ESG and Sustainability Predictions for 2023
What themes will characterise the world of ESG and Sustainability in 2023? ESG and Sustainability comprises a very wide range of issues and so we’ve focused on three trends that we think are likely to have sizeable implications for employment opportunities.
1. More transparency, more pressure on Boards
2022 saw worldwide impact investing pass $1 trillion for the first time, according to the Global Impact Investing Network. Growing numbers of institutional investors are not only evaluating companies based on their ESG ratings before making investment decisions, but are also becoming increasingly active in expressing their dissatisfaction with companies failing to set or hit environmental or social targets. As an example, the Chief Governance and Compliance Officer of Norway’s sovereign wealth fund announced just this month that the fund will be voting against the re-election of at least 80 company Boards in the coming months. She said that only 17% of the more than 9,000 companies that the fund invests in have set appropriate net zero targets – an indication of the scale of the gap between investor expectations and company commitment.
At the same time, a slew of sustainability disclosure standards are due to be adopted during 2023 – including those of the European Financial Reporting Advisory Group (EFRAG), the U.S. Securities and Exchange Commission (SEC) and the International Sustainability Standards Board (ISSB), to name but a few.
We expect 2023 to see a continued increase in the ESG activities of companies, with ESG specialist roles emerging in a wide range of functions – product development, HR, supplier management, etc. Alongside this we anticipate a surge in new roles for compiling, analysing and reporting ESG information.
2. Greater supply chain scrutiny
Regulators around the world are hardening their stance on how companies manage human rights in their upstream operations. In Europe, the draft European Supply Chain Act will require EU companies to audit their suppliers against human rights and environmental standards along the entire global supply chain – including all direct and indirect business relationships. The Act is likely to pass into law during 2023. Similar developments are underway in many other countries. Where legislation does not yet exist, many businesses are unilaterally strengthening their due diligence processes to align with the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises.
In 2023, we can reasonably expect to see companies devoting more resources to building the competencies and systems needed to comply with the new requirements, with many potentially even needing to adapt their sourcing models.
3. Pushing forward with Clean Tech and Decarbonisation
In the US, the Inflation Reduction Act, the Infrastructure Investment Act and the CHIPS and Science Act – all passed in the last two years – collectively amount to $500bn of federal spend over the next decade on climate technology and clean energy. In January of this year, the EU announced its “Green Deal Industrial Plan” that will relax state aid rules to make it easier for national governments to subsidise clean technologies, and setup a European Sovereignty Fund to back clean tech research and innovation. The UK government has pledged £1bn to a net-zero innovation fund. The transition to decarbonised economies represents a major economic opportunity that many nations are keen to capitalise on.
We can expect to see growing business activity in the clean tech space, both of start-ups and within large energy and industrial companies.