Corporate Sustainability Trends in 2023

Following the United Nations Climate Change Conference (COP27) in November 2022, corporations around the world started redefining their sustainability goals for 2023. From reducing carbon emissions to addressing plastic pollution, firms have been developing climate action plans through newly developed frameworks to mitigate their environmental impacts and reduce financial costs. Corporate accountability and the role of the private sector in addressing current environmental challenges were among the leading topics discussed at COP27, and corporate leaders continue to come under pressure from other stakeholders on their environmental, social, and governance (ESG) performance and carbon footprint.

On a national level, the U.S. Securities and Exchange Commission (SEC) proposed a rule in 2022 that requires registrants to provide climate-risk disclosures in their reports that include greenhouse gas (GHG) emissions. The SEC proposal, along with other global programs such as the European Union’s Corporate Sustainability Reporting Directive, which came into force in January 2023, are affecting how corporations establish their sustainability goals in light of more stringent requirements. Many businesses are striving to meet their sustainability targets by focusing on two prominent goals: reaching net-zero and incorporating circular economy initiatives into their agenda.

Net-Zero Commitments

The goal of reaching net-zero emissions by 2050 has become a focus for several businesses aiming to reduce their GHG emissions. Efforts to decarbonize the grid have been implemented through investing in clean energy and purchasing carbon offsets. Forest carbon offsets are leading the carbon markets as large corporations such as Delta and Disney continue to finance reforestation and conservation projects performed by NGOs to compensate for the carbon they emit in other areas.

Addressing Scope 3 emissions has become the largest challenge in reaching net-zero—indirect emissions are difficult to reduce, which is why the majority of a company’s emissions fall under this category. The Corporate Net-Zero Standard from the Science-Based Targets initiative (SBTi) is a global framework that focuses on providing insight and guidance to companies aiming to reduce their Scope 3 emissions and achieve net-zero. Driven by this framework, 96% of companies had targets that included Scope 3 in 2021, and that number is projected to grow. Corporate sustainability and decarbonization frameworks play an important role in the rise of net-zero commitments made by corporations. ENGIE Impact’s 2023 Net Zero Report revealed that 98% of global companies are showing improvements in reaching their decarbonization targets, and with effective incentives like SBTi’s Corporate Net-Zero Standard, more companies are willing to incorporate net-zero and sustainability initiatives into their agendas.

The Circular Economy

The shift to a circular economy is one that cannot be accomplished alone and requires the collaboration of multiple corporations. As consumers are becoming more aware of the environmental impact of plastics from products and packaging, businesses face pressure to reevaluate their business models by adapting to sustainable alternatives. In 2020, Adidas launched its Social Plastic Program and Three Loop Strategy to address the company’s plastic pollution problem by incorporating biodegradable materials into its products. In addition, large corporations such as H&M have committed to being 100% circular by 2040. A report on the global circular economy indicated that the market size is projected to increase by a compound annual growth rate of 7.8% from 2021 through 2027. As environmental degradation and consumer demand continue to become the key market drivers for circularity, corporations will aim to move toward developing circular economic models into their action plans.

Overall, achieving net-zero and investing in circular economy initiatives are goals that will encourage corporations to reduce plastic pollution and carbon emissions. Increasing pressure from consumers and the government sector will force companies to make stronger commitments to sustainability and redesign their climate action plans moving forward.

For more on corporate sustainability and ESG initiatives, check out Guidehouse Insights’ new Corporate Sustainability Tracker, which monitors efforts to reduce Scope 1, 2, and 3 GHG emissions across 20 industries.