The top 5 ESG/Sustainability trends to look out for in 2024

Thursday 18 January 2024

Whatever business you’re in, it’s unlikely you’re immune to the growing demands for action when it comes to your impact on the planet and wider society. Perhaps you’re facing calls for disclosures about your environmental, social and governance (ESG) impacts from investors or large business customers, or, if you tender for contracts, no doubt you’ve seen an increase in questions about your environmental efforts and the social value you can bring to the table.

Even if customers aren’t nipping at your heels just yet, unless you’re a hermit living off grid in the wilds with no means of communication with the outside world (in which case, you won’t be reading this!) the growing urgency to address climate change must surely have grabbed your attention.

Indeed, the urgency on climate change is reaching new heights all the time, with 2023 confirmed as the warmest year on record and its effects being felt increasingly across the world. Just this week I noticed narcissi in our garden trying their best to bloom on Sunday and on Monday woke up to snow.

Long gone are the days when businesses had to focus only on their economic viability. Now, they need to consider their sustainability, which means balancing their impact on people and planet with the need to make profits. So, what are the big trends dominating the sustainability landscape in 2024?

1)   Regulations and reporting – 2024 is set to be a big year when it comes to sustainability regulations. Around the world, governments are introducing or updating the requirements for companies to be transparent in reporting on non-financial matters. All large companies and listed SMEs operating in the EU for example will need to comply with the Corporate Sustainability Reporting Directive (CSRD). By the summer, the UK will have brought in its own Sustainability Disclosure Standards and it’s clear that non-financial reporting will increasingly be a requirement for companies rather than the voluntary, unregulated activity it has been in recent years.

2)   Data and assurance - this growing focus on disclosure brings with it a need for better and more robust data and sustainability metrics, particularly given that many of the new reporting regulations come with mandatory assurance requirements. Expect to see continued growth in the range of software solutions available to help companies capture and analyse this data as a result. From carbon emissions to employee volunteering and waste data to equity, diversity & inclusion metrics, robust data governance will be critical to avoid any risk to corporate reputation, as well as assuring eligibility for sustainable sources of funding. Local providers such as SustainIQ are a good starting point for ESG data software.

3)   Supply chain transparency – increased regulation and reporting requirements also have a major knock on effect on supply chains, as demands for information and transparency continue to grow. The need to get a handle on scope 3 emissions has been a key driver of supply chain engagement for many companies, but increased demands for social and environmental accountability mean that many companies are putting their supply chains under the microscope with an intensity not seen before. Supply chains can be a major source of risk, from carbon footprints to human rights violations and of course climate change can cause major problems due to unforeseen weather impacts around the world affecting shipping routes. This is leading many companies to explore localising or onshoring their supply chains to increase resilience.

4)   Nature under the spotlight – there has been a (very) slow dawning realisation that we rely on nature and biodiversity much more than we might think. Whilst much of the focus has been on climate change and reducing our dependence on fossil fuels, increasingly the spotlight has been shifting to the depletion of natural capital through deforestation and the degradation of ecosystems around the world. More than 50% of the world’s GDP is dependent on nature and the services it provides, so our carelessness doesn’t only destroy ecosystems and biodiversity, but also puts businesses and economies under threat. Finally, we are starting to realise that, without a healthy, thriving planet, there’s nothing on which to build a single business, much less a prosperous economy.

5)   Clamping down on greenwashing – as demands for transparency and reporting grow and consumers become ever more alert to companies ‘overclaiming’ the benefits of their products, I believe we’ll see a reduction in greenwashing in 2024. The proposed EU Green Claims Directive will play a role in clamping down (although this won’t be in place for a couple of years yet) and we’ll see more companies investing in certifications to add a level of rigour and credibility to sustainability claims they make. This is good news for consumers as it means we’ll be able to have greater confidence that if something is marketed as being ‘green’, it actually will have good environmental credentials, not just unsubstantiated claims that confuse and mislead.
You may recognise some of these trends and others may be news to you, but make no mistake, whether you’re directly affected now or not, you will feel the ramifications at some point. If you’re in a supply chain, the businesses you supply will be looking for data and information on what efforts you’re making to address your ESG issues. If you’re seeking investment, the investors will want to know what plans you have to minimise any negative impacts from your business. If you’re selling directly to consumers, you’ll see them asking more and more about what you’re doing to ensure their money isn’t supporting harmful practices. Or, you’ll simply see that competitors are winning more business because they are actively addressing their own impacts and being transparent and open about their efforts.

And to be clear, although we’ve called them trends, this drive towards greater corporate accountability and transparency is here to stay. You can either jump aboard and be proactive in addressing your responsibilities, or wait to be pushed. Which option will you choose?