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Two Steps Forward

The year in review: Progress in sustainable business, but too little and too slow

Five themes stood out in 2023: decarbonization, finance, plastic waste, ESG and AI.

Highway exit sign showing the way to leave 2023

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Another year, another round of ups and downs, hope and despair, excitement and disappointment, fits and starts.

Still, 2023 saw plenty of progress. Topics such as regenerative agriculture, green upskilling, plastic waste, transition finance and carbon removal grew in stature. ESG regained its footing after years of attacks by both rightwing politicians and leftwing activists. More climate technologies seemed ready for prime time. "Fossil fuels" was uttered for the first time in a global climate agreement.

But none of it is happening up at the scale, scope and speed needed to meet the moment.

As I’ve done for more than a decade, I’ve perused the 1,000 or so stories published on GreenBiz.com during the 12 months just ending in search of trends and themes. Here, in no particular order, are five worth noting.

Another year, another round of ups and downs. Still, 2023 saw plenty of progress.

1. Decarbonization gained heat. Suddenly, the word is everywhere, from the chemical industry to consumer products to the circular economy, thanks in large part to policies and financial incentives emanating from both the United States and European Union.

As such, industries and their sustainability enablers talk about decarbonizing transport, especially heavy transport such as tractor-trailers. One would expect that the electric grids around the world to be a decarb focus. But food systems? Of course: Big Ag is heavily dependent on fossil fuels, including the energy, fertilizers and other inputs of growing crops and producing meat.

And then there are the so-called hard-to-abate activities such as concrete and aluminum. Wringing out the emissions from these and other products and processes will no doubt ensure that the focus on decarbonization continues to rise.

2. Climate solutions banked on finance. The role of finance was front and center at this year’s COP28, as well as in other policy and banking circles. At issue: How to finance the trillions of dollars needed to transition to a sustainable economy and ensure such finance ensures the well-being of traditionally underrepresented and underserved communities.

One place where finance is sprouting is in nature — specifically, the governance needed to embed nature into the global financial architecture. Among the tasks: Standardize how companies and financial institutions publicly report on nature-related risks; a new set of guidelines aims to do just that.

Another key challenge falls under the rubric of "financed emissions" — the greenhouse gases associated with loans and investments. One meme describes the aspirational goal: "climate-safe banking."

The European Union already has put in place a transparency framework, the Sustainable Finance Disclosure Regulation, which mandates how financial institutions disclose the climate and sustainability risks of their lending. A small but growing corps of companies are similarly integrating sustainability risks into capital investments.

3. Plastic waste became material. A long-simmering movement seemed to reach a rolling boil, providing common cause for the once-disparate climate, biodiversity, waste and environmental justice communities.

One catalyst are efforts toward a global plastics treaty, which would legally bind nations to end the flow of plastics into oceans and other ecosystems. Whether the treaty is finalized (and so far, the drafts leave two-liter-sized loopholes), it’s clear that policy, not voluntary action, is what’s needed. Meanwhile, activist pressures are mounting for companies to publicly disclose their contributions to the plastic (and microplastic) waste problem.

With good reason: Companies don’t appear to be meeting their plastic waste commitments despite experts weighing in with prescriptions on how to fix that. And some purveyors of plastic waste — notably, bottled water companies — are facing legal action, no doubt the canary in the judicial coal mine foreshadowing the rise of plastics litigation.

4. ESG took account of itself. After being vilified and dismissed as performative politicking, companies’ accounting for their environmental, social and governance impacts issued seemed to slow, though hardly stopped. But it is poised for a rebound.

Actually, three ESG stories were unfolding at once. There’s ESG as a corporate reporting tool. There’s the investment side, in which funds deploy the ESG moniker as a marketing tool. And there’s the political realm, in which conservatives have conflated both activities without distinction, notably in a U.S. congressional hearing last summer.

All three stories continue to evolve. Companies are engaging in ESG reporting and strategy without necessarily using that three-letter acronym. CEOs are still prioritizing ESG issues despite current economic and geopolitical headwinds. Third-party assurance firms are stepping in to ensure that ESG isn’t just a meaningless term. Right-wing critics, for their part, seem to have moved on.

And regulators are giving all this further rigor and requirements, notably in Europe, where new EU directives are transforming ESG reporting, but also in Japan.

Alas, none of this is heading off lawsuits over ESG issues, including for greenwashing, and an increase in securities litigation, where lawsuits are filed over events that purportedly impact a company’s share price. Amid all this, there seems to be strong demand for ESG jobs and careers, although finding them can be a challenge.

5. AI became a sustainability essential. No story about 2023 would be complete without mentioning artificial intelligence, a term that seemed to be on everyone's lips this year for its ability to revolutionize everything from agriculture to automobiles.

In the sustainability realm, AI already is being used to address a broad range of challenges. Companies are using it to identify replacement ingredients for laundry and cleaning products. The transport sector is tapping into its potential to curtail emissions and boost efficiency. Airlines are learning how it can help pilots reduce climate-warming contrails. AI can help find new sources for lithium, cobalt, copper and nickel more quickly and with less environmental harm.

And AI is rapidly becoming a tool for helping sustainability professionals assimilate mind-numbing datasets and identify hidden opportunities to cut greenhouse gas emissions.

It’s not easy. The growth of AI means grappling with the vast quantities of energy the technology requires, assessing the tradeoffs between business benefits and environmental costs. And it means keeping current with this fast-changing, complex technology. Where it all goes, nobody knows.

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