Thirty years ago, Greenpeace boats were in the TV news fighting to block commercial whaling ships. Environment activism was a niche pursuit.
In the 21st century, sustainability has become mainstream, and politicians, companies CEOs, and civil society, leaders, share their views about climate change.
A quick reflection on the 2019 situation and then five key trends explained.
2019: Black or White
- Facing climate change. In 2019, the world set a new high record, with 36.8 billion metric tons of carbon emissions released. These and other scientific pieces of evidence have sparked the level of civil society mobilizations with movements like Greta Thunberg’s Fridays For Future that demand rapid action from governments and companies.
“Change is coming, whether you like it or not. “- Greta Thunberg, Instagram, September 2019
- Optimism. In 2019, companies, investors, and countries have increasingly responded, committing to moonshot targets, creating policies favoring low-carbon economies, and aiming for net-zero emissions.
Since, after Christmas excess, many will need to think about how to achieve those targets, I decided to comment on five trends that most would agree will shape the world in 2020.
1. Renewable energy
Renewable power capacity will grow by 50% between 2018 to 2024, according to an IEA report (link). Solar Photovoltaic (PV) technology will account for 60% of that growth due to declining costs and favorable public policies.
Distributed on-site generation will play a key role with systems that will power our homes, offices, and industry directly and will return its excess power to the network in moments of low consumption.
Renewable energy could produce a third of total planet electricity by 2024, but as IEA’s highlighted, renewables’ deployment still needs to accelerate if we are to achieve long-term climate, air quality, and energy access goals.
Besides, the increasing popularity of Power Purchase Agreements (PPAs), where corporates sign long term contracts to promote renewable power plants, will make PPAs play a key role in accelerating the transition to a renewable-powered world.
Take away – Potential distributed solar PV boom.
2. Eco-friendly products and circular economy
Buyers in the past had little to no interest in how brands made their products or delivered their services. Nowadays, in a global market with pressure on customization, costs, and new styles, consumers expect products to be made responsible.
According to a study from Toluna, a consumer intelligence firm, 37% of consumers are ready to pay 5% more price for eco-friendly products. Besides the survey, found 51% of consumers declaring big brands the most suited for changing consumer behavior vs. 25% that feel that regulation is.
An example of this trend is the fashion industry, where new bio-based or recycled materials are currently entering many of the top brands’ latest products. An example is Reebok’s Floatride GROW bio-based sneaker, high performance with no oil-based materials.
Another example is healthy food, where consumers favor bio ingredients, sourced locally, and reduce/eliminate meat from their diets. An example, plant-based-meat burgers allow a veggie burger to taste like a meat burger. Food and beverage startups like Impossible Foods or Beyond Meat are chased by investors, venture capitalists, and major food companies that don’t want to miss a growing market.
Circularity, an economic system based on the principles of designing out waste by keeping products and materials in use (Ellen MacArthur Foundation), a concept that a few years was more a philosophy than reality, is already demonstrating reduces costs and environmental impact across the company and its supply chain.
Take away – Including an eco-designed product can potentially increase 5% your sales + reduce costs.
3. Sustainable finance
Environmental, social, and governance (ESG) investing, a niche product that was in the past only used by those who were more environmentally conscious, is becoming part of the investing strategies of major asset managers, green bond issuers, and even the more conservative pension funds.
In particular green bonds market is growing as companies and governments raise funds to cut fossil fuels. The main instruments are green bonds, $788bn since the first was issued in 2007, and an astonishing $108bn in the 2-year old instrument sustainability-linked loans, according to BloombergNEF.
More broadly, Sustainable Development Goals are going to create markets worth €12 billion by 2030, as highlighted by Antoni Ballabriga co-chair of UNEP-FI,
Due to ESGs links to sustainability performance (e.g., sustainable development goals SDGs), several standard control methodologies are emerging. The Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) are becoming as standard setters to avoid the risk of greenwashing, as noted by Reuters.
As an example, the European Commission in June 2019 incorporated in its guidelines the TCFD recommendations as part of its existing non-financial corporate reporting requirements. Besides, ESG indexes like CDP already included as part of their questionnaire, TCFD recommendations.
The future of Finance is financing the Future,” BBVA Group Executive Chairman Carlos Torres Vila
Take away: ESG growth is vital in financing projects for climate change mitigation, and investor increasing interest will push company boards for more transparent and ambitious sustainability programs.
4. Sustainable transport
Flights, shipping, and land transport account for 24% of total emissions (IEA‘s report). Reducing transport emissions pass for increasing efficiency, optimizing routes, using less emitting fuels, electrification, and compensating short term unavoidable emissions with quality offset projects. Three initiatives:
- Electric Vehicles (EVs), according to Deloitte‘s outlook, EVs sales are to increase from 2 million units sold in 2018 to 21 in 2030, where sales would account for 20% of total light vehicles market share. The forecast depends on battery price evolution, regulation, and demand.
- The clean cargo initiative, where 80 percent of the global container cargo carried collaborate to reduce their environmental impact, will be vital in driving transparency and innovation in the shipping industry.
- Increased pressure over flight emissions is making the industry to self-regulate its impact by measuring and limiting increased emissions with UN’s CORSIA program. Besides, some airlines, like EasyJet, announced going carbon neutral by investing 32 million dollars in an offsetting project to protecting against deforestation. Moreover, the company plans reducing emissions by eco-flying (better routes, new planes, removing weight), supporting the development of new technologies such as electric/hybrid planes, or reducing waste.
Take away: technology and consumer pressure to radically transform the transportation sector.
5: Water Stewardship
Climate change, increasing population, and industrialization are creating a global “water crisis,” putting at risk the socio-economic development, energy and food production, healthy ecosystems, and human survival itself.
Water stress is the biggest crisis no one is talking about,” claims Andrew Steer, president, and CEO of WRI.
The water crisis implies that sometimes water is just too little (severe droughts), too much (floodings), or excessively dirty (pollution and access to clean water).
The traditional approach has been to reduce corporate’s consumption while avoiding to pollute and contaminate water. While this approach is still necessary, this will not be enough to solve problems in the communities in which corporations operate.
The solution is to become a Water Steward. Water Stewardship is about taking care of the water that we do not own. Good water stewards recognize the need for collective responses to the complex challenges facing the water resources on which we all rely.
Since 2014, the Alliance for Water Stewardship Standard (AWS) has become the tool to reduce water-related risks along supply chains and operations. This standard aims at understanding the situation of the watersheds where corporates operate and engage with communities and local stakeholders to drive social, environmental, and economic benefits at the scale of a catchment.
Take away: water stewardship principles to reduce the water crisis
Renewable Energy, Eco-products, ESG investing, Transport, and the sometimes forgotten Water Stewardship are creating ample risks and opportunities as to shake the way companies operate not in 2050 but 2020.
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