Explore 6 major sustainability trends of 2024 reshaping businesses: ESG integration, digital transformation, stricter reporting, supply chain transparency, and more.
2024 has been a critical year for sustainability, marking a significant moment in the global effort to address environmental challenges.
As awareness of climate change intensifies, governments, businesses, and communities worldwide are amplifying their commitment to sustainable practices with innovations in corporate sustainability, circular economy models, and green technologies reshaping industries and fostering a mentality shift.
Such a shift of business mentality is underpinned by tangible data, regulatory pressures, and international agreements highlighting the critical importance of integrating sustainability into core business operations as reported in the ISO ESG Implementation Principles which emphasizes a comprehensive and iterative approach to ESG implementation.
Below are six pivotal sustainability trends reshaping the corporate landscape which demand immediate attention.
1. Integration of ESG into Corporate Strategy
Integrating Environmental, Social, and Governance (ESG) factors into corporate strategy is no longer optional—it's a necessity driven by investor demand, regulatory pressures, and international commitments.
The Paris Agreement, reaffirmed at COP26 and COP27, has set a clear trajectory towards limiting global warming to well below 2°C, with efforts to limit it to 1.5°C requiring a global commitment supported by significant contributions from the private sector.
Regulatory bodies are reinforcing this direction.
For instance, the European Union's Corporate Sustainability Reporting Directive (CSRD), adopted in 2022, mandates that approximately 50,000 companies provide detailed reports on their ESG impacts, a substantial increase from the previous 11,700 companies under the Non-Financial Reporting Directive reflecting a push towards greater transparency and accountability in corporate ESG performance.
Moreover, according to the Global Sustainable Investment Alliance's 2022 Global Sustainable Investment Review, sustainable investment assets under management remained substantial at $35.3 trillion globally, representing 36% of all professionally managed assets.
While these figures mirror the 2020 data, they reflect more stringent criteria and reclassification in sustainable investment definitions, especially in Europe where it underscores that integrating ESG into corporate strategy is essential not just for compliance but also for attracting investment and enhancing financial performance.
This growing focus aligns with the ISO ESG Implementation principles which advocate for organizations to develop ESG strategies that prioritize material impacts, address long-term risks, and enhance stakeholder trust.
With regular materiality assessments and the integration of equity-focused approaches, it can be ensured that ESG becomes a core organizational value rather than a compliance exercise.
2. Increased Stakeholder Engagement
Transparency and proactive communication with stakeholders regarding sustainability efforts have become critical components of corporate success. The Glasgow Climate Pact, resulting from COP26, emphasized the need for non-state actors, including businesses, to enhance their climate actions and report transparently.
In response, regulatory frameworks are evolving.
The Task Force on Climate-related Financial Disclosures (TCFD) recommendations, supported by over 2,600 organizations globally, are becoming de facto standards for climate-related reporting.
A 2023 survey by Edelman found that 86% of global consumers expect CEOs to lead on societal issues, including environmental challenges. Furthermore, 99% of investors consider a company's social and environmental impact when making investment decisions, according to EY.
These figures highlight the growing demand for corporate leadership in sustainability, emphasizing that integrating ESG into corporate strategy is essential not just for compliance but also for attracting investment and enhancing financial performance.
3. Digital Transformation in Sustainability Management
The acceleration of digital transformation is significantly enhancing sustainability management by providing advanced tools for monitoring, reporting, and optimizing environmental performance.
The International Data Corporation predicts that global spending on digital transformation technologies will reach $2.8 trillion by 2025, with a substantial portion directed towards sustainability initiatives.
Regulatory requirements are also driving this trend with the EU's Sustainable Finance Disclosure Regulation (SFDR), effective since March 2021, which financial market participants to disclose detailed ESG data, necessitating robust digital systems for data collection and reporting.
Companies are adopting Internet of Things (IoT) technologies to reduce energy consumption and emissions. Additionally, the use of blockchain for supply chain transparency has been shown to increase efficiency by 15% and reduce errors by up to 70%, as reported by Deloitte.
4. Stricter ESG Reporting Regulations
Governments and regulatory bodies worldwide are implementing more rigorous ESG reporting requirements, pushing companies towards greater transparency and accountability.
The International Sustainability Standards Board (ISSB) released its first two sustainability disclosure standards, IFRS S1 and IFRS S2, in June 2023, establishing a comprehensive global baseline for sustainability disclosures—a move endorsed by participants at COP27.
Another interesting data can be found in KPMG's Survey of Sustainability Reporting 2022, where it is highlighted that 96% of the world's largest 250 companies (G250) now report on sustainability, reflecting the impact of these regulatory developments.
As of today, with tightening legislation and regulations such as CSRD, compliance with these regulations is essential to avoid legal repercussions, meet investor and consumer expectations, and contribute to global climate goals.
5. Supply Chain Transparency
Supply chain sustainability has become a paramount interest, extending beyond individual companies to encompass entire supply chains. Businesses are increasingly held accountable for the environmental, social, and governance (ESG) practices of their suppliers and partners pushed by the circular economy approach which is gaining traction, focusing on reducing waste, conserving resources, and extending product lifecycles.
Regulatory frameworks are tightening globally.
In Europe, the EU Corporate Sustainability Due Diligence Directive (CSDDD) mandates large companies to assess and mitigate human rights and environmental risks throughout their supply chains. Similarly, the UK's Modern Slavery Act and Germany's Supply Chain Due Diligence Act impose strict ethical sourcing requirements.
To meet these challenges and capitalize on emerging opportunities, companies are implementing innovative strategies. Digital technologies, such as AI, IoT, and big data, are revolutionizing supply chain management by improving visibility, efficiency, and sustainability.
This trend is also supported by the ISO ESG Implementation principles which introduce tools like life cycle assessments and social impact analyses to enhance supply chain visibility and resilience, encouraging organizations to adopt a systems-thinking approach, and addressing risks and opportunities across the entire value chain.
6. Climate Risk Assessment and Adaptation
With the escalating impacts of climate change, businesses are prioritizing the assessment of climate-related risks and developing adaptation strategies to ensure long-term resilience.
The World Economic Forum's Global Risks Report 2024 identified climate action failure and extreme weather events as top global risks.
Extreme weather events, such as hurricanes, floods, wildfires, and heatwaves, are becoming more frequent and intense, damaging infrastructure, disrupting supply chains, and leading to operational disruptions. Rising sea levels threaten coastal cities and regions, while water scarcity impacts industries like agriculture, manufacturing, and energy.
To mitigate these risks, businesses should conduct comprehensive climate risk assessments, develop robust adaptation plans, set ambitious emissions reduction targets, and adhere to disclosure frameworks like the Task Force on Climate-related Financial Disclosures (TCFD).
Engaging with stakeholders, including investors, customers, employees, and suppliers, is crucial to address climate-related issues and build trust.
Conclusion
The integration of sustainability into the core fabric of business operations is no longer a forward-thinking strategy—it's an immediate imperative substantiated by compelling data, regulatory pressures, and international agreements.
The trends of ESG integration, stakeholder engagement, digital transformation, stricter reporting regulations, supply chain transparency, and climate risk assessment and adaptation are redefining the parameters of corporate success.
Businesses that proactively embrace these trends are better positioned to mitigate risks, capitalize on new opportunities, and meet the evolving expectations of investors, consumers, regulators, and international commitments. Ignoring these sustainability trends is not just a missed opportunity but a strategic oversight that could jeopardize a company's future viability.
