Sancroft 2023 predictions

Sancroft Team
By Sancroft Team

We asked the Sancroft team what they think should be top of business sustainability agenda in 2023. Here’s what they said:

Penalties for greenwashing – Charlotte Miller, Consultant

I predict that 2023 will see a marked increase in legal penalties associated with greenwashing (Black Mountain and Danone representing the first casualties). In the finance industry this is likely to result in a sharp decrease in ESG products on the market, as firms scramble to reassess what sustainability and ESG means for them. Businesses need to ensure that robust and appropriate sustainability practices, approaches, and frameworks are in place to support genuine sustainability and ESG claims.

Actionable climate change adaptation plans – Noëlle Smits van Waesberghe, Analyst
Sancroft Noëlle Smits van Waesberghe

While still at an early-stage relative to mitigation plans, I think that 2023 will see an increased focus on the development of actionable climate change adaptation plans. Governments and investors will increasingly be looking to finance adaptation initiatives following the launch of the Adaptation Agenda and the historic agreement on loss and damage at COP27. Businesses must collaborate with suppliers and the local communities they rely upon to make their value chains more resilient and manage the risks of climate change impacts which will arise even if warming is limited to 1.5°C.

Demand for sustainability-related skills – Judy Kuszewski, Chief Executive

The demand for sustainability-related skills in business has been on a sharp rise for the past couple of years, but it will be heading into a new phase in 2023. The trends may be clear, but the solution to the challenge is complex: sustainability skills are highly varied, affecting every function in every industry in unique ways. We will be seeing businesses increase their efforts to identify the subtle leadership skills, creative problem solving and integrative mindsets that sustainable success requires – with diverse teams and unconventional career paths a welcome result.

The evolving ESG reporting landscape – Ilkka Saarinen, Analyst

In 2023 and beyond, I see the evolving ESG reporting landscape forcing investors to up their game on data relating to ESG risks and impacts. In the EU, the Sustainable Finance Disclosure Regulation (SFDR) will require investors looking to label their funds ‘green’ to pay close attention to the technical data requirements to evidence this. Firms should ensure they have a thorough understanding of this, as well as the right processes in place to collect and report data to prepare for SFDR and other upcoming reporting requirements.

A growth in green bond issuance – Alex Miller, Consultant

Despite a lull in the second half of 2022, I see a continuation of the growth in green bond issuance which preceded, particularly of those with energy efficiency related use of proceeds. The drivers are twofold:

  1. Insulation from volatile energy costs increases the business imperative for undertaking such projects whilst being a key aspect of any corporate sustainability strategy; and
  2. The significant cost savings that result from these projects dramatically reduces their payback period and thus improves the financial attractiveness to investors.

With an uncertain macroeconomic backdrop, such investment opportunities should entice investors.

A spotlight on biodiversity – Erika Furbert, Senior Analyst

COP15 has brought biodiversity up the businesses agenda with the expectation to positively contribute to global biodiversity goals. Moving into 2023, I predict we will see a growth in tools and products in the market. Certified biodiversity credits, one example, are an economic instrument used to finance net-positive biodiversity gains. Unlike carbon or biodiversity offsets which compensate for negative impacts, biodiversity credits allow companies to fund long-term conservation and restoration beyond compensation. Biodiversity credits – while not a silver bullet solution – are one mechanism that will help deliver nature-positive outcomes.

The expectations of mandatory due diligence – Kwame Taylor, Analyst

I think that 2023 will see mandatory due diligence legislation putting an increased spotlight on companies globally. The proposed Corporate Sustainability Due Diligence Directive is just one example with mandatory due diligence at its core. The German Supply Chain Act, which came into force this year, will require companies to ensure human rights are respected throughout their supply chains. It is clear companies risk legal and reputational consequences if they do not undertake assessments to identify risk, mitigate their impacts, and report on their management approach.

An understanding of sustainable crop production – Ailsa Dormon, Consultant

In 2023 I believe the agricultural industry will be under increasing pressure to provide for a growing population and take mitigating action against key sustainability issues. However, low profit margins and increasing regulation will slow the industry’s progress. Businesses need to understand how their supply chains depend on the sustainable production of crops. This will help ensure their effectiveness in identifying opportunities to add stability to operations, increase profit margins, and reduce the impact of products.

Progress on the EU taxonomy – Benedict Greenway, Analyst
Sancroft Benedict Greenway

Last year, entities published EU Taxonomy disclosures. For some, this was mandatory, for others, voluntary. In 2023, more entities will be required to report. Many of the first disclosures we saw in 2022 were narrative in nature and there was confusion interpreting the literature and presenting the data. As more entities have a second effort at reporting in 2023, following regulator feedback, we will gain a better understanding of how to disclose effectively. Entities that fail to learn from the example of their (or others’) initial disclosures will face scrutiny and increased regulatory, reputational, or financial risk due to misguided reporting.

Bring on the disruptors – Felix Gummer, Director

As traditional investments and trade networks falter, I say: ‘bring on the disruptors!’  The US’s Inflation Reduction Act has set the pace, the EU is talking of little else, and the UK Labour Party are to make it the core of their election bid.  However, with all European governments strapped for cash and markets increasingly cautious, it remains to be seen how and if this talk will be converted into real progress.

Inequalities in the private sector – Matt Thorogood, Senior Analyst

Mirroring the difficulties which have led to public sector strikes in the UK, I think that the prolonged ‘cost of living’ crisis and recession are likely to lead to exacerbated inequalities within the private sector. Business leaders should be aware to this, ensuring they retain their human capital through the economic downturn by prioritising the ‘E’ (equity) in DEI to ensure that staff do not leave for fairer employers. This may include a more back to basics approach to benefits as staff struggle with rising costs.

Tailored for impact – Siân Wynn Jones, Senior Consultant
Sancroft Siân Wynn-Jones

Reflecting the adage that ‘one-size fits no-one’, I predict that 2023 will be the year that more companies look inwards and reflect their uniqueness in their sustainability ambitions and actions.

Strategic tools such as double materiality and purpose require business leaders to better understand and articulate the role of their specific organisation and its potential to thrive in and support a sustainable future.

A bespoke approach to ESG means solutions are right-sized, right-placed and right-paced. This means results are delivered faster and are more long-lasting, leading to greater impact.

What do you think? Did we miss any? Get in touch here.

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