Sustainable Development: The time of beautiful promises is now really over

During Climate Week in New York, the global focus was on sustainability and environmental issues. This week featured numerous discussions and events centered around climate change, highlighting the importance of addressing this pressing issue. Overall, Climate Week served as a crucial platform for raising awareness, sharing ideas, and fostering collaboration among various stakeholders committed to advancing the sustainability agenda and tackling the challenges posed by climate change.

It was a busy week in New York as many world leaders gathered for the UN General Assembly, coinciding with several other significant events, including the Summit for the Future and Grow Africa. During this time, Climate Week took a prominent position on the agenda, making it the largest climate meeting outside of the COP (Conference of the Parties) events.

New York Climate Week attracts a diverse group of participants, including companies, financial institutions, and NGOs. Many of these groups convene outside the UN meetings in various hotels and boardrooms across the city. For instance, on Monday, the World Business Council for Sustainable Development held a meeting attended by approximately 170 CEOs. Throughout the week, around forty events were organised, covering a wide range of topics related to sustainability.

These gatherings often involve scientists and representatives from NGOs, fostering rich discussions that aim to provide business leaders with new insights and practical strategies to enhance the sustainability of their companies. The ultimate goal is to accelerate efforts toward more sustainable practices across various industries.

Vulnerable chains

While Climate Week was viewed positively, it also highlighted significant concerns within the business community regarding the impact of climate change. Recent natural disasters, including tornadoes and floods, have underscored the vulnerability of companies to climate-related risks, emphasizing the urgent need for action.

While the Climate Week provided a platform for positive dialogue, it also served as a reminder of the pressing challenges that businesses face in addressing climate change and the importance of integrating sustainability into their core strategies.

Champions League of adjusting

The upcoming American elections on 5 November had a significant influence on discussions during Climate Week. The business community, known for supporting adaptation to climate change, is keen to continue pushing for sustainable practices. However, many NGOs are expressing concern about the potential outcome, especially if Donald Trump were to win the election.

One key issue is the future of the Inflation Reduction Act (IRA), a program that has so far been instrumental in providing substantial funding and incentives for sustainability efforts in the US. There is uncertainty over whether the IRA would continue in the same form under a Trump administration, as his previous policies were not as focused on climate initiatives.

Meanwhile, attention is also on how Europe will respond to the IRA. The European Union, under Von der Leyen, is working on a Green Industrial Deal, which is part of the broader Green Deal. This is seen as a critical step to keep Europe competitive in the growing global focus on green industries. European companies are calling for stronger policies to boost their competitive position, especially since Europe sometimes seems to be caught between political and industrial interests more than the US and Asia.

Sustainable decisions

One of the key topics discussed during Climate Week was the Corporate Sustainability Reporting Directive (CSRD), which is a new sustainability reporting requirement for companies. This directive is designed to make businesses more transparent about their environmental, social, and governance (ESG) practices by requiring detailed reports on their sustainability efforts.

Large companies have the resources to comply with these reporting obligations and can actively work on improving their sustainability strategies. For small companies, however, complying with the CSRD is much more challenging due to limited resources and capacity.

Companies must not view the CSRD as merely a tool to meet the minimum legal requirements. Instead, they should use it as an opportunity to make better, faster sustainable decisions, which could help them gain a competitive advantage by becoming more sustainable and innovative.

There are concerns about whether the CSRD alone will be enough to drive a meaningful sustainability agenda. Without strong support from capital markets, the process of transitioning to greener practices might be slow. Investors need to play a key role in accelerating this shift. A critical question remains: Will investors actually consider the CSRD reports when making investment decisions? If they do, it could create stronger incentives for companies to improve their sustainability efforts.

In essence, while the CSRD is a significant step towards greater transparency and accountability in corporate sustainability, its impact will largely depend on how seriously capital markets and investors factor it into their financial decisions.

Anti-ESG

In Europe, companies that fail to meet their sustainability targets are often placed under scrutiny, with regulators and the public expecting them to take responsibility. However, the situation in the US is quite different. There, sustainable companies are sometimes criticized or vilified for being "too green," a sentiment driven by what’s called the anti-ESG movement.

ESG and sustainability have become highly politicized and polarized in the US. Some groups oppose ESG efforts, viewing them as politically motivated or detrimental to business, which has led to companies being accused of focusing too much on green practices at the expense of other priorities. This polarization creates a challenging environment for businesses that want to embrace sustainability.

Despite this political divide, it is essential for all parties to recognise that climate change poses serious financial risks to businesses, especially in their supply chains. As the impacts of climate change grow, these risks are becoming more immediate and could affect business operations and profits. Framing sustainability as an economic issue, rather than a political one, may help bridge the divide and encourage action. When businesses and politicians see sustainability in terms of financial risk, it becomes a matter of money and economic survival.

In Europe, there is generally less opposition to ESG, although populist parties do have some influence on the debate. While Europe is more focused on holding companies accountable for sustainability, it is not completely immune to the political influences seen in the US.

China Carbon Accounting

In Asia, particularly in countries like China, sustainability is not as widely debated as it is in the West. Instead, it is viewed as a natural progression towards the future.

In China, the government takes a top-down approach to sustainability. When the government sets a goal, such as achieving a carbon-free industry, every CEO is expected to contribute to that objective. This directive-driven approach has led to rapid advancements in sustainability, including the rollout of carbon accounting at a pace that is hard to imagine in the West. Starting in 2027, around 17 million companies in China will be required to report on their carbon emissions, showing the country’s serious commitment to tracking and reducing its carbon footprint.

The EU is introducing some protectionist measures to protect its industries, but these are likely to be short-term solutions. The bigger challenge is ensuring that Europe remains competitive in the global market as countries like China push forward with sustainability at a rapid pace.

Sustainability is no longer just about environmental symbolism (like saving the polar bear); it has become a crucial element of economic competitiveness. Governments and businesses in Asia see it as an essential part of future growth and development, not just an environmental necessity.

Time of promises is over

The media often highlights a growing trend that the traditional capitalist system is being forced to evolve, with companies needing to become more sustainable and pay greater attention to nature and society. While this shift is still encouraged, optimism around it has been shaken in recent years due to factors like wars and economic uncertainty.

The transition to sustainability is not linear. While many companies are working towards becoming more sustainable, the general feeling is that progress is too slow. Scientific reports—such as those discussed in New York—are becoming increasingly alarming, especially when considering the impact of climate change on weather patterns.

Despite these challenges, no company has completely abandoned its sustainability goals. Instead, they are becoming more pragmatic, recognizing that while financing and implementing sustainable practices can be more difficult than initially expected, these efforts must continue.

In the past, many companies made bold promises about sustainability, but now the focus has shifted. The era of merely making promises is over; now, it’s about seeing whether these promises can actually be kept. There is a growing emphasis on action and accountability, as companies can no longer afford to delay real progress.

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