Cop26 represents a real breakthrough on many levels. The analysis during the first week that the various pledges would cumulatively bring the anticipated 2100 temperature rise down from 2.7 degrees to 1.8 degrees presented clear evidence that gatherings such as these really can make a difference. The cause is not lost, the case is not hopeless, concerted global action really can halt and reverse climate change.
But we now need to get real on sustainability. Solid strategy and attack plans are necessary. We can’t just wait for change to happen. The discussion and attendant pressure to act is playing out on the entire global system, at the same time. We are all on the same basic adoption curve, which will create untold disruption and pressure on all our societal systems, from finance to talent to raw materials to innovation and technology.
All of this is happening against a backdrop of human suffering, climate migration, storms, floods and, unfortunately, loss of life, thus raising the stakes for action and reducing further any space for the laggards.
Adaptability and agility are key for business – but so too are data-driven strategic planning and execution.
Amid all of the noise and uncertainty, we see a number of key trends emerging that we can expect to permeate business action in 2022.
1. The year of the sustainability strategy
2022 will be the year of the sustainability strategy. Every organisation regardless of size or sector will need to have a sustainability strategy. And it will be just as important as their core business strategy; in many case it will be central.
This will not be an option. Banks, investors, customers, consumers, citizens, regulators and governments will all demand it. Right now the burden of sustainability reporting frameworks is being kept away from small and medium-sized enterprises. But as suppliers to big companies, these entities too will find themselves needing to pin their sustainability colour to the mast or risk losing contracts.
In the wake of Cop26 it is no longer enough for organisations to make vague commitments to sustainability in mission and vision statements, or to include a few metrics in their annual reports indicating how much energy they have saved and the waste they have eliminated.
Organisations will have to specify their short, medium and longer-term targets, what they are based on and how they align to the global goals – and explain how they are going to reach them. They will also have to explain how they are planning to adapt to global supply chain disruptions, which will arise as countries pursue their own sustainability goals in line with the pledges they have made.
2. Data-driven integrity
One of the most profound outcomes of Cop26 will be a heightened sensitivity to the veracity of sustainability claims. More people than ever before will take responsibility for calling out greenwashing wherever they see it.
One of the key messages from Cop26 is that individuals can make a difference, and that will be taken on board by people around the world. If they see greenwashing, they will call it out. That will not only be an issue for organisations deliberately misleading the public; it will bring forward the case for widespread independent verification and assurance requirements.
Organisations establishing a sound basis for their sustainability claims will be a key theme in 2022, and data will form an integral part of that process. That will require organisations to put in place systems capable of capturing the data, which can then be subject to independent verification.
3. A single source of truth for carbon
The time for comparing climate apples and oranges is well and truly at an end. If we have learned one thing from Cop26, it is that there must be a common language when it comes to climate action.
As we move towards the implementation of the Cop26 climate pledges, there will need to be agreement on a single means of measurement. Data integrity will be of the utmost importance – and there can be no room for manoeuvre on that.
In 2022 we will see the audit community move to develop new generally accepted metrics that can be used to properly measure and compare the climate impact of different actions.
4. A changed FDI agenda
2022 will see countries around the world scrambling to take the green high ground. If 2021 was the year of global tax reform and its impact on FDI, 2022 will be the year of sustainability. Global companies considering new locations will add climate credentials to their criteria.
Countries with a poor environmental score, unengaged in the Cop26 process, will find themselves falling down the list of preferred locations. On the other hand, countries that have embraced the Cop26 agenda will enhance their position and become more attractive to the growing band of businesses seeking to differentiate themselves through superior sustainability performance.
Countries such as Ireland must ensure that there is full alignment between the climate agenda and the actions it takes. Every single decision by Government must be seen to be in accordance with the climate agenda.
You can’t be half in and half out. Countries with clear and consistent sustainability strategies will be see the greatest flow of inward investment. Countries sending out mixed signals will lose out.
Decision time
Taken together, these trends are likely to take Irish businesses to places they have never been before – and possibly never expected to be. Business strategies will need to be reshaped and sustainability claims independently verifiable and measurable against global goals.
2022 will be decision time for many organisations. Either they wish to remain in business for the medium to long term or they stay the same – it won’t be possible to do both.