Sustainability & ESG insights December '22: Historic deal to protect Nature while the EU initiates additional Carbon Taxes.

??Via this monthly newsletter, we'll share more knowledge and content about what's arguably the most important domain of our generation: Sustainability and ESG. The goal is to inspire and share insights so each and everyone of us can make a difference in the Environmental, Social and Governance domain we call Sustainability.

Valuable ESG and Sustainability news of December '22

??In this months’ newsletter: 

• 99% of Public Companies expect to invest in ESG software the next 12 months;
• EU announces new rules requiring all recyclable packaging by 2030;
• Australia plans mandatory climate reporting;
• COP15: Nations reach ‘historic’ deal to protect Nature;
• Linking Executive compensation to ESG performance;
• EU now requires ships to pay for their carbon emissions;
• EU to implement a Carbon Tax on imports;
• Tokyo by 2025 will require solar panels on new homes;
• And more…

99% of Public Companies Expect to Invest in ESG Reporting Tech & Tools in Next 12 Months: Deloitte Survey

As shared by ESGToday.com, executives at large U.S. companies are rapidly increasing sustainability reporting efforts, with nearly all actively investing in ESG data and reporting technology and assigning new ESG-focused roles internally, to meet rising stakeholder demand and approaching regulatory requirements, according to a new survey released by global professional services firm Deloitte.

The growing focus on ESG encompasses investments in capabilities as well as human capital. The survey found that well over half (57%) of companies have already implemented a cross-functional working group tasked with driving strategic attention to ESG, with nearly all others (42%) planning to follow suit, compared to the earlier survey findings with only 21% having implemented such a working group.

Similarly, in order to address ESG data and reporting needs, virtually all (99%) respondents said that they were somewhat or very likely to invest in more disclosure-focused technology and tools in the next 12 months, and more than 80% reported that their companies have new roles or responsibilities to prepare for increased disclosure requirements.

The survey also found a significant increase in plans to seek external assurance for ESG disclosures, with 96% planning to do so over the next reporting cycle, compared to approximately three quarters in the prior study.

The study indicated that executives anticipate benefits from enhanced ESG reporting, beyond just meeting regulatory requirements. More than half of respondents expect tangible benefits including increased employee retention (52%) and improved ROI (52%), alongside intangible benefits such as stronger stakeholder trust (51%). Other key benefits included elevated brand reputation (49%) and risk reduction (48%).

Commenting on the survey results, Jon Raphael, National Managing Partner, Sustainability, Transformation and Assurance at Deloitte & Touche LLP, said:

“Sustainability, integrated with business strategy, is about unlocking value for a company and its stakeholders, as well as creating a sustainable future, where people and the planet prosper together.”

Click here to access the survey results.

EU announces new rules requiring all recyclable packaging by 2030.

The European Commission proposed new rules on Wednesday that will require the EU market to have all packaging be fully recyclable by 2030. These new rules are a way to reduce packaging waste through increased recycled content in plastic drink bottles and these rules set targets for reuse of single-use materials used for things such as online deliveries.

This new proposal or rules has three overarching objectives:

1. To prevent the generation of packaging waste and reduce it in quantity, restrict unnecessary packaging and promote reusable and refillable packaging solutions.
2. To boost high quality (‘closed loop') recycling: make all packaging on the EU market recyclable in an economically viable way by 2030.
3. To reduce the need for primary natural resources and create a well-functioning market for secondary raw materials, increasing the use of recycled plastics in packaging through mandatory targets.

According to the European Commission, “on average, each European generates almost 180 kg of packaging waste per year. Packaging is one of the main users of virgin materials as 40% of plastics and 50% of paper used in the EU is destined for packaging. Without action, the EU would see a further 19% increase in packaging waste by 2030, and for plastic packaging waste even a 46% increase”. 

Companies will be required to have a certain percentage of their products to consumers in reusable or refillable packaging along with some standardization of packaging formats.

Business travel, energy consumption in the spotlight as sustainability jumps up the agenda.

An article by Jada Jones at ZDNET based on research by Gartner, showing that investing in sustainable business practices can help protect companies from economic and political disruptions.

Sustainability measures will remain among companies' top three priorities during the next few years. Pressure from consumers and governments resulted in several major tech companies pledging to achieve net-zero carbon emissions within the next 15 to 20 years. 

According to a survey from tech analyst firm Gartner, 87% of business leaders aim to increase their company's sustainability measures. And according to the surveyed executives, 80% say they're going green because of pressure from customers. 

Following pressure from customers, 60% of executives say they feel pressured by investors to beef up sustainability initiatives, and 55% attribute this pressure to regulators. But a looming recession and political interventions that affect the prices of materials and energy are factors when a company considers its sustainability measures.

The top areas where survey respondents said sustainability programs are mitigating cost increases are energy consumption, business travel, and customer transactions.

"Sustainability enables businesses to cope with disruption," said Kristin Moyer, distinguished VP analyst at Gartner, said in a press release. "Economic uncertainty, geopolitical conflict, and escalating materials and energy costs are forcing businesses to re-examine all forms of expenditure." 

"This focus on essentialism, in combination with increasing stakeholder desire to see progress on environmental, social and governance (ESG) goals, creates new opportunities for organizations to grow while mitigating cost and risk."

Companies are particularly interested in investing in sustainability because it shields them financially from disruption, according to 86% of surveyed executives. Sustainability initiatives also decrease business costs, particularly energy consumption (65%) and business travel (42%).

Australia Plans Mandatory Climate Reporting for Companies.

The Australian government announced today the launch of a consultation paper on the development of a climate risk disclosure framework for businesses and financial institutions, with plans to make the reporting rules mandatory for large entities.

The consultation considers implementing the rules using a ‘phased’ approach, beginning as soon as 2024.

COP15: Nations reach 'historic' deal to protect nature.

As shared by BBC environment correspondent in Montreal, Helen Briggs, Nations have agreed to protect a third of the planet for nature by 2030 in a landmark deal aimed at safeguarding biodiversity.

There will also be targets for protecting vital ecosystems such as rainforests and wetlands and the rights of indigenous peoples. The agreement at the COP15 UN biodiversity summit in Montreal, Canada, came early on Monday morning. The summit had been moved from China and postponed due to Covid. China, which was in charge of the meeting, brought down the gavel on the deal despite a last minute objection from the Democratic Republic of Congo.

UN Secretary General Antonio Guterres hailed the deal and said: "We are finally starting to forge a peace pact with nature."

The main points include:

• Maintaining, enhancing and restoring ecosystems, including halting species extinction and maintaining genetic diversity
• "Sustainable use" of biodiversity - essentially ensuring that species and habitats can provide the services they provide for humanity, such as food and clean water
• Ensuring that the benefits of resources from nature, like medicines that come from plants, are shared fairly and equally and that indigenous peoples' rights are protected
• Paying for and putting resources into biodiversity: Ensuring that money and conservation efforts get to where they are needed.

Linking Executive Compensation to ESG Performance.

Research by ESGAUGE - ESG Intelligence & Analytics, Semler Brossy and The Conference Board show’s the lessons learned and insights for what’s ahead in regards to linking executive compensation to ESG performance. 

As companies address two fundamental and related shifts—the intensified focus on environmental, social & governance (ESG) issues driven by investors, employees, consumers, business partners, ESG rating agencies, and regulators, and the shift to a multi stakeholder form of capitalism—corporate boards are not only incorporating non financial matters into discussions of company strategy and business plans, but also increasingly considering ESG performance measures in incentive plans.

73% of S&P 500 companies are now linking executive compensation to some form of ESG performance, an increase from 66% the prior year.

Valuable insights are provided by this report:

GRI launches new Disclosure Standard for agriculture, aquaculture and fishing sectors.

The Global Reporting Initiative (GRI) announced the launch of a new disclosure standard for the agriculture, aquaculture and fishing sectors this week. These sectors have become the main area of focus based on their immense impacts across economic, environmental, and social dimensions. This includes impacts on climate change and biodiversity, food security, farming and fishing practices, and community engagement. According to GRI, the standard will increase the completeness and comparability of sustainability information for all organizations around the world involved in crop cultivation, animal production, aquaculture or fishing.

Biden-Harris Administration announces the first Federal Building Performance Standard.

This month, the Biden-Harris Administration announced the first federal building standards designed to reduce energy use while electrifying equipment and appliances in 30% of the building space owned by the Federal government by 2030. This announcement was partnered by the U.S. Department of Energy (DOE) announcing a proposal to electrify new Federal buildings and Federal buildings undergoing major renovations.

Last and certainly not least, to further drive home the cause, the State of California announced that it will be joining President Biden’s National Building Performance Standard Coalition that has committed to reducing the emissions of existing buildings. These three changes represent massive progress for the U.S. and will certainly have a ripple effect across the US.

EU now requires ships to pay for their carbon emissions.

Recently, the European Union added shipping to its carbon market. What this means, is now shipping vessels will be required to pay for their emissions, putting a financial incentive on being more environmentally conscious and forcing the entire sector to begin reducing emissions.

This deal, which was agreed to by lawmakers and negotiators from the 27-country block would all to the carbon market all carbon dioxide, methane and nitrogen emissions from maritime voyages within the EU.

This new change is set to go into effect in 2024. At that time, shipping companies will be required to purchase permits to cover 40% of their emissions. This will steadily rise each year, requiring 70% in 2025 and 100% by 2026.

It’s important to note, this new ruling also includes 50% of emissions that occur on international trips that start and end in the EU. To help fund these changes, negotiators on the deal agreed to dedicate revenue from the sales of these carbon permits to these emission reduction projects.

ISSB adding Biodiversity to reporting standards.

This month, at the United Nations COP15 talks in Montreal, Emmanuel Faber, the chair of the International Sustainability Standards Board (ISSB) announced that they expect to add in guidance for more transparency on biodiversity immediately after publishing their first climate rules in 2023.

This decision to add biodiversity comes after the board received strong feedback regarding the connection between climate, natural ecosystems and a just transition. The goal now is to do incremental updates to the core standards as soon as they’re released.

“We have decided that we will immediately advance work to build from the climate standards, which should be ready in the next few months, to extend that immediately to the connection to natural ecosystems, deforestation, biodiversity and the connection to the just transition.”

- Emmanuel Faber, chair of the International Sustainability Standards Board

Tokyo by 2025 will require solar panels on new homes.

In the first mandate of its kind, the Japanese capital’s local assembly now requires all new houses built in Tokyo by large-scale homebuilders after 2025 must install solar panels. This mandate requires around 50 major builders to equip any new homes of up to 21,500 square feet with renewable energy sources, mainly solar panels.

According to Tokyo Governor Yuriko Koike, just 4% of buildings in the city can currently have solar panels. The hope is that with this new mandate, Tokyo will be able to halve their greenhouse gas emissions by 2030 as compared to the 2000 levels. With Japan currently standing in 5th place as one of the worlds largest carbon emitters, there truly is no time to waste as stated by Risako Narikiyo, a member of the local assembly.

EU to Implement a Carbon Tax on Imports.

Lawmakers at the European Parliament and members of the EU Council reached a late-night deal today on the establishment of a carbon tax on imported goods, aimed at equalizing the carbon price paid by European producers with those outside the EU, and avoiding undermining the EU’s actions to reduce product’s emissions with imports from countries with less ambitious climate policies.

Under the new agreement, the new EU Carbon Border Adjustment Mechanism (CBAM) will equalize the price of carbon paid for EU products operating under the EU Emissions Trading System (ETS) – the EU’s internal cap and trade carbon pricing mechanism – with that paid for products produced in other countries, with companies that import into the EU required to purchase CBAM certificates in order to make up the difference.

Canada to Require 100% of New Cars Sold to be Zero Emission Vehicles by 2035.

All new passenger cars, SUVs and pick-up trucks sold in Canada will be required to be zero emission vehicles (ZEV) by 2035, according to new proposed regulations announced today by Minister of Environment and Climate Change, Steven Guilbeault.

The announcement follows the release earlier this year by the Government of Canada of its 2030 Emissions Reduction Plan, outlining its strategy to achieve its interim climate goals to cut GHG emissions by 40% – 45% by 2030. The strategy included plans to ZEV sales mandates for light vehicles, alongside other transport electrification moves including funding for charging stations and infrastructure and for EV incentives.

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