The world is moving into a sustainable future, therefore incorporating sustainability is crucial for any business today. McKinsey's research shows that companies with high ESG (environmental, social, and governance) ratings are higher than the market average for medium and long-term earnings.
So, should businesses like you boost energy sustainability and become greener companies in the coming years? Check out these business trends to look out for in 2022!
Data is key. Evaluating the impact of a company's sustainability efforts is challenging regardless of size. The industry is moving to boost data analytics practices to ensure that businesses are getting results from their sustainability projects.
We see a demand for data-driven businesses that consider the social impact of every business decision. It's not enough to add the concept of sustainability— what matters is the execution of their data-based ideas.
Several companies have already started using Pirelli, the Italian tire giant. The company stores usage data recorded by tire sensors to apply better decisions about what inventory to stock to reduce waste.
Sustainable investing. Deloitte said that 53% of financial services firms believe that sustainability has become a central consideration to the organization. The ESG funds received $5.1 billion of investment in 2020, which means the trend is set to remain, generating new career paths for companies with a desire for energy sustainability.
Shareholders to stakeholders. There is a growing sustainability consideration globally. A BCG study found that 70% of people are now more aware of climate issues compared before the COVID-19 pandemic, while 40% look to adopt better sustainable practices.
This trend makes the customers, investors, and job-seekers check a businesses' sustainability efforts critically before working with them. With greater awareness of sustainability requires shareholders to balance with the needs of stakeholders, which include employees, consumers, and the local community.
Government promotes renewable energy use. The transition to energy sustainability through renewable energy will impact many organizations in 2022. In China, for instance, factories have started limiting electricity use to conform with renewable emission and energy target goals set by China's National Energy Administration.
The Singapore Exchange (SGX) will require companies to provide climate-related reporting and other disclosures on board diversity starting next year. All issuers need to provide climate reporting using a “comply or explain” basis in their sustainability reports from the financial year from 2022 onwards. Climate reporting will also become mandatory for issuers in the financial, food and forest products, agriculture, and energy industries by the financial year 2023.
Enhancing transparency. Business transparency is another growing trend. UN regulations have started requiring organizations over certain sizes to report on environmental data, which helps stakeholders see the efforts being made while holding organizations accountable.
There has been a discussion and reminder for disclosure in the recently concluded UN 2021 Climate Conference in November, which will undoubtedly spark more transparency efforts in the coming years.
From an investment point of view, one major challenge will be navigating the many different methods of ESG reporting. There are a couple of different standards for energy sustainability and general renewability practices.
Business leaders and startups looking to get into the renewable eras should research more about energy sustainability and start applying practical strategies to their business even without official requirements or apparent needs.