When it comes to implementation - technology will be at the forefront.
2023 is bringing with it an interesting era of global business. Armed with promises of Net Zero goals and an increased sense of climate consciousness – companies will look to readjust to a post-covid world and a workforce that is young, modern, and socially responsible.
Here are a few of the ESG trends that are expected to gain momentum in 2023. As the global demand for sustainable practices increases, it’s important for companies and investors to stay informed about the latest ESG trends and to take action to align their strategies with these trends.
1. Climate-focused Boards
A study among UK-listed companies showed that boards that practice better governance end up with better results when it comes to their emission reduction (Source: MSCI ESG Research, 2022). Boards that include directors with experience in climate change and sustainability may become more favoured among investors due to their ability to bring forth results. It will be important in 2023 to see how companies, especially Net-Zero target companies are able to stay true to their trajectories and to what extent the board leadership will affect these results.
2. Greater Corporate Transparency
Companies are expected to be under increasing pressure to be more transparent about their ESG performance and to disclose more information about their environmental and social impacts, with the most recent effort to standardise disclosure practices coming from The GCC Exchanges Committee. With multiple countries and stock exchanges mandating members to disclose on ESG practices – this is an undeniable trend and all eyes will be on institutions that have yet to announce such mandates.
3. Accelerated Use of Technology in ESG (Implementation and Reporting)
When it comes to implementation – technology is at the forefront. From mining companies using AI to collect, analyse and provide new insights that help the company and the investors to make climate-conscious decisions to the anticipation of AI making data centres more carbon efficient, advanced tech is now a backbone in providing ESG solutions. Besides this, companies are also expected to increasingly use technology to improve the accuracy and transparency of their ESG reporting. This could include the use of automation and data analytics to collect, analyze, and report on ESG data.
4. Increased Scrutiny of Supply Chains
Companies are expected to face increased scrutiny of their supply chains in 2023, as investors and consumers demand greater transparency and accountability. This could include increased attention to issues such as labour rights, human rights, and environmental impacts. Using blockchain to track faults in supply chain operations right from raw material sourcing to production to last-mile delivery, all the way to waste management will be a prime focus.
5. Labour, Profit and Cost of Living
The labour market has been difficult to manage at a global scale in the post-pandemic world. With most countries facing inflation in the cost of living and rising worker wages, several companies (especially in the service sector) have seen a direct hit to their profits. With increasing pressure for labour reform for both local and international employers, it will be interesting to watch how companies manage workforce retention and labour law compliance while also not letting their profits and ESG targets take a hit.
Trends in corporate responsibility are constantly evolving and tied closely to global needs toward climate responsibility, national and international norms and social justice awareness. Several organisations that approached ESG as a simple compliance requirement have pivoted to treating ESG as an important vertical to stay in the good books of new-age consumers and conscious investors. The upcoming COP28 in UAE is also expected to outline the needs of the hour and the innovations in achieving development and climate change goals.
