7 ESG Trends for 2023

7 ESG Trends To Watch For In 2023

7 ESG Trends To Watch For In 2023

Every year that passes brings new businesses, technologies, and trends.

 

As companies, governments, and consumers become increasingly aware of their social and environmental impact, ESG (Environmental, Social, and Governance) initiatives have become an important part of corporate strategy.

 

To help you keep pace with the rapid evolution of ESG trends, the Sandpaper team has put to together a list of the four key trends that we believe will dominate the ESG sphere in 2023.

 

So, without further ado, let’s dive in.

1. Changing Sustainability Disclosure Standards Will Force Companies To Adapt

This past year brought a series of major changes in the form of more stringent regulations regarding sustainability disclosures.

 

The European Financial Reporting Advisory Group (EFRAG), the U.S. Securities and Exchange Commission (SEC), and the International Sustainability Standards Board (ISSB) all issued  proposed changes to the worldwide standards for ESG disclosures in 2022. These proposed changes require more detailed, uniform reporting on ESG policies and practices, which will need to be implemented in the coming year.

 

Companies that plan to remain competitive in the years ahead will need to adjust their ESG reporting structures quickly and efficiently. Agile management, clear communication, and thoughtful decision-making will be the traits that set the best apart.

2. Consumer Pressure Will Continue To Increase

Over this past year, we saw the biggest single-year increase in consumer demand for sustainable products and services.

 

According to a survey of 10,000 global consumers conducted by Statista, roughly 40% of consumers were making an effort to buy more sustainably in 2022 than they did in 2021. This finding is supported by a larger body of research indicating that consumer demand for green products is on the rise.

As consumers become more aware of the social and environmental impacts of their purchases, companies will need to demonstrate that they are taking strong measures to protect the environment, promote human rights, and combat inequality.

3. Corporate Board & Executive Accountability Will Become a Key Issue

This past year, we’ve seen an increasing number of companies come to the realization that a lack of accountability at the highest levels of management is a recipe for empty promises and performative action.

 

In response, we’ve seen a growing number of companies enacting “boardroom accountability” initiatives, in which executive compensation is tied to ESG targets and policies. Whether it’s base pay or bonuses, more companies are beginning to realize that executive accountability is a necessary component of any successful ESG program.

In 2023, we expect more companies to continue to adopt these types of initiatives in response to growing public demand.

3. Scope 3 Reporting Will Become the Norm

Scope 3 reporting is the process of tracking and reporting on an organization’s indirect emissions—such as those resulting from employee travel, waste disposal, the use of products or services, etc.

With an increasing number of companies setting science-based targets to reduce their greenhouse gas (GHG) emissions, Scope 3 reporting has become a critical tool in helping organizations understand and track their progress towards achieving these goals.

 

While Scope 3 reporting has been around for some time now, we anticipate that it will become the norm in the coming year. As a result, organizations of all sizes should begin to develop strategies for capturing and tracking their Scope 3 emissions.

4. Sustainable Banking & Investment Will Become a Dominant Market Force

The banking industry has long been criticized for its lack of transparency and accountability, but over the past year we’ve seen a growing number of banks making public commitments to sustainability.

 

In addition, more investors are incorporating ESG criteria into their investment decisions. This trend is expected to continue in 2023 as public pressure mounts for companies and financial institutions to take meaningful action on sustainability issues.

 

We expect to see an increasing number of banks committing to sustainable banking practices, such as:

 

  • Incorporating ESG criteria into loan decisions and product offerings
  • Increasing investments in sustainable businesses and technologies
  • Providing more transparency on their environmental and social impacts

 

The net result of these actions will be a financial system that is better equipped to support the transition to a sustainable economy.

5. The Importance of Employee Engagement & Education Will Be Recognized

The success of any ESG program depends largely on the willingness of employees to participate and understand their role in making a difference.

 

This year, we expect to see a renewed focus on employee engagement and education. Companies should invest in programs that provide employees with the necessary tools and knowledge to understand their organization’s sustainability goals, as well as their own role in helping to achieve them.

 

Organizations should also provide employees with opportunities to provide feedback and offer suggestions for improvement. This type of open dialogue can help to ensure that employees are invested in the company’s sustainability initiatives, and also that they understand their importance.

6. Technology & Data Will Play A Key Role

The role of technology and data in driving ESG performance is only growing.

 

Data-driven solutions such as predictive analytics and emissions tracking tools are also expected to become more widely adopted in 2023. These technologies can help organizations accurately measure their ESG performance and develop strategies for making improvements.

 

Overall, we expect technology and data to play an increasingly important role in helping companies track, manage, and report on their ESG performance in 2023.

7. Partnerships & Collaboration Will Continue to Grow

In the ESG space, partnerships and collaborations will remain a key driver of progress.

 

Organizations should seek out opportunities to collaborate with other like-minded companies on sustainability initiatives. These partnerships can help companies share best practices, gain access to new resources and technologies, and pool their collective knowledge and expertise.

 

We also expect to see an increase in the number of public-private partnerships focused on driving progress towards achieving sustainable outcomes. In 2023, these collaborations will become increasingly important for helping to ensure that the transition to a sustainable economy is successfully achieved.

Stay Ahead of the Curve

The ESG landscape is changing rapidly, and 2023 promises to be an important year for sustainability initiatives. By staying on top of trends and emerging challenges, organizations can better prepare themselves to meet their ESG goals in the coming year. 

 

At Sandpaper, we specialize in helping companies across the MENA region design and create effective sustainability reports that measure and communicate their ESG performance.

 

Contact us today to learn more about how we can help you stay ahead of the curve in 2023!