High-profile initiatives across the corporate, government and NGO sectors have given new momentum to the sustainability agenda in 2015
In sustainability terms, 2015 has been something of a turning point. Significantly, it marked the date by which the UN’s eight Millennium Development Goals (MDGs) should have been reached. Described by UN secretary-general Ban Ki-moon as “the most successful anti-poverty movement in history”, the MDGs helped to lift more than one billion people out of extreme poverty, made a significant impact on hunger and helped to virtually eliminate ozone-depleting substances.
According to Ban, the MDGs “generated new and innovative partnerships, galvanised public opinion and showed the immense value of setting ambitious goals”. However, the goals were not all achieved and much work remains to be done. At the UN Sustainable Development Summit in September 2015, more than 150 world leaders adopted the new 2030 Agenda for Sustainable Development, which included the 17 Sustainable Development Goals (SDGs) that build upon the MDGs.
This new set of goals will shape the global development agenda, guiding policy and funding for the next 15 years. “It is a roadmap to ending global poverty, building a life of dignity for all and leaving no one behind,” said Ban. “It is also a clarion call to work in partnership and intensify efforts to share prosperity, empower people’s livelihoods, ensure peace and heal our planet for the benefit of this and future generations.”
Climate change and its impacts have dominated the headlines this year, with devastating fires in Indonesia, deadly heatwaves in India and Pakistan, tornadoes in China, cyclones in Vanuatu and floods in a number of countries, including Chile, Tanzania, Malawi, Georgia and the US. Hopes were therefore high for a decisive outcome at the COP21 Climate Conference in December. And, after a fortnight of negotiations, almost 200 countries reached consensus on the need to cut emissions. It appears that governments and corporates alike have finally acknowledged that tackling climate change underpins economic progress.
“For perhaps the first time, we are beginning to see a united front of business leaders and policymakers setting their course toward a bold deal on climate change that can begin to close the gap between ambition and execution,” says Lise Kingo, executive director of the UN Global Compact.
The Global Compact’s CEO Study on Climate Action, in partnership with Accenture, showed that 91% of business leaders believe that the climate challenge is significant and that action is an urgent priority for business. “It’s extremely encouraging to see so many leaders agree,” says Kingo. “That means that it is no longer a question of if we transition to a low-carbon economy, but how.”
As the business case for sustainability has become better understood, says Frances Way, chief operating officer of CDP (formerly the Carbon Disclosure Project), climate change has moved from a backroom issue to the mainstream. “Ninety-four per cent of the companies that participate in our climate change programme assign board or senior management responsibility to climate change, nine in every 10 has activities in place that are lowering their carbon output and three-quarters offer incentives for improving climate performance,” says Way.
A number of multinationals have made significant steps in 2015 in terms of reducing emissions. “Leading companies, such as L’Oréal, have achieved what we call a decoupling of emissions growth from business growth,” says Way. “The French cosmetic and beauty giant has reduced the carbon emissions from its production activities by 50% compared to 2005, while production grew by 22% over the same period. Apple reduced its overall emissions by around 25% in the space of a year.”
Way cites a number of other positive examples that show the tide is turning. For instance, companies will now have to prove they meet strict environmental, social and governance (ESG) standards to be included in the portfolio of ABP – one of the world’s biggest pension funds. Globally, $21.4tn was invested in funds with ESG mandates in 2014, up 61% in two years, according to the Global Sustainable Investment Alliance. In Europe, it is more than half of institutionally managed assets. “All this action is hard to ignore and suggests we are on the cusp of an economic revolution,” says Way “We need policy that will unlock the corporate world’s full potential as an outcome of the climate conference.”
However, not all corporates covered themselves in glory in 2015 when it came to sustainability. In September, the US Environmental Protection Agency discovered that software called “defeat devices” had been found in Volkswagens. These devices detect when car emissions are being tested and reduce the pollution emitted by the vehicle, effectively cheating the test. In reality, nitrogen oxide emissions were up to 40 times the legal level during normal driving. In a statement at the time, Martin Winterkorn, the CEO of Volkswagen who later resigned, said: “I personally am deeply sorry that we have broken the trust of our customers and the public.” The company says it has since agreed steps to prevent future manipulation.
Way believes the momentum of corporate climate action is matched by the increasing attention of investors to the issue, particularly during 2015. “The Governor of the Bank of England has spoken about the risk of stranded assets as a result of the climate challenge and has called for greater disclosure of climate information from companies, so that investors can make more informed decisions,” she says.
The international Financial Stability Board announced in December that it is establishing an industry-led disclosure task force on climate-related financial risks, to be chaired by former New York mayor Michael Bloomberg. The Task Force on Climate-related Financial Disclosures (TCFD) will “develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders”.
Bloomberg said: “It’s critical that industries and investors understand the risks posed by climate change, but currently there is too little transparency about those risks. While the business and finance communities are already playing a leading role on climate change, through investments in technological innovation and clean energy, this task force will accelerate that activity by increasing transparency.”
Nothing less than full co-operation will do, says Kingo. “This year we have seen an increase in the pace and ambition of corporate sustainability as the risks and opportunities have become more apparent,” she says. “But it is not enough. We need 100% participation from the business community. Coming out of COP21 in Paris, we must mobilise the great majority of companies that are not yet part of this movement.”
Governments have also been doing their bit. In August, Barack Obama and the Environmental Protection Agency announced the Clean Power Plan, an important step in reducing carbon pollution from power plants, which is “designed to strengthen the fast-growing trend toward cleaner and lower-polluting American energy”. The plan aims to reduce carbon dioxide emissions by 32% from 2005 levels by 2030.
Shortly afterwards, China announced plans to launch its national emissions trading scheme in 2017, a significant move that covers key industry sectors such as iron and steel, power generation, chemicals, building materials, paper-making and nonferrous metals. In a joint statement with the White House, President Xi Jinping declared: “China commits to promote low-carbon buildings and transportation, with the share of green buildings reaching 50% in newly built buildings in cities and towns by 2020.”
In December, the European Commission adopted an ambitious new Circular Economy Package to “help European businesses and consumers to make the transition to a stronger and more circular economy where resources are used in a more sustainable way”. The proposed actions will contribute to “closing the loop” of product lifecycles through greater recycling and re-use, aiming to “extract maximum value and use from all raw materials, products and waste, fostering energy savings and reducing greenhouse gas emissions”. The proposals cover the full lifecycle, from production and consumption to waste management and the market for secondary raw materials.
Partnerships and coalitions have abounded in 2015. Corporate responsibility and sustainability expert John Elkington, founder of SustainAbility and Volans, cites one of the significant sustainability events of 2015 as the launch of the Breakthrough Energy Coalition, a group of 28 high-net-worth investors from around the world (including Virgin’s Richard Branson, Microsoft founder Bill Gates, Facebook CEO Mark Zuckerberg and Amazon founder Jeff Bezos).
Gates describes the coalition as “a global group of private investors who will support companies that are taking innovative clean-energy ideas out of the lab and into the marketplace”. He says the primary goal of the Coalition is “as much to accelerate progress on clean energy as it is to make a profit”.
Elkington also saw significance in Mark Zuckerberg’s announcement about his “long-term philanthropic intentions”. Following the recent birth of their daughter, Zuckerberg and his wife, Priscilla Chan, announced their intention to give away some £30bn during their lifetimes via the Chan Zuckerberg Initiative, which Zuckerberg says aims to “advance human potential and promote equality for all children in the next generation”. He has drawn criticism, however, for creating a limited liability company rather than a foundation.
“COP21 has also galvanised more business coalitions, such as We Mean Business and RE100,” says Georgina Stevens, director of sustainability consultancy One Pumpkin. “I think we will also see these genuine coalitions, who are ambitious and committed, strengthen in post-COP21 talks and meetings in 2016.”
Social issues have also been a focal point this year. “We’re seeing an increasing recognition that social issues such as labour rights are as crucial to the sustainability of business as climate change and the environment,” says Sabita Banerji, the Ethical Trading Initiative’s knowledge and learning adviser.
“The UN’s Global Principles on Human Rights and Business have played a decisive role in awareness raising, and brands are telling us that safeguarding the human rights of their workers is not regarded as a side issue any more,” says Banerji. “The obviously huge issue that is impacting globally is the migration and refugee crisis and the effect this has had on working conditions for migrants as well as the risk to their human rights.”
The Ethical Trading Initiative has been involved in the employment of Syrian and other refugees in Turkish garment factories. There are an estimated 2 million refugees in Turkey. “This has rapidly increased the already problematic informal economy and shone a spotlight on an industry that is beset by poor labour standards, informal and unregulated working arrangements and inadequate union representation,” says Banerji.
In June, the UN High Commission for Refugees released new figures on how many refugees have left their homes due to conflicts in their countries of origin. According to the report, the total number of refugees by the end of 2014 was a staggering 59.5 million. “Globally, one in every 122 humans is now either a refugee, internally displaced, or seeking asylum,” stated the report. “If this were the population of a country, it would be the world's 24th biggest.”
Look to the future
Turning to the year ahead, several key themes are likely to be at the forefront of sustainable thinking. “Modern slavery within supply chains will continue to be a dominating topic in the ethical trading agenda, particularly in light of the migration crisis,” says ETI’s Banerji. “Additionally, the UK’s recently ratified Modern Slavery Act contains a ‘transparency in supply chains’ clause which will require companies to report on their efforts to protect against slavery in their supply chains worldwide.
John Elkington says a number of issues are likely to emerge, among them “integrated business models, carbon tax proposals, expanding the stranded (and strandable) assets discussion, plastics in the ocean and the need to shift from incremental to exponential change strategies”.
Orsola de Castro, co-founder of Fashion Revolution, believes waste will be high on the agenda. The issue, she says, will be “how to consume better but also how to make a more effective use of existing resources at all levels from mills to manufacturing to retail”. One Pumpkin’s Stevens agrees, saying: “Although not a new or yet global phenomenon, Hugh Fearnley-Whittingstall’s current campaign ‘war on waste’ has driven all the UK supermarkets into action over food waste, something they have been side stepping for far too long.”
Stevens adds that corporate lobbying is also likely to be a hot topic in 2016. She says: “Companies need to demonstrate and ensure that their lobbying activities, either their own or those of their trade associations or other lobbying groups they are members of, are consistent with their CSR policies and external messages.”
The Global Compact’s Kingo believes that 2016 will see significant momentum on carbon pricing and science-based emissions targets. “The UN Global Compact has developed a set of Business Leadership Criteria on Carbon Pricing, and more than 60 companies have now signed on to be Carbon Price Champions,” she says. “This small but growing vanguard of CEOs have taken on the triple challenge of setting an internal carbon price, advocating publicly for carbon markets and reporting on progress.”
More than 90 companies from different sectors around the world have committed to setting science-based targets. “According to the 2015 Accenture-UN Global Compact CEO study, 43% of business leaders see reduction targets in line with science and the 2°C limit as one of the most important climate leadership behaviours for companies to adopt,” says Kingo.
CDP’s Way also sees science-based targets as a means of effecting change. She cites the example of the UN’s Nazca portal, which hosts “thousands of climate-related company targets and pledges”. Way says: “Commitments such as these demonstrate that companies are planning on playing a positive role in efforts to curb emissions. We need to ensure that these commitments translate into meaningful action. The tools to enable companies to establish science-based targets appropriate to their sector now exist, so we are optimistic that an increasing number of companies will set such targets.”global corporate government NGO sustainability UN Ban Ki-moon ozone sustainable development Agenda global poverty climate change low-carbon economy Frances Way emissions environmental Martin Winterkorn Michael Bloomberg clean energy Barack Obama Environmental Protection Agency carbon Human rights