What do we expect from 2023? What to look out for and prepare for in ESG

Companies continue to face an unprecedented number of challenges right on the cusp of a new year. With predictions of ESG trends popping up around every corner for companies to take into account, we've put together a roundup of what we think are the key ones.

Know all your emissions

Climate change continues to be a much-discussed threat. To the society, the planet and the economy. As Deloitte research shows, climate security risks are among the top business priorities. In the past year, the number of companies that have set a goal of achieving zero emissions by 2050 has increased. Unfortunately, these commitments often lack interim targets or plans which would include indirect emissions (the so-called Scope 3). In 2023, companies must rapidly decarbonise their entire value chain to meet the Paris Agreement targets. Despite urgent decarbonisation, however, many C-level executives still believe their companies can continue to grow, and many are preparing to accelerate their sustainability efforts in the upcoming year.

Forewarned is forearmed

One of the motivations to introduce new ESG strategies is surely the recent legislation and the obligations it imposes (see our recent article). The new EU rules will require ESG reporting at a level never seen before. It will affect a wide range of companies which have not been subjected to financial reporting so far. Businesses that are not directly affected by the new rules are, nonetheless, likely to feel the impact through their participation in wider supply chains. Which is why they also must be ready to disclose neccessary information. The reasons why it is the high time to start your preparations we summarized in this article.

It’s not only about the climate

In addition, governments will introduce new regulations on biodiversity protection and companies will increasingly be expected and even required to measure and disclose their impacts on nature. The final TNFD recommendations are expected to be published in September 2023.

Be transparent

Due to the increase in mandatory disclosures, the susceptibility of companies to accusations of false or misleading statements will most likely grow. Thus, in 2023, more and more companies will find themselves under scrutiny and pressure for transparency. This pressure will come from both outside and within organizations. There is no shame in embracing ambiguity - communicating where a business is heading but simultaneously acknowledging that its journey is not over, yet. Authenticity lies in the willingness to make and admit your mistakes.

Beware of greenwashing

One reason for possible accusations of greenwashing may be a heavy use of carbon offsets. Previously, carbon offsets were seen as a legitimate way for companies to demonstrate their sustainability and zero pollution commitments. Recently, however, this method has come under fire from critics because it represents an easy escape and a way for companies to absolve themselves of responsibility. All environmental claims made on products should soon start to follow the PEF (Product Environmental Footprint) calculation method, which does not allow offsetting emissions with offset credits.

Invest in your people

Last but not least, as a part of the transition to carbon neutrality, businesses will need to focus on retraining and investing in their workforce. In the times of fearce competition for new talent, a strong company values-aligned culture should not be underestimated. It is often the employees themselves who drive corporate initiatives towards sustainability. Management should, therefore, tap into this enthusiasm and e.g. offer employees climate training or involve them in the company's ESG activities in an organized and strategic way. Similarly, businesses should not ignore the conditions of workers in their value chains. It is not only their own workforce to take into consideration. For a sustainable strategy to work, the whole ecosystem — including suppliers, manufacturers and others — must be aligned. One of the biggest challenges ahead is bringing all the partners of a value chain together and having them commit to the same process and goal.