As 2023 draws to a close, certain themes are already emerging as top areas of focus for sustainability professionals in the new year. From fossil fuel phase-outs to increased litigation risks, from climate resilience to strengthened governance, CSO Futures dives into the main topics that are likely to draw the attention of Chief Sustainability Officers in 2024.
In 2023, the planet sent us an alarming wake-up call: during the hottest year on record, it became all but impossible to ignore the acceleration of climate change. Sure enough, more organisations than ever joined the net zero movement – at least in words.
But momentum has been too slow to build, and now the world needs much more than words. In 2024, companies’ climate targets will be scrutinised by regulators and civil society, who will focus particularly on action and delivery.
Strengthened sustainability governance
Turning targets into action requires the buy-in of senior executives and the board. And while corporate sustainability only recently became a core business priority, certain governance best practices are starting to emerge.
For example, it’s important to bring more sustainability skills and vision to boards of directors, and to hire Chief Sustainability Officers that can focus primarily on forward-looking strategy, rather than reporting.
Sustainability committees and pay incentives may also have their place, as long as they are backed by a real commitment to positive impact.
Join us on January 11 for an online panel discussion on best practices in sustainability governance. Speakers include Joanna Bonnett, Chief Sustainability Officer and non-executive director, Harry Broadman, finance executive, policymaker and NED, and Ron Soonieus, Senior Advisor at BCG.
A clear direction
On the global stage, COP28 provided CSOs with a mixed bag of hope and disappointment, but it was, at the very least, the first time world leaders put the need to move away from fossil fuels in writing.
At the same time, 110 countries pledged to triple renewable energy capacity by 2030. This is likely to be done by lightening the permitting process and incentivising corporate power purchase agreements – and it is already leading to some funding pledges by European banks.
Most companies already have an energy transition strategy that involves the uptake of renewables and a reduction in fossil fuel reliance: this will accelerate next year.
As they continue their efforts to decarbonise energy use, Chief Sustainability Officers should be aware of upcoming changes in Scope 2 emissions accounting, which may soon affect market-based decarbonisation strategies.
Demanding (but more standardised) reporting
Many new sustainability reporting standards and regulations were introduced in 2023, from the EU’s Corporate Sustainability Reporting Directive (CSRD) to California’s climate rules and the International Sustainability Standards Board (ISSB) IFRS S1 and IFRS S2 (which is being made mandatory in Brazil).
If 2023 was a year of new reporting standards, 2024 will be one of harmonisation and transition as the first reports start to be prepared. A recent study showed that less than half of sustainability disclosures are aligned with the CSRD, so Chief Sustainability Officers will likely be involved in streamlining the reporting process to ensure compliance with these new requirements.
Additionally, the Securities and Exchange Commission (SEC) final climate rule is expected to be published in April – after extensive delays.
CSOs may also take advantage of this transition period to get the buy-in the need from top management and finally integrate sustainability into core business.
Increased climate litigation risks
Climate litigation is on the rise, and not just around greenwashing claims. More granular sustainability laws are creating more liabilities and setting the scene for potential real economy litigation, based on financial losses as a result of misleading climate statements.
There could also be an increase in transition plan litigation, either because a plan is not solid enough, or because companies fail to implement it. And with the EU’s supply chain due diligence directive ever closer to becoming law, companies could soon be sued for failing to mitigate environmental and human right risks in their value chains.
To protect their businesses, Chief Sustainability Officers will need to enhance their focus on transparency and stakeholder engagement.
In 2024, CSOs will likely give more emphasis to resilience planning, not least because the business case is clear: a study released in December showed that measures to improve water, infrastructure and food resilience had a benefit-to-cost ratio of 2:1 to 15:1.
For years, environmentalists have fought for nature and biodiversity to be integrated into climate considerations, and they finally started to be heard in 2023. The EU’s Nature Restoration Law was passed in the European Parliament, and is set to mandate the restoration of 20% of land and sea by 2030.
The law will have wide-ranging repercussions for the agriculture, forestry and fisheries sectors – which are also the focus of the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action, signed at COP28.
Now, most of the world’s countries will have to include food production into their next climate commitments, known as nationally determined contributions (NDCs), which are due to be presented next year at COP29. With much of the food systems focus placed on regenerative agriculture, these commitments will likely result in enhanced nature action.
Most companies are yet to start analysing their nature-related risks, but for those looking to start the work in 2024, the Task force on Nature-Related Financial Disclosures (TNFD) offers a great starting point.