2023 was the 12 months that chief sustainability officers (CSOs) struggled to make the enterprise case for sustainability amid a worldwide financial slowdown and conflicting enterprise priorities as geopolitics wormed its manner into the boardroom.
Some firms scaled again their local weather ambition. Massive polluters reminiscent of BP and Shell, and multinational client manufacturers reminiscent of Canon, rolled again decarbonisation pledges, whereas main banks, together with Normal Chartered and HSBC, stepped away from the Science Primarily based Targets Initiative (SBTi), the United Nations-backed organisation that aligns net-zero targets with a climate-safe planet, over issues that SBTi validation might hinder their capability to finance fossil fuels.
However different firms ramped up local weather ambition regardless of governments suspending or adjusting local weather targets. In November, 367 finance corporations and multinational firms value US$33 trillion joined forces to demand science-based targets to restrict world warming to 1.5°C, together with carbon intensive corporations reminiscent of Dow Chemical, Nippon Metal and JD.com.
However the lifetime of a CSO didn’t get any simpler in 2023, amid useful resource constraints and rising expectations of what the sustainability operate ought to ship for the enterprise. Eco-Enterprise spoke to CSOs and sustainability consultants to get a way of the issues that saved the company conscience awake at night time this 12 months.
What’s a CSO really for?
Expectations for what CSOs must be delivering for the enterprise grew in 2023, because the operate ballooned in significance amid investor and client stress to lift company local weather ambition as governments dithered. However sustainability executives struggled with the right way to outline their function. CSOs can’t be all issues to all folks, and the sustainability agenda is changing into so broad and so numerous that it’s getting ever harder for CSOs to explain and outline what it’s that they do.
ESG backlash
Blackrock CEO Larry Fink has grow to be a lightening rod for criticism of ESG investing within the US. Picture: Stefan Wermuth/Bloomberg by way of Getty Pictures
The politically-motivated backlash towards environmental, social and governance (ESG) investing in the USA – which dragged the identify of Blackrock CEO Larry Fink by the mud and prompted him to cease utilizing the acronym – didn’t straight have an effect on many CSOs in Asia. However it didn’t make their lives any simpler. Significantly throughout price range conferences. Easy methods to achieve board approval for ESG when one of many world’s supposed main nations on company sustainability is headed within the different path?
The enterprise case for net-zero: On skinny ice
Many firms have made net-zero pledges with little understanding of the right way to get there, leaving a niche between expectation and actuality within the boardroom. Getting science-based net-zero targets accepted requires board, if not c-suite stage approval. However CEOs hardly ever come to the desk with an understanding of the monetary dynamics or the ethical crucial of net-zero. In line with Valerie Phua, senior sustainability guide at Paia Consulting, a Singapore-based sustainability consultancy, one query CEOs could ask is whether or not they should purchase all of the renewable vitality certificates (RECs) or carbon credit the corporate wants one 12 months earlier than their goal net-zero 12 months – as a result of RECs and carbon credit are less expensive than vitality effectivity measures and onsite renewable vitality. What has shifted the needle most for web zero ambitions this 12 months has been the prospect of income loss attributable to rising buyer expectations, and reputational injury, Phua mentioned. CSOs that make an efficient enterprise case usually tend to safe the funding wanted to decarbonise enterprise operations, she says.
Competence greenwashing
Maybe the most typical gripe amongst CSOs this 12 months is hiring from a restricted expertise pool wherein candidates declare to have mastered a fancy and always altering area after occurring a six-week course. Certain, everybody bigs-up their CV. However there are few sectors in current historical past which have produced so many in a single day consultants. This can be a explicit concern in Asia, the place industry-watchers say folks have been promoted too shortly into senior roles with little or no sustainability expertise, leaving them uncovered in board conferences when they’re requested to justify their existence.
Geopolitics
As if CSOs didn’t have sufficient to fret about. The Ukraine conflict and tensions between China and the USA wormed their manner into boardrooms this 12 months, prompting some sustainability consultants to recommend that an additional “G” must be added to ESG: Geopolitics.
The Science Primarily based Targets Initiative
John Haffner (proper), deputy director for sustainability at Hong Kong property developer Dangle Lung Properties, spoke on behalf of actual property corporations in opposition to SBTI’s proposed new guidelines on the ReThink occasion in October. Picture: ReThink
The gold customary for decarbonisation target-setting misplaced a couple of CSO pals in 2023, significantly in Asia. Hong Kong’s actual property sector lobbied towards a proposed SBTi rule change that will have meant buildings corporations in Hong Kong – and elsewhere in Asia – couldn’t rely carbon-cutting measures reminiscent of shopping for RECs and clear vitality energy buy agreements made abroad of their net-zero calculations – an enormous downside for firms in jurisdictions with fossil fuels-based grids with a restricted provide of RECs. SBTi appears to have relented in the newest model of its constructing sector steering, and can now permit firms to make use of both location- or market-based accounting for Scope 2, or oblique emissions from the electrical energy they use. Even so, many firms in Asia struggled to get their net-zero targets accepted by SBTi in 2023, and really feel that the organisation favours Western companies which have the luxurious of cleaner grids. Others say SBTi is true to maintain pushing firms to attempt more durable to align with the Paris Settlement’s 1.5 levels Celsius objective, and never depend on low-cost and simple strategies to decarbonise.
Greenwashing and greenhushing
One of many largest fears any self-respecting CSO has is getting accused of greenwashing (see our story on the manufacturers known as out for greenwashing this 12 months), significantly when it’s unintended. CSOs don’t wish to greenwash, however poor alignment with the communications division – which in Asia is usually the place the sustainability operate is parked – exposes manufacturers to greenwashing threat. Fairly than threat the reputational injury of getting known as out, many manufacturers most well-liked to not say something in any respect about their sustainability credentials this 12 months. However “greenhushing” stunts company transparency, dilutes the corporate’s potential local weather affect and deters opponents from elevating their recreation. One theoretical different to greenhushing that emerged this 12 months is “company vulnerability”, the place firms are trustworthy about their failings and missteps in sustainability reviews. Eco-Enterprise has but to see any proof of this idea coming into follow.
Scope 3
Getting your personal home so as is tough sufficient, however decarbonising the total worth chain – which accounts for the lion’s share of emissions for many corporations – was a thorn within the facet of CSOs this 12 months. Significantly oil and gasoline firms like Malaysia’s Petronas, which mentioned it wanted regulatory assist to mandate emissions reporting throughout its worth chain. “It’s not that we’re ignoring Scope 3 as a result of we do perceive that it will be important,” mentioned the corporate’s chief monetary officer Liza Mustapha in September. “The problem is knowing the right way to measure somebody (else’s) utilisation of your product and … not having the ability to management how they use your product.” Whereas two-thirds of the world’s largest firms now have a net-zero goal, simply over a 3rd (37 per cent) of net-zero targets totally cowl Scope 3 emissions, based on Internet Zero Tracker.
Sustainability occasions
Whereas CSOs benefit from the networking, espresso break tittle-tattle and after-show cocktails, some do get the sinking feeling that sustainability occasions are echo chambers that preach to the choir. “The data swirls across the room, however doesn’t depart,” one Malaysia-based sustainability skilled informed Eco-Enterprise. “Innovation is required within the occasions area to get the issues we face and the right way to remedy them into the mainstream. Occasions are at present not arrange to do this,” she mentioned.
Regulation
Maintaining with policymakers, significantly these based mostly in Brussels, preoccupied CSOs in 2023. The European Union’s Deforestation Legislation (EUDR) gave CSOs working in forest-risk commodities reminiscent of palm oil, pulp and paper and soy a lot to consider, reminiscent of whether or not the EUDR undermines the function of certification in weeding deforestation out of provide chains. The EU’s proposed ban on the time period “carbon impartial” with out information to again up such claims additionally made CSOs with unconvincing “aspirational” decarbonisation plans really feel uneasy.
The voluntary carbon market
A number of articles within the Western press butchered the credibility of the voluntary carbon markets this 12 months and made low-cost and simple methods for companies to decarbonise a complete lot harder to justify. Environmentalists, nonetheless, argued that carbons markets have been in dire want of a shake as much as carry some much-needed accountability to the emissions-reducing claims of suspect carbon tasks.
Alphabet soup
The variety of sustainability requirements, taxonomies and frameworks CSOs should navigate as they work in the direction of sustainability targets is befuddling for many – despite the fact that there are some indicators of market consolidation, such because the merger of Sustainability Accounting Requirements Board (SASB) and the Worldwide Built-in Reporting Council (IIRC). CSOs really feel they’re spending an excessive amount of time on this, somewhat than doing necessary issues like really serving to their enterprise to decarbonise.
Knowledge digging
One of many trickiest issues about regulated sustainability reporting, CSOs say, is getting their palms on dependable information. Ensuring sustainability information is collected comprehensively and precisely is laborious and requires the gentle abilities of a diplomat to persuade numerous firm departments into coughing up the mandatory info whereas they’re busy doing their day jobs.
COP
COP28 President Sultan Al Jaber and contributors applaud on the UNFCCC formal opening of COP28 in Dubai. Picture: COP28 / Christopher Pike
Christiana Figueres, one of many architects of the Paris Settlement, mentioned in September that the annual United Nations Convention of Events (COP) have grow to be “a circus”, and instructed that the ambition of the local weather conferences might be higher achieved by getting issues finished at house. As for CSOs, some say that COPs are usually not properly arrange for the discussions they should assist their companies decarbonise and do their jobs higher – so can’t justify the carbon footprint of flying half away all over the world to witness politicians disagree over a single line of textual content that doesn’t change a lot.
Consultancies
Eye-wateringly costly and what worth do they actually add? Certain, some consultancies are helpful for serving to firms chart the suitable decarbonisation pathways, meet regulatory necessities and write sustainability reviews, however some CSOs surprise if the hundreds, typically tens of millions they pay a consultancy couldn’t be saved by bringing the experience inhouse.
Have we missed any? Tell us by writing to information@eco-business.com. This story is a part of our 12 months in Evaluation sequence, which journals the tales that formed the world of sustainability in 2023.
