their assessments of climate risks, and make progress on Scope 3 measurement and reporting.
Our clients are receiving more and more requests for climate-related disclosures (e.g. from investors and B2B customers). They are diving deeper into their carbon footprint, especially when it comes to Scope 3, so they can gain a clearer understanding of where reductions can take place.
Biodiversity is now on the agenda
Given the extent of biodiversity loss globally, the outcome of COP15 was hugely encouraging. The new biodiversity framework was signed by nearly 200 countries and included the adoption of a “30×30” target to protect 30% of terrestrial, inland water, and coastal and marine areas by 2030. It demonstrated a growing global understanding of how nature, climate and our economies are inextricably linked. I expect to see more countries joining the Task Force on Nature-related Financial Disclosures (TNFD), which is developing and delivering a risk management and disclosure framework for organisations to report and act on evolving nature-related risks.
Organisations must be transparent on the impact their activities have on nature and biodiversity. We are already helping some of our clients to achieve this. For certain, biodiversity disclosures are coming, and companies need to get prepared.
New legislation and guidance
The bad news: the landscape of corporate climate reporting is not set to get any less complex. The good news: Most of this represents positive developments in ensuring better transparency and in stimulating positive action on climate change. At EcoAct, our focus will be on supporting our clients to interpret the new developments and ensure their preparedness.
From a global perspective, further guidance on achieving net-zero is anticipated in 2023. The UN-appointed High-Level Expert Group (HLEG) on the Net-Zero Emissions Commitments of Non-State Entities has released a new roadmap to prevent net-zero from being undermined by greenwashing and the ISO (the International Organization for Standardization) has also released its net-zero guidelines.
We are also anticipating more regional legislation. Significant examples being the EU Corporate Sustainability Reporting Directive (CSRD) coming into force; the UK’s Transition Plan Taskforce (TPT) devising guidance for transition plan disclosure; Canada’s private sector will need to prepare for mandatory reporting of climate-related financial risks from 2024; US public companies can expect to see a proposed reporting framework informed by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) as well as the Greenhouse Gas (GHG) protocol; and a decree in France now provides a stricter legal framework for carbon offsetting and carbon neutrality claims in advertising.
Evolution of the voluntary carbon market
Businesses are now recognising the value of responsible carbon offsetting alongside an ambitious emissions reduction strategy. Some remain cautious, citing concerns around greenwashing, but the work of the Integrity Council for the Voluntary Carbon Market, the Voluntary Carbon Market initiative (VCMI) and other frameworks should provide more confidence in the market. High-integrity carbon credits support companies to be more ambitious, but they also channel vital finance towards nature and technology-based solutions to climate change mitigation world-wide. The carbon market will therefore be a vital lever to achieve our urgent global climate goals.
We are observing a growing trend in companies investing in developing their own projects to secure their long-term net-zero targets. Supporting companies to navigate the evolving voluntary carbon market and devise robust strategies for carbon offsetting, as well as developing more new projects and methodologies, will be a continued focus for EcoAct in 2023.
Digital technology’s role in the net-zero transition
To achieve net-zero, companies must remove almost all emissions from their value chains. This will require massive transformation in all aspects of business. We expect to see the potential of digital technologies to enable greater efficiencies and provide new solutions to the low carbon transition being realized in the years ahead. We see digital technologies (like cloud migration, Digital Twins, AI, low-carbon data centres and smart factories) as a significant enabler of business transformation, and digitalization providing an opportunity to accelerate the corporate journey to net-zero.
Key to this will be access to the right data. Quality data will also be important to meet the evolving requirements of the new guidance and legislation mentioned above. There will be an increasing need for reporting data to be more traceable and auditable. IT platforms and databases will play an increasingly important role in centralizing and monitoring emissions-related data as well as improving its quality. In order to report on the transition, identifying and gathering the right data, at the most granular level will be integral to our climate strategies.
Keeping 1.5° alive in 2023?
It -would be easy to feel overwhelmed by climate change. National pledges to net-zero remain inconsistent with limiting global heating to 1.5°C, regulatory progress to date has been too slow and extreme weather events continue to break records. However, I’m encouraged by the emerging trends and increasing momentum within the public sector, and choosing to stay stubbornly optimistic. More than ever, I believe that the private sector has a crucial role in leading the way on science-led climate strategies. The collective carbon footprint of the international corporate world is vast but perhaps greater still is the power that the private sector has to influence, innovate and deliver the transformational change required to decarbonise our economies at large. I truly hope that 2023 will be the year when we begin to realise this potential.
If you’re looking for support with transition planning, digital transformation, data collection, offsetting project development or any aspect of these emergent trends, please get in touch to speak to one of EcoAct’s climate experts today.