Over the last 10 years, sustainability has had a coming of age. Most companies now have robust departments and programs, including advanced data tracking and management, alignment with reporting frameworks, and compliance with global regulation. And today, we’re excited to see sustainability is now core to corporate strategy, and we’re seeing real signs of progress.
Yet, as we wrote about last year, there continues to be pushback on the pace of change and growth. Given this context, here are a few key trends that will define sustainability in 2024:
#1: Sustainability regulation is here (and more is coming!)
Regulation is driving increased emphasis on data management and validation, the identification of material risks and opportunities, and the demonstration of concrete strategy and internal management processes to grapple with sustainability challenges.
This is the first year we will see reports in alignment with the EU Corporate Sustainability Reporting Directive (CSRD). While this first round of required reporting covers EU based companies, US and international companies will increasingly need to report in the coming years. With disclosures covering everything from climate change risks, biodiversity, circular economy, employee health and safety, community impact, and corporate governance, NOW is the time to start formalizing data, policies, and management of these topics to ensure compliance.
Even though the SEC has delayed discussion of national-level climate regulations, California’s Climate Accountability Package will require many companies to report on their Scope 1, 2, and 3 emissions and their approach to managing climate-related risks and opportunities. Mandatory disclosures start in 2026 for GHG emissions data, so 2024 is the year to ensure that you have the internal processes in place (or get them in place) to measure your data in 2025.
#2 ESG reporting continues to evolve
As a result of trend #1, ESG reports are shifting from a multi-purpose communications/compliance tool to a document narrowly focused on data, progress, and meeting regulatory requirements. As a result, we’ll see reports without superfluous storytelling, excessive design, and content aimed at reaching a wide variety of stakeholders. Instead, reporting will more narrowly focus on meeting the needs of investors, regulators, and customers or suppliers.
Concurrently, we will see a shift in where those stories of sustainability progress and positive impact are told. That storytelling will likely move to corporate websites, internal engagement efforts, and external communications.
#3: Decarbonization and climate justice are top priorities
Driven by the compounding pressures of regulatory requirements and concerns about the existential threat of climate change, a focus on emissions reductions, decarbonization, and climate justice is likely to dominate sustainability priorities and conversations this year.
States and countries are driving change toward decarbonization: CSRD regulation requires companies to develop transition plans and meet carbon neutral goals, over a dozen US states have mandates on electric vehicles on the horizon, and according to news outlets, Canada is poised to require all vehicles sold in the country to be zero emissions by 2035.
Businesses are also jumping in to lower emissions. Technologies are continuously developing and evolving to lower the carbon footprint of products and processes. There has been significant growth in data management platforms and technologies designed to assist companies in measuring and validating their environmental data. And, increasingly, countries, cities, and businesses are making net zero commitments. However, more work is needed to formalize short, medium, and long-term transition plans and ensure that ambitious commitments are realized.
As businesses, regulators, and countries grapple with climate commitments, calls to consider the interconnectedness of the health of the planet and the health of people have moved to the forefront. We need to advance solutions to the climate crisis that also consider human rights, economic justice, and the needs of communities disproportionately impacted by climate change. Expect more conversations on climate justice and a just transition this year.
#4: Social issues remain on the forefront (despite legislative challenges)
Socially conscious customers, employees, and community partners want companies to demonstrate their “social impact,” which can include everything from diversity, equity, and inclusion (DEI) to employee engagement, workers’ rights, and community engagement, is top of mind for companies this year.
Stakeholder pressure on companies to report what they are doing to advance DEI has gotten more complicated in the aftermath of the Supreme Court decision to overturn affirmative action in higher education. While that decision did not directly impact businesses, a lot of eyes are on what the Courts may do next. There are concerns that doing too much may attract negative attention from those opposed to DEI efforts and not doing enough may result in negative consequences from stakeholders who want companies to do more.
If DEI and social impact are key priorities for your organization, this uncertainty shouldn’t mean that you abandon your strategy, priorities, and programs entirely. However, this is a good time to get clear on what your priorities are, what language or terminology you are going to use to describe them (for example, “impact,” “belonging” or “inclusion” or “equity”), and how you want to communicate these initiatives to key audiences, like employees, future employees, regulators, or investors. In 2024 and beyond, expect an increased focus on measuring impact and engaging more deeply on human rights and supporting holistic employee and community well-being.
#5 The year of the sustainability rethink
The pendulum swung from massive ESG hype to equally thunderous ESG backlash over the last few years, and in 2024 we’ll settle into something closer to equilibrium. Companies have heard from stakeholders on both sides, and now need to reflect on what kind of company they want to be, what matters to their business, and what they stand for. For some, who merely jumped on the ESG bandwagon, that might mean demoting sustainability to a compliance function. For others— hopefully most companies—this will mean thinking critically about how sustainability can be truly integrated into business strategy, operations, and brand. It will mean intentionally building a unique sustainability program that drives real change for the business, your reputation, and for the world. That will require focusing on the very specific areas where your company can create impact, and building a platform and brand around that will simultaneously shift perception and build brand value.
Looking to 2024, there is a lot of work ahead as companies double down on sustainability efforts to meet regulatory requirements, address stakeholder concerns, tackle the climate crisis, promote climate justice, and create a sustainability program that is truly valuable to the business, planet, and society. Need help creating a strategy to tackle these challenges and opportunities? We’d love to hear from you. Connect with us.