This year’s forecast of sustainability trends looks like the perfect storm (in a good way) of purpose-minded, yet business opportunity-led progress. Although Forrester analysts expected at least 10 companies to incur $5 million or more in greenwashing fines, the longer term outlook for meaningful environmental impact is far brighter. Other researchers predicted that political bodies worldwide would support nation-state commitments to invest tens of trillions of dollars in climate mitigation from 2025 to 2035. Prodded by consumer demands and impelled by increasingly stringent regulations, the business sector has taken notice and actions to create a more sustainable future. Here’s a summary of their investment priorities.
Customer concerns are followed by regulations
Consumers are increasingly concerned about the environmental impact of their favorite products, prompting a wave of new packaging regulations and new plastic taxes that extend corporate producer responsibility to the post-consumer phase of the product lifecycle and include packaging. As such, this also affects manufacturers and producers of packaging, who will increasingly have to prove that their products have been produced sustainably. Furthermore, they also have a responsibility to implement processes that allow for the reuse of materials. Consumers prefer brands that demonstrate responsible use of the earth's resources and more sustainable practices, while also being affordable.
In parallel, governments and administrations around the world are introducing new Extended Producer Responsibility (EPR) regulations, where a manufacturer's responsibility for a product extends to its use, disposal and reuse after consumption. With more than 400 different EPR schemes in place or being introduced around the world, this is an increasingly complex issue for companies, particularly consumer goods manufacturers and their packaging suppliers. Under the Blue Box program in Ontario, Canada, for example, the companies concerned are required to report data on packaging and material quantities.
Managing materials and regulatory data is increasingly posing significant challenges for companies. Software solutions such as SAP Responsible Design and Production can help companies manage their obligations to producer responsibility organizations by providing a unified view of packaging materials, production, and the market in which they are sold, as well as automated reporting to the many EPR schemes around the world. Find out more with a trial of SAP Responsible Design and Production.
Getting accurate, quality ESG data
This shows clearly that Environmental, social, and corporate governance (ESG) standards and regulations are becoming a dominant force in how organizations operate, touching every part of the business. In the US, the SEC is slated to enact more ESG regulations for investors, while the UK Plastic Packaging Tax is expected to transform global supply chains worldwide. According to Deborah Kaplan, global head of sustainability at SAP Customer Success, corralling and understanding tons of disparate data is the biggest challenge for organizations – regardless of where they sit on the sustainability preparedness spectrum.
“Companies need data transparency with detailed precision along the entire value chain. They have to act quickly as ESG frameworks and standards evolve, embedding into every business process sustainability metrics that are aligned with the company strategy,” said Kaplan. “We’re seeing customers replace time-consuming, inaccurate manual approaches with a holistic steering and reporting solution like SAP Sustainability Control Tower. It simplifies data visibility, allowing companies to record, report, and act on quality data across the value chain with built-in assurance and audit capabilities.”
IDC analysts predicted by 2024, 30% of organizations will use ESG data management platforms to steer ESG KPIs through a centralized system of record for reporting purposes and real-time operational decision-making support. Within three years, these analysts said ESG performance will be viewed as a top three decision factor for IT equipment purchases; over 50% of RFPs will include metrics regarding carbon emissions, material use, and labor conditions.
Connected data provides organizational accountability
With Scope 3 emission regulations on the rise and continuously changing, organizational leaders have realized the value of connected data to track, report, and reduce climate impact. Gartner researchers said that customer expectations around environmental and social sustainability will apply to the entire product life cycle, predicting that “buyers will speak with their wallets by purchasing only from companies and suppliers that demonstrate authentic achievement of commitments.” The firm found that 67% of organizations intend to hold supply chain leaders accountable for defined environmental and social sustainability KPIs.
By next year, IDC analysts predicted 80% of G2000 companies will capture their carbon data and report their enterprise-wide carbon footprint using quantifiable metrics compared with 50% today. Gartner researchers said that by 2027, 50% of the top 10 consumer goods manufacturers will have “digital product passports” for at least one of their product categories. Essentially a digital thread, passports will track the product’s carbon footprint, waste, liability and risk, and more, sharing information company-wide and with suppliers and regulatory agencies.
Innovating sustainable business models
Sustainability is good for business, and not just because it mitigates regulatory compliance risk. Researchers say the ability to efficiently navigate the global regulatory environment and scale compliance systems will offer companies a significant competitive advantage. Urging business leaders to think further ahead, these analysts predicted a “carbon flip” after “an intensive period of innovation in climate mitigation technologies that is already under way, to be followed by roughly 20 years of implementation for scalable solutions and replacement of carbon-based technologies.”
Meanwhile there are plenty of near-term business results from the sustainability wave. By next year, IDC analysts predicted a quarter of organizations worldwide will demonstrate responsible leadership by increasing their sustainability-related digital technology spend by more than 25% from 2022 levels. Within three years, they said 45% of G2000 organizations will operationalize integrated sustainability in the supply chain and effectively report impact data, enabling 10% reduction in waste and improving competitive advantage.
As sustainability has morphed from carbon emissions tracking into company-wide commitments to achieve global imperatives, organizations of all kinds find themselves in the business of creating a healthier world. Surely that’s progress that will help us breathe a little easier and live longer.
Want to learn more? Read this Oxford Economics supply chain research that highlights the paradox between a focus on sustainability and driving efficiency and revenue goals.