As we continue to meet with sustainability leaders from companies across sectors in which agricultural inputs are a critical to production, we are learning a great deal about pain points and challenges they are facing, as well as the myrid of opportunities that accompany breakpoint change. This includes back-to-back global crises in the form of the COVID global pandemic and Russia's invasion of Ukraine, which have had devastating impacts on human life, families, and communities, and have contributed to an environment of tenuous uncertainty.
These events have also created challenges for many private sector companies in the form of disruptions to their traditional supply chains, which impacts not only business decisions, but has far-reaching implications for their suppliers and communities around the world, as well as consumers who depend on timely accessibility to goods.
In keeping with this framing, and following a year of major commitments and initiatives emerging from the UN Climate Change Conference (COP27), and the UN Biodiversity Conference (COP15), companies and their corporate sustainability leaders are being tasked with pivoting, adjusting roadmaps, applying a wider systems perspective, and discerning when and in what ways collaboration will drive greater sustainable impact than going it alone.
8 Corporate Sustainability Trends for 2023
Given this context, what should we expect in 2023? Here’s our list of the 8 top corporate sustainability trends we see coming this year.
1. Increasing Integration of Environmental and Social Impact Objectives in Corporate Sustainability Strategy
Traditionally, companies developed sustainability projects with a focus on either environmental OR social outcomes. They were looking to improve water quality, lower carbon emissions, or increase diversity across their value chains.
But as perspectives expand toward systems thinking, we’ve seen now that sustainability goals often intersect, and a well-conceived initiative can have an outsized impact on multiple goals.
- For example, a company’s investment in regenerative agriculture not only protects soil diversity and local environments; it can also have profound implications for advancing healthier diets and empowering farmers.
- Amidst a growth in companies supporting regenerative farming practices, Unilever launched its Regenerative Agriculture Principles to regenerate soil, protect waterways, increase biodiversity, develop climate solutions, and improve farmer livelihoods.
- In its efforts to strengthen its supply chains and realize sustainability goals in rural farming communities, PepsiCo's five-year global development alliance (GDA) partnership with USAID is empowering women farmers through innovation and technology adoption, training, and facilitated access to finance and other resources. Increasing participation and leadership of women could result in increased yields by up to 30 percent, contributing to PepsiCo's supply chain, and leads to higher individual and household earnings, national economic growth, and increased global food supply.
These are just a few examples that demonstrate the ways in which corporate sustainability teams are crafting initiatives that address multiple, interlinked impact areas. We expect even greater focus on integration of business and impact goals in the coming year, which is what our own Sustainable Impact approach helps clients accomplish.
In particular, we are anticipating an uptick in strategies that integrate some subset of gender equality (SDG 5), decent work (SDG 8), reduced inequalities (SDG 10), responsible consumption and production (SDG 12), climate action (SDG 13), life on land (SDG 15) and life below water (SDG 14), particularly as it applies to biodiversity pledges, and (SDG 17), which echoes what we know of the importance of partnerships in achieving aims and carrying out initiatives.
2. Greater Scrutiny of Net-Zero Claims, with a Focus on Addressing Scope 3 Emissions
Carbon management has become a top priority for Chief Sustainability Officers; however, many are stymied by uncertainty around SCOPE 3 emissions given the delay of the SEC's final rule, as well as exploring and deciding which strategies among the many will be the most impactful (and sellable to decision-makers and investors) going forward.
Despite these challenges, the pursuit of net-zero continues in the private sector. In fact, from 2021 to 2023, the number of the world's 2000 largest publicly traded companies with net zero commitments increased by 10% with nearly one-third now having published net zero emissions targets. At the same time, there’s also growing scrutiny of net-zero commitments and claims with nearly two thirds of pledges falling short on necessary detail, leaving major corporations open to accusations of greenwashing, a new report has concluded. Critics are questioning what, exactly, companies are counting (and what they’re leaving out) —and how and when they plan to meet their goals.
Speaking to Forbes, Thomas Hale, associate professor at the Blavatnik School of Government at the University of Oxford and one of the collaborators on the report noted: “Science-aligned net zero pathways are now the baseline expectation for countries, companies, cities, and regions. It’s insane that two-thirds of the largest companies have yet to set a target for a transition that is well underway.”
Sustainability leaders we engage with have been expecting increasing levels of scrutiny, particularly as countries hand down laws, policies, rules, and guidance. For example, last year, in line with its Net Zero Strategy, the UK became the first G-20 country to require businesses to disclose their climate-related risks, opportunities, and financial information. These new requirements follow recommendations from the Taskforce on Climate-related Financial Disclosures (TCFD). Other countries are following suit.
What are the implications?
Given that most investors support the core tenets of the new disclosure rules, many expect that 2023 will see the rules finalized and an implementation process started. The focus will then turn to how companies will account for their Scope 3 emissions—or the vast indirect emissions produced along the value chain (which can account for a huge and hidden fraction of a business’s total carbon footprint). According to many ESG experts, there are steps that companies should take right now to ensure their data warehouses are in order and that they’re reporting accurate figures when the new rules go into effect, especially given the emphasis on disclosure transparency and not merely setting targets.
To that end, explore SBTi’s recently launched Net-Zero Standard for more guidance and tools for setting verified, science-based net-zero targets and accounting for Scope 3 emissions.
- One creative example: Walmart is tackling scope 3 emissions by extending supply chain finance to smaller suppliers to aid them in reducing their own climate impact. As part of this initiative, Walmart suppliers can also get support setting and validating science-based targets through the Science Based Targets initiative (SBTi).
3. The Mainstreaming of Biodiversity into Business Decisions
The UN Biodiversity Conference (COP15) held in Montreal in December 2022 closed with a multi-national pledge to address the very real threat to nearly 1 million species of plants, insects, and animals across the globe as a result of wicked problems like climate change. This agreement, the Kunming-Montréal Global Biodiversity Framework, is a historic global framework intended to safeguard nature and halt and reverse biodiversity loss, putting nature on a path to recovery by 2050. In the US, President Biden signed an EO, commonly known as the “30x30,” committing the country to protect and conserve 30% of U.S. lands and waters by 2030.
Sustainability leaders had throughout 2022 anticipated the addition of biodiversity goal integration and inclusion of measurement and roadmaps to their already ambitious sustainability, ESG, and Scope emissions goals and initiatives. What is still unclear is how this new global commitment to biodiversity will take shape in terms of governance, target-setting and metrics, assessment (including risks), roadmaps and initiatives, and reporting. In many ways, companies will be addressing simultaneously carbon and biodiversity as part of business and impact goals with a great deal of uncertainty, particularly in the ways these challenges intersect.
We recently published as part of our Insights series, Research that Resonates, a summation and link to a research paper that examines and assesses the most common tools used by the private sector in assessing biodiversity. We believe that article is a good read and good start for those who have yet to embark on what is sure to be a challenging undertaking in 2023 and the coming years.
4. Disillusionment with ESG Will Open the Door for Net-Positive Thinking
The Environmental, Social, and Governance (ESG) rating system continues to come under fire, with emerging criticism raising serious doubts about its efficacy in directing sustainable investment toward opportunities that positively impact the environment and society.
At the same time, it is clear, ESG isn't going anywhere. There appears to be a growing sentiment among sustainability leaders that they should have more prominent seat at the table in helping to shape how ESG translates from an external framework to company-specific roadmaps and implementation. This is due to the recognition that despite the growth in sustainability reporting, external ESG pressures are not necessarily translating into significant, sustainable impact on the issues that count, and other efforts generated from within the company outward might deliver greater and more meaningful impact long-term.
In 2023, we expect to see more corporate sustainability teams strive to holistically understand their positive and negative dependencies and impacts on environment and society, with a focus on actions that regenerate our society’s social and environmental foundations (such as circular economy approaches and regenerative agriculture).
A couple of examples of this corporate sustainability trend include:
- Microsoft has committed to becoming carbon negative by 2030—reducing its total emissions (including scope 3) by more than half and then removing the rest. (The company has also pledged, by 2050, to remove the equivalent of its historical emissions since its founding in 1975.)
- Meanwhile, the fashion firm Kering is targeting a net-positive impact on biodiversity by 2025 (primarily by investing to convert an area six times its agricultural footprint to regenerative practices).
5. A Focus on Pre-Competitive Partnerships for Corporate Sustainability
Today’s sustainability challenges span supply chains and industries—and demand immediate action, at scale. Pre-competitive partnerships provide greater impact, reach, and power for the companies involved, thanks to their collective resources and impact.
- Take for example the Lowering Emissions by Accelerating Forest finance (LEAF) Coalition, which, in 2021, mobilized $1 billion in financing for large-scale tropical forest protection. Partners include select governments and companies like Amazon, Airbnb, Salesforce, Nestle, Unilever, SAP, Walmart, and others.
Companies are also using pre-competitive collaboration to tackle persistent sustainability challenges in overlapping supply chains. For example, we’re working with a consortium of private sector companies from The SAI Platform, which includes leading multinational agribusinesses like PepsiCo and Ingredion, to create pre-competitive and cross-sector partnerships to advance sustainable agriculture supply chains in Pakistan. This initiative is identifying intersecting supply chain challenges and coordinating action across company partners.
6. Leveraging Open Innovation to Crowdsource New Sustainability Solutions
Open innovation allows companies to crowdsource solutions—often through a competition or prize—by calling on global innovators to put forward ideas to address a specific challenge. The winners, with the best and brightest ideas and business models, receive funding or other support to pilot and scale their solution. This approach also helps companies connect to regional and local NGOs and small- to medium-size enterprises with solutions adapted to the local context.
Companies have used open innovation for decades to drive advancements in business operations. But now we are seeing more corporate sustainability teams turning to open innovation to unearth new, locally-informed ideas to advance sustainable supply chains.
- For example, PepsiCo and Pioneer Foods are using open innovation to identify new partners to co-create and scale impactful solutions for South Africa’s food system. And Unilever, Colgate-Palmolive, and Coca-Cola have joined ABInBev on the 100+ Accelerator to identify innovative startups with solutions for circular packaging, smart agriculture, water stewardship, climate action, and upcycling.
7. A Greater Role for the Private Sector to Advocate for Public Policy and Industry Reform
As companies work toward their sustainability goals, many have recognized the critical role that public policy plays. No single organization has the power to shift a market, funding landscape, or economic system, especially when it comes to complex sustainability issues that span geographies and markets. This is where the public sector becomes a critical partner in driving change—something that the private sector has been increasingly calling for.
We expect to see more companies both proactively engage in progressive public policy through their government affairs teams and hold their industry associations to account. Through this work, there’ll be a growing focus on climate action, renewable energy, accelerating the circular economy, expanding health access, and extending internet access.
8. Emphasis on Improving Diversity, Equity, and Inclusion (DEI) Across the Value Chain
Companies are realizing that meaningful focus on diversity, equity, and inclusion (DEI) is needed across every area of the business, from human resources to operations to the supply chain. The past two years have seen big commitments and investments.
- For example, Target has committed to spending more than $2 billion with Black-owned businesses by 2025. And by 2024, Unilever committed to spending €2 billion annually with supplier companies owned and managed by under-represented groups.
We’d argue that corporate sustainability teams—with their cross-company reach, supply chain insights, and understanding of the interplay between social impact and core business targets—are uniquely positioned to help companies achieve their commitments toward addressing systemic inequality across supply chains, operations, human resources, and talent management.
As more companies commit to ambitious DEI goals, we anticipate that corporate sustainability teams will increasingly be tapped to help ensure these targets drive change across their company’s core business units and value chains.
Working Together to Advance Sustainability in 2023
Companies recognize the need for ambitious targets in many areas, including climate action, health and wellness, gender equality, water and sanitation, responsible consumption and production, poverty, and affordable and clean energy. As such, companies have set bold milestones to achieve sustainability goals by 2025 and 2030. This places enormous pressure on companies to make progress.
The corporate sustainability trends we have highlighted indicate that sustainability teams and their business partners understand their mission and the challenges before them—and they are finding new paths forward to make progress toward sustainable impact, together.
Editor’s Note: This post has been updated for accuracy and current best practices.