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Companies around the world are turning sustainability concerns from dialogue into action. They develop sustainable products and services and supply chain practices to increase revenue, satisfy investors and regulators, and improve reputations. Additionally, these practices help reduce our environmental footprint while saving costs related to waste, resources, and energy consumption.
Many corporate leaders also believe that sustainability can help deepen their organization’s sense of purpose in attracting and retaining a new generation of employees. This shift is being driven by increasing energy insecurity, rapidly changing regulatory and reporting standards, and investor appetite for environmental, social and governance (ESG) performance.
The COP27 UN Climate Change Conference in Egypt and the UN Biodiversity Conference COP15 in Montreal emphasized the need for companies to develop action plans to reduce human impacts on climate and nature. The Russian attack on Ukraine and the subsequent surge in refugees, rising inflation, and lingering concerns over the COVID-19 pandemic have also cast doubt on the government’s ability to ensure an inclusive society. Additionally, ESG investors and rating agencies are holding companies accountable for their sustainability records. Businesses are increasingly expected to play an active role in advancing efforts to ensure a sustainable and inclusive future for the next generation.
Looking ahead to 2023, IMD experts have identified a set of sustainability trends. These trends are driving further growth to create value, manage risk, and reconfigure entire industries and systems to respect our planetary boundaries and ensure a more inclusive and resilient economy. Drive business transformation.
From net-zero to climate-positive supply chains
Carlos Cordon, Professor of Strategy and Supply Chain Management
Many companies are working hard to reach their net-zero sustainability goals by 2050 or some other target date. This includes Scope 3 emissions. This is not from our own operations, but from the larger value chain. This is the hardest part, as typically 90-99% of a company’s greenhouse gas emissions are Scope 3. Along the way, many are also beginning to realize that it is impossible to reach net zero without looking outside traditional businesses. For example, a significant number of food companies cannot achieve net zero without having their suppliers (farmers) plant crops that are useless to the company’s supply chain but capture CO2. Along the way, they are now asking themselves whether they can go further and transform their supply chain into CO.2 Minus, “beyond net zero”. Not only do they ask these questions, but they also plan how they will pay off the CO2 “debt” the company has created since its inception.
Preparing your organization for sustainable transformation
Vanina Farber, elea Professor of Social Innovation
Patrick Reichert, Term Research Professor and Research Fellow
There is an urgent need for private capital to enter frontier markets to solve systemic grand challenges. But pushing the boundaries of what private capital can address and solve requires institutional transformation and readiness. For example, the humanitarian sector currently experiences a $32.3 billion shortfall between funding and what the United Nations needs. Can development organizations, governments, businesses and private financial institutions work together with the humanitarian sector to close the gap? We need alternative sources of funding to complement grant funding. However, to achieve these objectives, stakeholders must undergo organizational change. NGOs need to embrace more market-based approaches, governments need to provide stable policies and support the riskiest initiatives, and development finance institutions need to identify opportunities to provide additionality. . (i.e., focus on interventions that would not have occurred without their participation), and firms will need to be willing to work with traditional non-market players. We tend to think of collaboration as an ‘external task’, but the key to success lies in redesigning organizations that can align their incentives for influence and mobilize complementary resources to achieve it. is in
Next Generation Family Business Drives Data-Driven Sustainability
Peter Vogel, Professor of Family Business and Entrepreneurship
Ivan Miroshnychenko, Research Fellow, Term Research Professor
Family businesses will adopt new digital capabilities to manage sustainability data that guides sustainable business practices. Whether it’s reducing waste, optimizing supply chains, or reducing emissions, insights from sustainability data can help you achieve zero net emissions. A total of 60% of family businesses with strong digital capabilities have made sustainability a core part of their day-to-day operations, according to a 2021 PwC study. One of the main drivers of this is the next generation of family owners. A new generation of business owners and leaders are deeply concerned about the environment and striving for more sustainable and equitable business practices. Tech-savvy digital natives are willing to adopt a more data-driven approach to pave the way for a net-zero future.
War and Energy Shortages Accelerate Adoption of Energy Efficiency and Renewables
Natalia Olinek, Head of Sustainability
Russia’s invasion of Ukraine has disrupted energy supplies across Europe, creating energy insecurity, rising costs and strong incentives to invest in renewable energy sources. In the short term, companies of all sizes and industries will consider energy efficiency measures to reduce both costs and carbon footprint. To save on energy bills, companies are retrofitting buildings to prevent heat loss, implementing digital solutions for temperature control, turning off lights and equipment when not in use, and replacing old, inefficient equipment. To exchange. In the long term, this could lead to increased adoption of new types of energy and fuels. Policy incentives will also continue to emerge to stimulate innovation, help tackle climate change, and finance the transition to clean energy. Many companies see an opportunity to accelerate the transition to green energy and pre-war plans in Ukraine as renewables become more cost-competitive.
Accounting for nature and biodiversity in climate goals
Amanda Williams, Term Research Professor and Research Fellow
More than 40,000 species are at risk of extinction in the next few decades, according to the United Nations Progress Report on the Sustainable Development Goals, released in July 2022. The biodiversity challenge is closely intertwined with the climate crisis. Survival of vulnerable species and conservation of biodiversity can help mitigate climate change. This interrelated challenge provides a timely opportunity for companies serious about ambitious climate goals to explain climate goals as a means to net zero protection of nature and biodiversity. At COP15, the 2022 United Nations conference on biodiversity, leaders decided on a post-2020 global biodiversity framework and joint business goals. advocated Mandatory biodiversity assessment and disclosure by 2030.
Share your emotions for healthy, sustainable high performance
Susan Goldsworthy, Associate Professor of Leadership, Communication, and Organizational Transformation
A survey of over 3,000 executives since April 2020 found that half to two-thirds of leaders say they operate from a “sick” position rather than a happy one. Many feel overwhelmed, anxious, frustrated and irritable as organizations face many challenges in a world coping with ecosystem collapse, biodiversity loss, social fragmentation and economic decline. are reported to be on the rise. Management teams increasingly need to address these emotional challenges. One simple exercise can go a long way toward creating a more inclusive and productive environment. Taking a pile of sticky notes, team he members write down everything about themselves from a personal and professional perspective. They put them all on the wall and acknowledge and accept them. Then write down all the things you can influence and accomplish at your next meeting and stick those sticky notes on the opposite wall. Through this process, leaders co-create the conditions in which people can thrive in the face of adversity.
Luxury Goods Developing Sustainable Supply Chains
Stéphane JG Girod, Professor of Strategy and Organizational Innovation
In 2022, the luxury industry will continue to accelerate innovation to improve sustainability. Auto and fashion have had the most negative impacts on the environment and society, and those working in his two sectors have spearheaded the reversal of this trend. For years, automakers like Porsche have been working on the transition to electrification. Kering, on the other hand, launched his decarbonization journey in 2012. In the process, it introduced the first environmental profit and loss statement in luxury fashion and shared its methodology so other companies can learn from it and use it as a model. In watches and jewelry, the change started late, probably due to the long life cycle and low production volumes of these products. Extravagant actors, traditionally fearless competitors, have come to realize they need to work together to shift to positive impact. was established. This initiative, like The Fashion Pact, aims to promote sustainability in the sector. In 2023, luxury companies will accelerate their decarbonisation efforts by tackling Scope 3 emissions, and the idea of managing ESG risks will create an opportunity for strategic renewal and create new purposeful and positive A shift must be made to increasing brand desirability through influential business models. All of this requires a significant amount of investment and capacity building.
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