Kategori: sustainablity

Insights: April 2024

In this newsletter I will briefly touch upon the Corporate Sustainability Reporting Directive (CSRD), the Nature Restoration Law, the latest Human Development Report, the latest on the EU due diligence legislation (often referred to as CSDDD) and a new book on obsessive measurement versus pragmatism.  I think all of the above is relevant and important, both in business and in other walks of life.

The (landmark) EU Nature Restoration Law – postponed

Some 80% of European habitats (like forests, grasslands and wetlands, rivers, lakes and coral beds) are considered to be in poor shape. After lengthy discussions the European Parliament has adopted a new law which is meant to restore 20% of EU’s land and sea. To reach the overall EU targets, member states must restore at least 30% of habitats covered by the new law from poor to good conditions by 2030, increasing to 60% by 2040, and 90% by 2050. Member states will also have to adopt national restoration plans detailing how they intend to achieve these targets. However, though the law was expected to pass through the European council as a last formal step before coming into force, the Belgian presidency decided to withdraw it from the agenda late March. Hungary, the Netherlands, Italy and Sweden are allegedly among the countries resisting the law. (Read more here and in Swedish here). The discussions will for sure continue.

Comment: this is an important law not only from a biodiversity perspective. It will also have consequences for industries and livelihoods, not least agriculture and forestry.  I think the law is an enabler for a healthier nature and sounder economies. And we need more enablers. At the same time, the proposed law highlights the difficulty with looking at all contexts from the same (or a similar) lens. One size doesn’t fit all and conditions in the very north of Europe may need different solutions from the very south of Europe. Therefore, I understand that there is some resistance, but I also think that the countries (and industries) blocking the law have a special responsibility to ensure that we can get something across soon, which doesn’t imply watering down the intention of the law makers: the restoration of our damaged nature.

Corporate Sustainability Reporting Directive – CSRD

Affected companies in the EU are now in full swing, preparing for disclosing their sustainability impact in accordance with the Corporate Sustainability Reporting Directive (read more here or refer to my previous newsletters). As this is a new law with far reaching consequences, there are still uncertainties on the actual application and how both auditors and authorities will interpret some of the disclosure requirements. In Sweden, introduction of the law is expected to be delayed for six months and, unlike the previous reporting directive, the Swedish law is not expected to go further than the EU Directive requires.

Comment: the new directive will certainly imply more work and new procedures for most large companies in Europe, and I also notice signs of smaller companies adapting to the new directive. There are several reason why smaller companies are interested in reporting at least partially in line with the directive, even if not obliged to (yet):

• For some companies it is a matter of staying ahead of the curve and prepare for the future,
• Some assume that they will be expected to report on some of the issues to their customers/business partners anyhow, and
• a third reason is that the Directive also provides an opportunity to speed up and report transparently on the sustainability achievements of the company.

The delay in Sweden, I believe, will not make any major difference. The worry I have, is that the directive will take so much energy measuring all sorts of indicators, that there will be little energy left for thinking and acting on impact and purpose.

 

The Corporate Sustainability Due Diligence Directive (CSDDD)

The European Council has (finally) reached an agreement on the human rights and environmental due diligence directive. Though watered down in relation to previous compromises, it is never the less considered a “fundamental piece of legislation to tackle forced labour worldwide and ensure EU companies promote social rights and good working conditions worldwide”. The directive is expected to apply from January 2026, for the largest companies.

Comment: just as with the CSRD, this legislation will imply more work for many companies, and it will also indirectly impact smaller companies not directly bound by the legislation. However, wisely used it is likely to be a tool for greater care and better dialogue in supply chains all over the world. Complying with the general idea behind the directive is hopefully something most companies already do, and it is largely expected by customers and hence also a comparative advantage.

 

Human Development Report: It’s getting better. At least for some

The Human Development Report, published by UNDP, is a good source of information for those who wish to know more about the world as well as for those of us who are interested in trendspotting:

“Looking ahead, there will only be more globally shared opportunities and challenges. Besides the high economic interdependence, two main drivers of interdependence are likely to shape our future in the decades to come. First, the dangerous planetary changes of the Anthropocene are deepening the global connections among societies, economies and ecosystems: viruses, microplastics in our oceans and forest fires do not care much for national borders. As the Report argues, we may choose to deglobalize, but we cannot “deplanetize.” Second, an unfolding Digital Revolution has led to a dizzying increase in the sharing of data, ideas and culture across societies” –Achim Steiner in the HDR foreword

The report concludes that all 38 OECD countries (i.e. rich countries) seem to have recovered from the slow-down during the pandemic and are now increasing their human development, which is not the case for more than half of the 38 least developed counties who have not yet reached their 2019 levels. The report also identifies an emerging ‘democracy paradox’. While 9 in 10 people support democracy, over half of global survey respondents express support for leaders that may undermine democracy. As usual, the report comes up with suggestions on how (some of) the identified challenges may be tackled – there is still time. Read the report – it will make you more knowledgeable – here.

Do we measure too much?

In a recent book, the two researchers Susanna Alexius and Janet Vähämäki examine if there is too much measurement going on. In the book, Obsessive Measurement Disorder or Pragmatic Bureaucracy? , they look at how bureaucracies (and individuals in these organizations) have dealt with performance measurement, uncertainties and complexity in development aid contexts. Obsessive measurement disorder (OMD) is when excessive use of performance management and control seeking, lead to unintended, perverse or even counterproductive outcomes – or that decision makers loose contact with the very purpose of the activities.

Their (preliminary?) conclusion is that it is not the number of regulations or measurements that explains obsessive measurement disorder. It’s rather an individual experience of perceived over regulation. The important thing is not the number of regulations; at times even, extensive regulation can be meaningful, they argue. What is important, however, is sensemaking. As an “antidote” to OMD, they introduce the concept of “pragmatic bureaucracy”.

Comment: In general, I believe measurement makes follow-up easier which is necessary if you wish to improve. But sometimes we measure the wrong things, or we start confusing indicators with goals. This happens in business, the public sector as well as in the civil society.  In my view, the questions raised and at least some of the conclusions appear to be valid not only for aid and development in chaotic environments, but also in many business contexts including in the Nordic region. Many companies are now faced with new regulations related to sustainability, and there are new functions like “sustainability controllers” being created. This is probably a good thing. We need to follow-up and measure more. But at the same time, we must not loose sight of why we measure and follow-up. If we do, we may make irrelevant (or even counter productive) decisions – and we don’t have time for that.

 

Triangle of Impact

How do you measure and manage towards social sustainability? We have given it a try and created a tool that we call the Triangle of Impact

This is a slightly different post, so a brief background on my interest in these issues may be in order, but I have put it at the end of the document for those who are interested. *

For some time now, together with some companies that want more, I have been working on a model, or tool, for social sustainability. Those of us who have worked with this tool are the pharmaceutical company Chiesi Pharma, Tobii Dynavox (which is a leader in communication aids for people with communication challenges) and the communications agency Spoon. In addition, we’ve been privileged to have had a few more people and companies providing wise input. And then there’s We-ness (David Wiking), who facilitated the process.

The purpose of the tool is to help companies both report – and communicate – and to manage their operations towards a higher degree of social sustainability. When we started the work, we agreed on three starting points. The tool:

• Should be easy to use, yet effective. Limit the number of “nice-to-have” questions/features.
• Will focus in particular on the positive impact companies can have, in addition to “hygiene factors”
• Should be based on other information that the company either already discloses, or will need to report. This applies in particular to the requirements that follow from the EU Sustainability Reporting Regulation (CSRD) and its four standards on social sustainability (S1-S4 and possibly G1)

We also talked about a fourth starting point: the tool should facilitate cooperation between companies that allows good ideas to spread – and exchange. It is doubtful if we have reached that point yet, but the ambition remains.

This tool is not only (or primarily) intended for so-called “solution companies”, but on the other hand, the tool is probably most useful for companies that actively pursue value not only for owners but also for other stakeholders – i.e. the fairly large group of companies that believe that in addition to returns, they also have or want to have a positive impact on people or planet.

We divided positive impact into direct and indirect impact, where the big difference is that the indirect impact is a side effect, rather than the result of an active choice. This is not to say that the indirect impact cannot be addressed, but as the company strives to actively increase its indirect impact, the impact also becomes more direct in nature. In addition to direct and indirect impact, we considered it important that the tool should help limit the company’s own negative impact, which thus became a third category of impact. The model below summarizes the different categories, which we also think of as “scopes” for social sustainability.

 

1.      Your own organization: how can you reduce the negative impact and instead achieve something positive? (Scope 1)

In this scope, we ask ourselves how the company relates to its employees, its suppliers and, at least in part, its customers. The questions are based on the standards for social sustainability that have been developed for reporting, according to the EU’s CSRD directive, so for those companies that have already made a double materiality assessment, there is a good base line – and for those who have not, this can assist in future reporting. Unlike in the materiality assessment, here we have shifted the focus from mainly reporting your impact, to what you actually want to do to improve. In this way, this becomes both a way to account for the gaps that exist, and a way to consider if the company is satisfied with the status que, or wants to strive for an improvement (since a gap is not necessarily the same as an area where you want to improve).

Below is an example, a snapshot, of what this assessment might look like at an early stage (Note that the data is not validated):

This way of approaching the impact is a way of taking the materiality assessment a step further: the issues that are reported are chosen because they are important (material) to the company, but what emerges above all in this scope, is whether you intend to do something about the various issues that are raised. In this way, it becomes a way to reflect in a structured way on what you think you want and can do something about.

2.     The conscious, positive impact that the company has – can have – through product and operations (Scope 2)

Most frameworks and regulations are about limiting the negative impact of companies, about doing as little significant harm as possible. It’s not as strange as it sounds; Human rights, for example, are primarily about the responsibility of states towards their citizens. Strictly speaking, it is not the responsibility of companies to ensure that people have, inter alia, freedom of expression or the right to education. On the other hand, companies do not have the right to deprive people of their rights. In practice, of course, many companies also play a crucial role in enabling people to fulfil their human rights.

This scope is about documenting the positive role that the company has. This gives you the opportunity to reflect on your positive impact, to show others what you do and to create a “base-line“, so that you can compare with yourself over time, and perhaps also with other companies. Below is an example of what this might look like:(please note that the data in the example are not fully validated!)

 

 

Different companies and industries have different opportunities to create positive value. Areas such as volunteering, donations and pro-bono work can make a big difference and are relatively easy to target and measure.  When it comes to the goods or services the company offers, it is often more difficult to measure the positive impact, especially if we also strive for a measure that can be compared between companies. Therefore, you may want to focus on what makes sense for your company to follow up and steer – manage – towards.

When we tested this among the companies that have been involved in developing the instrument, we quickly realized, for example, that the conscious impact take different forms for the different companies: while the communications agency Spoon wants to work with a larger proportion of assignments that contribute to a sustainable transition, in the case of Tobii Dynavox and Chiesi, it is about their products making as big a difference as possible for the people who need them. In both cases, it can be measured and followed up, but it is not that easy to compare companies.

At the same time, the process of identifying tools for follow-up contributes to an important discussion about what the company’s additional, positive impact is and can be. And in some cases, also with how different goal conflicts should be handled: Can the positive impact the company has on society and people warrant a slightly lower return? Or to what extent can a positive impact on humans also “justify” an increase in greenhouse gas emissions? (and vice versa).

3. The company’s indirect positive impact on the surrounding society (Scope 3)

Presumably, all companies have some type of indirect positive impact. Perhaps the “easiest” example is through the taxes companies pay and the fact that they provide livelihoods for people. In some cases, the results of taxes and jobs may be marginal, but for businesses based in e.g. rural areas, the jobs they create are sometimes of vital importance for the survival of communities. And the tax that companies pay, directly or indirectly, is central to the welfare provided by the public sector.

The products or services that companies manufacture often also have what we call an indirect positive impact, even if that is not the reason why the product or service is offered and there is no goal to increase the positive impact for its own sake. An example could be family members who get a better quality of life thanks to medication used by patients, or pedestrians who benefit from cars that make less noise. These are examples that there may be value in reporting, i.e. communicating, even if it does not mean that the company actively directs its energy to increase this positive impact. In the event that the company starts to steer its operations to increase this indirect impact, in the Triangle of Impact, it moves towards becoming direct (i.e. Scope 2).

This third scope is, almost by definition, difficult to delineate and it therefore becomes a bit of an “other” item in the model. The reason for still using this scope is that the process of identifying the indirect impact can also make the company realize that there is some indirect impact that they actually want to work more with. In addition, it is an area that both internal and external stakeholders are often interested in.

The next step, or “How do I get started?”

“The Triangle of Impact” is not fully developed as a model, but hopefully it is ready enough for companies that are looking for ways to take their sustainability work further, and in particular their social sustainability work, to be able to work with or be inspired by the model. My, or our, hope is that we will continue to work with the different components of the model, both the communicative (because the model is also a way of communicating one’s work) and the governance aspects.  Thus, the model can hopefully contribute to making it a little easier both to adapt your business to increase the positive impact, but also to benefit from the work that is already being done! So what can you do? Start by looking at the scopes and ask yourself what your impact is – and what you want it to be. And don’t hesitate to contact We-ness or any of the other companies that took part in developing the Triangle of Impact.

If we feel that there is a great demand, we will probably develop this short introduction further, to become a “handbook” where we develop the process for those who want a clear roadmap to stick to, supplemented with inspiring examples.

———————-

 

* For many years, I have worked to find solutions to extremely serious social problems, especially poverty and oppression in so-called developing countries. Often, it has been about support for states to build their own capacity to, for example, establish a relevant system of education that reaches as many people as possible, or about support for human rights defenders in civil society – or, for that matter, about more urgent support through organizations such as the Red Cross or the UN. As it has become increasingly obvious that the world’s challenges will not be solved by states, I have come to work more and more with the business community. I am convinced that the commitment and innovation that exists in the business community is crucial for a transition towards a better, more sustainable society. And we can do much more than “do no significant harm”. Milton Friedman was, in my view, wrong when he wrote in 1970 that the sole responsibility of corporations is to generate returns for their owners. (read his famous article in the NY Times in this link). The companies I work for can and want more than that!

Varför elbil? En kort text om ett stort och komplext område

Om du kör en medelstor bensinbil 1500 mil/år, medför det utsläpp på ungefär 3 ton koldioxidekvivalenter (CO2e). Lite mer för en stor Volvo eller en stadsjeep, lite mindre för en liten bil eller en dieselbil. För att undvika stora klimatförändringar brukar man tala om att vi bör ner till en årsförbrukning om 1,5-2 ton CO2e per person. I Sverige ligger våra utsläpp idag på ungefär 8 ton CO2e per person (konsumtionsbaserat). Om vi vill undvika kraftiga klimatförändringar är det därför svårt att se att fossildrivna fordon har någon framtid att tala om. Och för företag som är måna om att minska sina utsläpp finns det redan nu bättre alternativ.

De flesta studier, artiklar och livscykelanalyser jag läst visar att elbilar i princip alltid medför ett mindre CO2-utsläpp än fossildrivna bilar under en livstid på 20-25 000 mil. Så även i länder som Kina och Indien, där en stor del av elen kommer från kolkraft. I t.ex. Sverige där bilar ladas med i huvudsak fossilfri el är brytpunkten för när elbilen har ett lägre utsläpp än fossilbilar normalt bara några få års körning. Det gäller dock inte nödvändigtvis om vi ställer en stor elbil mot en liten bränslesnål fossilbil (eller om vi tänker oss att fossilmotorn använder ett bränsle som HVO100, eller biogas, som visserligen medför CO2 utsläpp men inte ökar mängden CO2 i atmosfären). Än så länge är batterierna elbilarnas akilleshäl, och inte bara för att produktionen av batterier medför ett betydande koldioxidavtryck.

Skillnaden mellan att köra elbil som är laddad med i huvudsak fossilfri energi och att köra i ett land där elmixen domineras av exempelvis kolkraft, är stor. I det senare fallet är klimatvinsterna med elbil relativt blygsamma. En mindre diesel eller bensinbil kan i det fallet ofta vara ett klimatmässigt bättre alternativ. Så kan det även vara i exempelvis Norden; en stor elbil är ofta väldigt tung och bär runt på ett stort batteri, vilket kräver mer energi än en liten bil. Samtidigt ska man komma ihåg att för de flesta är det inte relevant att jämföra en stor (bekväm) bil, med en liten och oftare enklare bil.

Nedan ett exempel på livscykelanalys från Volkswagen, som visar hur mycket körning som krävs i några av deras bilmodeller, för att kompensera den energiintensiva tillverkningen av batterier. Se länkar nedan

 

 

 

Det handlar inte bara om klimat

En annan aspekt med elbilar är att de kräver andra, och mer av vissa, metaller och mineral än fossilfordon. Den ökade efterfrågan på dessa har skapat utmaningar för såväl miljön som (inte minst) arbetsvillkoren för de som arbetar med utvinningen. Barnarbete och konfliktmineraler har blivit reella utmaningar för många tillverkare. Dessa utmaningar är dock inte nya; exempelvis innehåller en stor del av den hemelektronik vi använder såväl metaller och mineral som är sällsynta och vars ursprung inte helt kan garanteras.

Många av de företag som är beroende av dessa metaller och mineral är överens om att
1) Återanvändningen av metaller och mineral måste öka, alternativt att produkternas livslängd förlängs (dvs vi behöver gå mot en mer cirkulär ekonomi. Se intressant länk om batteriåtervinning från Northvolt)
2) Arbetsförhållandena för de som arbetar med utvinning av metaller och mineral måste vara schysst
3) Den negativa påverkan på miljön och människor i de områden där utvinning sker, måste minska.

Men – det går knappast att komma ifrån att det finns målkonflikter i omställningen mot ett mer klimatsmart samhälle. Dessa behöver belysas och diskuteras, men det är inte rimligt att diskussionen förs på fossilindustrins villkor; som att vi kan vänta med att minska vårt beroende av fossil energi. Omställningen behöver ske nu, och den behöver vara både grön och rättvis.

 

Några slutsatser och rekommendationer

• Ur ett klimatperspektiv är det alltid bättre att inte åka bil alls. Men det är inte alltid rimligt eller önskvärt att avstå en resa. Däremot är det rimligt att fråga sig om en resa i stället kan ske med exempelvis kollektiva färdmedel, som sammantaget kräver mindre energi. Att inte använda fossilfrienergi i Sverige möjliggör trots allt att den energin i stället kan exporteras till exempelvis Tyskland eller Polen, och därmed minska behovet av kolkraft där.
• Om du behöver en bil är elbilar ofta att föredra. Du kan fundera på vad som är mest effektivt utifrån den elmix du använder och just ditt körmönster, men oftast landar du i att en elbil är att föredra. En laddhybrid kan vara ett bra alternativ om du endast kör mycket korta sträckor, men för de allra flest är detta inte något bra alternativ i längden.För att landa ”rätt” i valet av fordon kan du fråga dig om tillverkaren av din elbil har en uttalad policy om hur de tänker kring återanvändning av t.ex. batteri, hur de resonerar kring mänskliga rättigheter i leverantörskedjan och hur stort batteri du behöver. För de mer intresserade kan det vara värt att försöka komma över en livscykelanalys av de olika alternativ du har, och då kan det också visa sig att t.ex. biogas kan vara ett bra alternativ för dig. Vad gäller drivmedel gäller fortfarande att förbränningsmotorer kräver mycket mer energi än elmotorer, och att det (precis som med el) finns utmaningar i att få fram de mängderna av t.ex. biogas som behövs.
• Företag vill – och förväntas – göra rätt för sig och de lyssnar på sina kunder. Därför sker nu mycket arbete för att förbättra arbetsvillkoren och minska miljöpåverkan vid mineralutvinning – och förstås för att förbättra effektiviteten vid själva tillverkningen av batterierna. Men omställningen kommer gå snabbare om du visar branschen att du bryr dig; batteri- och biltillverkare liksom t.ex. bilhandlare och leasingföretag behöver veta att du sätter ett värde på både människor, samhälle och planet.

Några länkar för den som vill läsa mer:

Ny studie bekräftar: Elbilar har överlägset grönast livscykel | Vi Bilägare (vibilagare.se)

Elbilar kan vara smutsigare än dieselbilar | Teknikens Värld (expressen.se)

Livscykelanalys av ID. | Volkswagen Sverige

Green NCAP räknade fel i livscykelanalys – elbilarna är egentligen grönare | Vi Bilägare (vibilagare.se)

Från barn­arbete i gruvor – till nya elbilar (aftonbladet.se)

Recycling | Northvolt

Polestar 2 – Hållbarhetsdeklaration | Polestar Sverige

2023 – all bad?

 Last year I devoted my annual review to good news. I think that was quite uplifting, but I do recall that it felt a little awkward. Even more so this year, with heat records, floodings, fires and storms, the terrorist attacks in Israel and the bombings of Gaza, the protracted war in Ukraine, inflation and economic slowdown, to mention some examples.

Then we have the challenges that are not linked to specific or unique events, such as crossing planetary boundaries: 6 out of 9 boundaries are, according to Stockholm Environmental Institute, already transgressed; or the authoritarian and populist tendencies that seem to be gaining momentum on all continents. According to the well-known Freedom House, political rights and civil liberties in the world have now been declining for 17 consecutive years.

Well, some good things came out of this year as well!

 So, in many ways 2023 has been a dark year. At the same time, it is important to keep in mind that the long-term trends have been fairly positive regarding, for example, global public health, education, access to energy, work-related rights, income-poverty and so forth. This link (in Swedish) gives some good examples of such developments. Even when it comes to nature related crises, humanity has managed to change. Remember the hole in the ozone layer? In 1987, the Montreal treaty was signed and the ozone layer is now on track to recover, a UN backed panel of experts declared earlier this year (read more).

Or how carbon tax in for example Sweden, which was introduced in 1991, has managed to successfully price externalities, contributing to a decrease of green house gas emissions in Sweden with approximately 30% since 1990. Interestingly enough, the tax is not only effective, it also seems to be easy to implement and administer (read more).

Let me now turn to four events, or developments, that occurred during 2023 that I think have the potential of contributing to more sustainable businesses in the coming years.

Some interesting developments: COP 28, social sustainability, biodiversity and CSRD

1. Climate and COP 28

In some ways it is a mystery that we cannot do better than this and that it has taken us so long to talk clearly about fossil fuels. But getting everyone to agree in a world with so much division is not an easy task. This COP was the first “global stock take” on how we are doing in relation to the Paris agreement and though the results of how countries are performing are largely disappointing, some interesting things also came out of COP28. In the last hours of the meeting in Dubai earlier this month, the countries of the world – including oil-producing nations – agreed to “transition away from fossil fuels”. In addition, the loss and damage fund, designed to support climate-vulnerable developing countries, was inaugurated. Furthermore, some 117 countries agreed to triple their renewable energy capacity by 2030; and there were some new and renewed demands and discussions on emissions in relation to food-systems. It was also evident that the private sector not only wants to be part of the solution; many companies are in fact leading the way. Read more about COP28  here (from the World Economic forum with slightly more of a private sector perspective) and here. (from the UN)

On a slightly different note; China may not be at the forefront when it comes to advocating for carbon neutrality, but in fact China is doing quite a lot to reduce its emissions and may peak its emissions already 2025 rather than its 2030-goal (read more here). Very promising!

2. Biodiversity

In late 2022, the Convention on Biological Diversity, the so-called Kunming-Montreal Global Biodiversity Framework, was adopted after years of negotiations. In 2023, implementation has started. My experience is that a growing number of companies have stepped up their ambitions and are doing more to reduce their negative impact on the environment.

In September 2023, the Task Force on Nature Related Disclosures (TNFD), launched its recommendations which is expected to help companies in some of their endeavours. TNDF is an initiative aimed at providing decision makers in business and capital markets with better quality information through corporate reporting on nature, so that financial flows can flow towards nature positive outcomes.

The discussion has now matured so much that some real conflicting interests are being debated in board rooms as well as amongst legislators. One such example is the use of PFAS; harmful to humans and nature but at the same time an important substance in many pharmaceuticals.

3.Social Sustainability

In my own business I have noted a growing interest from companies and public institutions relating to the need for a Just Green Transition. For example, I was involved in an initiative where some Swedish embassies, the Swedish International Development Cooperation Agency as well as other public institutions and private companies asked themselves what and how the necessary transition away from fossil fuels and harmful use of natural resources, can – must – be built on a sense of fairness where people who often lack power and resources also feel that they are included. This was also a recurring theme at COP 28 (read more here) and certainly something that will continue to be discussed the coming years.

Recognizing the interconnectedness of sustainability goals and challenges is also at the core of Agenda 2030.

Another approach is to look at social sustainability “in its own right”, ie not only as a prerequisite for a green transition. That is the background to the CSR-discourse and documents such as the UN Guiding Principles on Business and Human Rights. During 2023 due diligence has been a concern of many companies, thanks to new OECD-guidelines, new EU legislation (CSDDD) but also national legislation relating to due diligence in, for example, Norway (I have written more about this in several Newsletters, e.g. here).

In the EU, the Social Taxonomy (a new piece of legislation that has been discussed for some years) does not seem to be in the immediate pipeline but there is a draft proposal, and the discussion is not dead. It is also evident, in my experience, that many companies are placing a greater emphasis on their social footprint and, more importantly, their social impact. The focus is no longer solely on avoiding doing harm in ones own business or value chain (through accepting work related rights etc) but also to actually have a positive impact on people and society.

In my own business I have worked together with three companies (Chiesi Nordic, Tobii Dynavox and Spoon) to develop a model on how companies can manage towards greater social impact. The model is called “The Triangle of Impact” and includes some disclosures in accordance with the Corporate Sustainability Reporting Directvie (ESRS S1-S4) but then tries to emphasise direct and indirect impact. I hope to be able to soon share more details for those who are interested.

4.Legislation: CSRD and ESRS

With the coming into force of the new Corporate Sustainability Reporting Directive (CSRD), EU countries will adapt their national legislation in accordance with the new directive. The directive comes together with European Sustainability Reporting Standards, detailing how and what to report. Companies of a certain size will have to start reporting from 2024. This is in many ways a revolution, at least from a reporting perspective, and has certainly managed to raise sustainability issues on to the agenda of most companies active in Europe.

Though many observers, including myself, fear that the directive may shift some attention away from action and business models towards data and reporting, it is difficult not to see this as a major breakthrough when it comes to sustainable business. Many other countries and regional blocks are now looking at developing similar legislation!

Time to leave 2023 behind. To move on.

For We-ness 2023 has been a good year. I have, together with partners, been fortunate to engage with both new and old clients and the assignments have been very rewarding. They have included several materiality (and double materiality) analysis, developing sustainability plans and strategies, lectures, trainings and workshops on sustainability, leadership coaching, reviewing business models and much more. In total We-ness have worked with 11 clients and some 15 assignments during 2023 and though it may be early to talk about impact, outcomes have, from my point of view, been great!

This will probably be the last regular newsletter for now. I will continue to write but I’m not sure about the format yet. Perhaps a little more analysis and slightly less news. In any case: thank you so much for reading and please don’t hesitate to get in touch if you have any suggestions on what I should write about moving forward.

Thank you for reading – and Happy New Year!

“While exceeding the 2°C threshold for a number of days does not mean that we have breached the Paris Agreement targets, the more often that we exceed this threshold, the more serious the cumulative effects of these breaches will become”
–Carlo Buontempo, Copernicus”

Summer, September and October 2023 gave the world new heat records.   Coincidence? Possibly, but certainly not likely. This is what has been predicted for some time. There exists a consensus that the climate is changing – and in the short run it will continue to do so regardless of what we do. That doesn’t mean that climate change is irreversible, but it will require determination to do something about it.

In comes the 28^th Conference of the Parties, more often referred to as COP28. Some 198 countries (and 70 000 delegates) will meet in Dubai and hopefully most of them will try their best to agree on how we can limit the temperature rise to 1.5 degrees Celsius.  Expectations are high and while many complain that COP28 is held in an oil producing country and chaired by the president of an oil company (Sheikh Al-Jaber), others argue that there is no way around that; oil producing countries must be inside the negotiations, leaving them outside won’t make anything better.
There is a lot on the agenda, for example:

• This is the first meeting where there will be a stocktaking of what countries have done so far,
• The loss and damage finance facility to help vulnerable communities deal with immediate climate impacts;
• A global goal on finance that would help fund developing countries’ in addressing climate change,
• Discussions on accelerating both an energy and a just transition, as well as
• Closing the massive emissions gap.

Read more about UNFCCC and COP28  here or in this brief  pedagogical summary by BBC

The stocktaking is based on the nationally determined contributions (NDC:s) that countries have produced. These will now be updated for the period 2025-30. It seems to me that there is still work to be done – with regard to ambition as well as to action. In fact, the synthesis report indicates that we are currently on track towards a 2.4-2.6 degrees.

On a positive note, the loss and damage fund has already been agreed and is beginning to take shape. It will be hosted by the World Bank and some 400 million USD have been pledged. This will not meet expectations, however, and discussions are expected to continue.

Personally, I am curious to see if COP28 will advance discussions on how economies can transform in a manner which is also socially sustainable (i.e. “just”). Earlier this year I had the opportunity to participate in an assignment where we looked at how businesses can contribute to a transition that is both Just and Green. I hope I will be able to return to this at some point (or ask me, if you wish to know more!). For an interesting background to the concept of a Just Green Transition, see this document.

“The 1.5-degree limit is only possible if we ultimately stop burning all fossil fuels. Not reduce. Not abate.” -Guterres

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There is no way around it. The last few months have been characterised by crises and disasters. Political, environmental and social. Armed conflicts and terrorist attacks, earthquakes and floodings, and if you live in Sweden: a gang-war that is now definitely impacting the larger public and not only criminals. And let us not forget the economic climate with inflation, sluggish or even negative growth figures resulting in unemployment and bankruptcies. As I write this, the consequences of the terrorist attacks on Israel, and the war that is now unfolding, are yet to be seen, but we know that they are and will to continue to be, brutal. It is physically far away from me, yet so present. This is another reminder that violence and conflicts, tend to overshadow most other developments. It is 2023 and we ought to know and be better.

There is good news as well, even though it may be difficult to recall. Like same sex marriages being legalised in Hong Kong. Or that a number of companies and municipalities silently decided that they see no option but being part of the solution (if you live in Sweden this article may inspire on what municipalities can do). Daily I meet people working for companies or government institutions that really believe that a better world is possible and who are actively working on finding their role in this change. That gives me hope.

We need to move from abbreviations and regulations to materiality and purpose!

During the last few weeks, I have made several presentations for senior executives, and board members. On a couple of occasions, I have received the feed-back that the sustainability field has turned into a massive wall of regulations and abbreviations, almost impossible to get through. I find this deeply problematic; sustainable business ought to be about solutions, purpose, and joy. If we let new regulations such as CSRD and ESRS (see below for explanations) dominate this discourse, we will not make it.

As an advisor to companies, I often work on regulations and frameworks, but I find my joy and meaning in discussing and helping companies identifying what is material to them, finding their purpose and adopting their business models to opportunities and threats. In order to do that, however, there are a few concepts that you may need to be aware of. I have assembled a few of them below, with brief explanations and sometimes links.

Hope it helps! Enjoy!

• Carbon credits and carbon offsets. There is a carbon compliance market and a voluntary market. In brief, both “systems” are based on either reduced emissions (e.g. energy efficiency), removed emissions (carbon capture from e.g. forests or capture and storage and avoided emissions. Read more here or here
• Circular economy is a kind of a business model developed in response to the fact that the supply of raw material (virgin material) is limited. It involves, for example, sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended. The “waste” in one process, becomes “food” (input) in another.
• Corporate Sustainability Due Diligence Directive (CSDDD) – Due Diligence of Human Rights and Environment: this is a new piece of legislation from the EU that, once ready and included in national laws, aims to ensure that businesses address adverse impacts of their actions, including in their value chains inside and outside Europe. Companies must have policies in place and conduct due diligence in their supply chain. The aim of this Directive is to foster sustainable and responsible corporate behaviour and to anchor human rights and environmental considerations in companies’ operations and corporate governance. It makes reference to the OECD framework for Due Diligence. CSDDD can be seen as a complement to CSRD (see below).
• CSR: Corporate Social Responsibility. Initially often referred to as a business model that companies could use to integrate social and environmental concerns into their operations. Not so commonly used today as some 10-20 years ago.  Read more for examples here
• CSRD: Corporate Sustainability Reporting Directive. A new directive on sustainability reporting that will be incorporated into national laws in the EU.  One of the biggest reforms in accounting and reporting ever, according to some observers. Gradual start from 2024 and onwards (depending on size etc. 50 000 companies will use the directive). Guidelines on how to report are found in the ESRS standards (see below).  It is envisioned that CSRD will lead to substantially better – and more comparable – sustainability reporting, once operational. It will probably also be fairly “heavy” (and expensive) for companies to comply with.

• EFRAG: European Financial Reporting Advisory Group
• ESG: Environment, Social, Governance. An approach used by investors to analyse companies. Focus on risks but increasingly used interchangeably with “sustainability”. Has also often become synonymous with CSR, though originally that was not the purpose. Read more for examples here.
• ESRS: European Sustainability Reporting Standards. A set of currently 12 standards that shall be used to specify what companies must report on according to the Corporate Sustainability Reporting Directive. The 12 standards are meant to help companies disclose their material impacts, risks and opportunities in relation to environmental, social, and governance sustainability matters.
• EU Taxonomy for sustainable investments: A classification system approved (and developed within) the EU to establish a list of environmentally sustainable economic activities. Also includes a list of minimum safeguards relating to human rights, etc. One purpose of the taxonomy is to help e.g. investors agree on what an environmentally sustainable investment is. Very few economic activities in the EU are today classified as “taxonomy aligned” May be followed by a “social taxonomy”.
• GHG–protocol and Scope 1–3: The world’s most widely used greenhouse gas accounting standard. The standard is used to calculate the emissions caused by a company (or a city/country). Scope 1 is direct emissions caused by the company, Scope 2 measures purchased electricity or steam, and Scope 3 indirect emissions caused by e.g. suppliers or customers. Many/most companies will find most of their emissions in scope 3.
• Net-zero: when global greenhouse gases (not only CO2) emissions are in balance with emission reduction. Term used by SBTi (see below). Other similar concepts include “carbon neutral” (often includes offsetting emissions), and “climate neutral”.
• Materiality (with regard to sustainability): a materiality analysis is a method to assess the issues that are most important to an organisation or company, as well as to its different stakeholders. With new legislation there is an increased focus on double materiality, which is a concept/tool to determine how a company impacts the planet from a sustainability point of view, and how sustainability issues impact the company (financially).
• Science Based Target Initiative (SBTi): An organisation “approving” targets set by companies. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to well below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.
• Shared value: “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.” – Porter & Kramer
• Sustainable Development: From the Brundtland report/”Our Common Future” in 1987:

“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Widely used definition and starting point for both business and public sector.

• Task Force on Climate–related Financial Disclosures (TCFD): a task force that has come up with recommendations and a framework on climate disclosures, structured around four thematic areas: governance, strategy, risk management and metrics/targets.
• Task Force on Nature-related Financial Disclosures (TNFD): this task force has developed a set of disclosure recommendations and guidance for organisations to report and act on evolving nature-related dependencies, impacts, risks and opportunities.
• 17 Sustainable Development Goals & Agenda 2030: In 2015, world leaders agreed on a what they wanted the world to look like in the year 2030. This agenda, the 2030 Agenda for Sustainable Development, includes 17 Goals (SDGs) and 169 targets and has become a way of concretizing what sustainability is all about.

(I also have a slightly longer version of this document, where I go through concepts and abbreviations such as GRI, SASB, and B-Corp and Benefit Corporations, Global Compact, UN Guiding Principles, OECD Guidelines for Multinational enterprises, GISD, PRI, etc. But let’s save that for some other time. Or just google them!)

 

Right now, many people in my “ecosystem” are talking about the new reporting requirements emanating from the Corporate Sustainability Reporting Directive (CSRD) and its accompanying reporting standards European Sustainability Reporting Standards (ESRS – See previous Newsletter here). This and other directives, such as the sustainability due diligence regulation, will imply a lot more work – but hopefully also a helpful push or pull for companies who want to become more sustainable.
This newsletter will be a little different as it will be devoted mainly to one theme, namely   sustainable business models.
(Towards the end of this Newsletter, I also comment on the current Africa Climate Summit, and the upcoming United Nation General Assembly + share an interesting article on social sustainability in finance).

What is a sustainable business model?

Books have been written on the subject and there are of course many different definitions out there (and some even question whether there are any truly sustainable business models). Usually a Sustainable Business Model refers to a way of conducting business that generates a value to stakeholders without depleting the resources used to create that value (read more e.g. here or here).

For now, my take is that we need to quickly shift how we do things, and the most efficient way of shifting is to also accept that most companies or business models will not be perfect. Not all owners (shareholders) are prepared to go as far as Patagonia who claim to be “in business to save our home planet” and have transformed its ownership to a trust that will ensure that profits will be used to combat climate change and protect underdeveloped land (read more). And if you are not prepared to go all the way, taking the train is usually a more climate smart choice than an EV (electric car), but an EV is normally a much better option than travelling with a petrol or diesel fuelled vehicle. There are “shades of grey” in action that are better than inaction. In other words, in my view it’s more helpful to discuss sustainable business models in terms of “how much”, rather than “yes or no”.

According to a Norwegian survey from 2021, 8 out of 10 companies believed that their business model has to change (read more) and from talking to companies in diverse places such as Sweden, South Africa, Kenya and Albania only in the last 6 months, I would say that change is happening all over. In my experience, there are different reasons why companies believe they need to change. For example:

• For some companies it’s about sustainability challenges (such as climate, or crime) that threaten their current way of doing business
• Customers -not least those who work with public procurements or with B2B with large corporations subject to harsh reporting requirements, but also those sell products or services directly to consumers
• Investors expect more sustainability and those with a positive impact can often access financing at lower rates, or are valued at a higher price
• Workers prefer working for companies that are sustainable and have a higher purpose (read more about “climate quitters” in the UK).
• Finally, some companies are considering change due to regulations.

However, regarding the last category,  I would maintain that disclosing sustainability information is not the same as revisiting business models. This quote from the Quest for Sustainable Business Model Innovation sums it up quite well, I think:

“There has been notable progress in defining metrics for materiality and sustainability and supporting them with increasingly relevant and better-quality data, but this has inadvertently created an overemphasis on reporting and compliance per se, rather than on strategy, action, and advantage.”

Usually, a more sustainable business model is expected to create business value. I also meet owners or CEO’s, however, who feel that it is their responsibility to adapt and/or change their business models. As one leader I spoke to put it: “It makes me feel better and, besides, it makes my daughters proud of me”. In any case it would need to generate profit, otherwise it can’t be sustained.

There are also different ways in which we can approach what a sustainable business model is. Let me for the purpose of this newsletter divide them into four categories (the examples below can surely be questioned, and though I don’t know most of the corporations that well, I think mentioning them will give you an idea of what I mean):

1. Companies that have intentionally developed a product (or service) that contributes positively to a sustainable transition, such as H2Green Steel, Vestas, Northvolt, EasyMining, Tesla etc.
2. Companies which have changed some or all their products or the way their products are produced. Examples include companies such as Scania and Volvo (cars & trucks), Unilever, Electrolux, IKEA, Patagonia, Boliden to mention a few. These companies have transformed part of their product(ion) lines so that it leaves a minimum footprint, often mainly in terms of climate but they also consider other environmental aspects and social sustainability
3. Companies that offer services that fit well with for example a more circular transition. Typical examples would be Blocket ( a platform for trading used goods), Airbnb and M-PESA (Vodacom/Safaricom)
4. Companies that have acted sustainably ever since inception, regardless of the broader “sustainability buzz”. This would include many small-scale organic farmers, companies that repair broken products or recycle used goods. These companies tend (in my view) to be more common in developing countries.

We tend to look more at sustainability in relation to nature (climate footprint and to what extent virgin resources are used) but with an increasing interest – not least from investors – in social sustainability, I find that a growing number of companies and other organisations are asking themselves if and how they can run their business in a way that not only avoids violating people’s rights, but actually makes a positive change for stakeholders.

The discussion around sustainable companies at some point often becomes political (not least in the US, as we have written about in a previous newsletter), where some argue that sustainability infringes on the capitalist economic model. In my view almost all economies are already regulated in one form of the other and I’m not sure I see why for example sustainability disclosures would make much difference (to that system). However, I admit that questioning the economic system plays a certain role when we look at sustainability as the current economic system is largely dependent on e.g. fossil fuels and other virgin resources and does too little to address other sustainability challenges. We need a transition to a system where we – corporations, governments and civil society – take better care of each other and of our planet.

This leaves me thinking that what differentiates a “normal” company from a company aspiring to introduce a more sustainable business model, could be that the latter acknowledges and actively tries to drastically 1) reduce its negative impact on people and planet, and 2) to some extent contribute positively to people or planet.  As the companies above are or are at least aspiring to do.  To me, it can’t only be about results –aspiration ( or intention) also matters.

Feed-back welcome!

Two events you may wish to know more about – and a report on social issues in sustainable finance!

Right now, the African Climate Summit is underway in Nairobi. It’s a warm-up for COP 28 – but perhaps also a little more than that. Key issues include climate finance, energy transition, innovative technologies, nature based solutions and, not least, youth engagement. Africa’s population and economies  are fast-growing  and discussions and developments in Africa will, I think, play an increasingly important role in the years to come. How will, for example, the deposits of raw material (“virgin resources”) – including fossil fuel, be dealt with?

The discussions that take place at board rooms and seminars around new economic models, aiming at a both greener and more just future, also takes place in different places in Africa. Keep an eye on it – I think we have an exciting (but perhaps bumpy) road ahead when it comes to the broader discussions on sustainability in companies and sustainable economic systems!

Secondly, the United Nations General Assembly is about to meet in New York later in September. The theme this year is “Rebuilding trust and reigniting global solidarity: Accelerating action on the 2030 Agenda and its Sustainable Development Goals towards peace, prosperity, progress and the sustainability for all.” Trust. That is something we desperately need, both between people and nations. Not likely that UNGA will manage to rebuild this trust, but meeting and talking is a good start. And in the meantime, the words from UN Global Compact regarding UNGA may be able to inspire action: “The world is in urgent need of solutions to the world’s most pressing crises that only the private sector can deliver. This need represents a burgeoning market for business innovation, creativity and new technologies. Private sector leadership and multi-stakeholder partnerships are vital to creating the transformational change that humanity so desperately needs.”

Finally, I have been talking about the Just and Green transition in previous newsletters. I’m currently involved in a couple of assignments where we explore different aspects of this transition and what it can imply for different organisations and businesses. I will return to this later but let me share this interesting article that convincingly makes the case for why social issues and green issues go together: “From fragmentation to integration: Embedding Social Issues in Sustainable Finance”

 

 

 

 

Thoughts and feed-back always welcome. Take care!

European Sustainability Reporting Standards (ESRS) now approved!

On July 31^st, the European Commission adopted the European Sustainability Reporting Standards (ESRS), i.e. the standards that should be used by companies subject to the CSRD (Corporate Sustainability Reporting Directive). Read about the standard here (or peruse the actual 245 page document here).  The standards, despite having lost a little bit of edge and having been watered down during the final round of input/negotiations (read more here), are potentially ground breaking! They have the potential of changing not only accounting, but also how assets and activities are valued. By extension the standards will therefore also change business models. The changes promise to be massive. Only going through the ESRS and its disclosure requirements takes hours, if not days.

A key to understanding and working with the ESRS is the so-called “double materiality” (which refers to impact and financial materiality). According to the now adopted final version, more issues are subject to materiality; only once they are considered material does a company have to disclose them. From this follows, that though there are a number of general disclosure requirements the perhaps most important way of finding out what to report, is through the materiality analysis.

Personally, I welcome that move. I think it is important that companies focus on what is material as it strengthens their buy-in by saving time and reducing unnecessary frustration and resistance. I do see the risk with leaving the assessment of what is material to companies, but I believe that is a risk worth taking. And, besides, auditors will work on this element and practice will evolve.

Though I have written about CSRD and ESRS before (see previous Newsletters), and I have helped companies assess what they are expected to do, it is still unclear to me how certain features of the standards will turn out in practice. My hope – and expectation – is that the vast majority of companies reporting according to ESRS, will approach this with curiosity and a wish to improve the reporting landscape together. I think we have reached far enough for companies to be competent enough to assess risks and opportunities relating to sustainability, and to be transparent with the risks they are facing (imagine a tourism operator in Southern Europe not accounting for the risks associated with heat and wild fires). We are in this together, and it is together that we will build corporate culture and procedures that will contribute to a better planet for people and nature.

The European Union is now one of the main actors when it comes to pushing reporting requirements, but change is happening in many parts of the world. For a brief summary of the landscape regarding sustainability reporting in different parts of the world (the US, China, India, Canada and more), this article from Sri Lanka may be interesting. As the European Council and the Parliament has already approved CSRD no further approval is needed. However, within 2 month of adoption the Council or the Parliament may still object to the ESRS. However, time is now short for companies who will start using the Standards from January 1, 2024.

(don’t hesitate to contact We-ness if you need help with for example your double materiality analysis!)

New OECD Guidelines for Responsible Business Conduct

In previous Newsletters, we discussed the upcoming legislation relating to due diligence of human rights and environment. A key document (which is also referred to in the Corporate Sustainability Due Diligence  Directive relating to due diligence and responsible business conduct, is the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.  The guidelines were recently updated and came into force in June.

The Guidelines are a little unique, as they are supported by an implementation mechanism consisting of National Contact Points appointed by national governments. Though I don’t think that the guidelines have changed substantially, some wording and some recommendations have been made stronger. The update did not include changes to the six-step due diligence framework (see below), which is now widely acknowledged as a template that companies can use when doing their sustainability due diligence.

 

 

Where are we at now, with regard to Agenda 2030?

July is estimated to have been the warmest recorded ever and human activities are to be blamed (read more). But the challenges are not only limited to climate; the recent high-level meeting in New York around the Sustainable Development Goals concluded that we have not yet managed to catch up the losses suffered during the COVID-19 pandemic. We were making good progress and many of us felt that the goals, including eradicating extreme poverty, would be a goal within reach.

It finds that many of the SDGs are moderately to severely off track (-report from the UN Secretary General, 2023)

Business as usual simply doesn’t seem to be good enough.  Successful implementation of the 2030 Agenda for Sustainable Development needs to be a continued priority for governments, corporations, and civil society. There’s no reason – no point – in giving up.

Social Return on Investment

I have for a while sensed a growing interest in how businesses can – or should – reduce risks of doing harm and increase their positive contribution to society, and not only nature (which of course also is critical). Tools that try to account for the social value of activities, are sometimes able to include environmental aspects, at least indirectly (“non-financial impacts”).

In my experience managers (and a fair number of owners) from both public and private companies, are often interested in knowing what their impacts are, in addition to strictly financial returns. However, despite an increasing amount of data – which is largely thanks to regulations and voluntary reporting frameworks such as GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board, from the US) – many decision makers still seem to struggle with what to measure, why and how. I personally believe it is a good idea to start with “why?” Is it to disclose information because of regulations, to learn and improve – or because of some other reason?

Depending on why you wish to measure, different options are available. The “tools” offered for working on social sustainability are many, and include Sustainability Return on Investment  (S-ROI), Social Return on Investment (SROI), Total Cost Assessment (TCA) as well as more general instruments on measurement, such as Log Frame Analysis and Balanced Scorecards. The tools mentioned above are not necessarily mutually exclusive, and are often designed as instruments for management, rather than “only” measurement.

One of the most common approaches is the Social Return on Investment analysis, with its 7 (or 8) principles:  1. Involve stakeholders, 2. Understand what changes, 3. Value what matters, 4. Only include the material, 5. Don’t overclaim, 6. Be transparent, 7. Verify the results 8. Be responsive.

I have not found any single instrument that fits all needs, which is not surprising: the complexity of most workplaces normally requires some adaptation to specific needs.
For a more information on some of the pro’s and con’s with SROI this paper may be useful. I find that many companies who have not yet spent a lot of time quantifying their impact may be helped by making a distinction between focusing on externalities (meaning “by-product”) as opposed to an intended goal.  In my view, it is now high time for companies to move from accounting for the value of sustainability, to managing for sustainability. Another way to look at it; we need to make use of all the data that is now available, to move from accounting to managing for results beyond finances. (this is part of stage 4 in a SROI-analysis, but my experience is that it ought to come in earlier, if we wish to use this as a management tool).

In the coming months, I will put additional effort into working on ways in which companies can become more sustainable with regard to their “social impact”. I intend to write about the progress but if you would wish your company to joint this process together with a handful of other companies, let me know!

Safe and Just Earth System Boundaries

A brand new study by “the Earth Commission” (an international network of scientists) have attempted to assess and quantify safety and justice for humanity on earth. The research builds on the planetary boundaries framework. By adding the “safe” and “just” perspective, the research shows how the room of manoeuvre is shrinking witin the original boundaries. Of the five analysed domains (climate, biodiversity, freshwater, nutrient cycles and aerosol pollutants), several boundaries are already transgressed.  Read the article here.

“If businesses and governments commit now to enormous and just transformations in order to operate within the safe and just boundaries, then our children will have a future worth living for.” –Rockström & Gupta in Weforum.org

Just Green Transition: are companies leading the way?

On a similar topic to the article mentioned above: During the last few months I have been involved in a project looking at how companies together with other actors can contribute to a Just Green Transition on developing markets (the project was initiated by Sida together with two Swedish Embassies and in collaboration with Business Sweden). Very interesting. Though the future sometimes appears grim, I see lots of opportunities when it comes to how the business community is transforming (though I often find the pace to be too slow). My own sense is that companies who have done their materiality analysis, are more likely to act in order to reduce risks and increase their positive impact on people and planet. And, mind you, these are successful companies.

Let me share two preliminary (personal) reflections:

1. There seems to be a growing understanding of the need to combine “Green” and “Just”; a transition that is excluding, or leaves people behind (to use the terminology of the 2030 Agenda) will probably not be embraced, if even accepted. For serious companies working in for example mining, this seem to be well understood and accepted.
2. Another reflection is that some developing countries oppose the concept of Just Green Transition, suggesting that for example “green industrialisation” better reflects their needs, as they never really had a chance to industrialize – in a way that needs to be transformed – in the first place.

The Corporate Sustainability Due Diligence Directive (CSDDD) approved by the European Parliament!

The CSDDD, that we have talked about in previous Newsletters, is now one step closer to implementation and integration into national legislation, as the European Parliament now has approved it. The directive requires companies to identify actual or potential adverse human rights and environmental impacts (Article 6); prevent or mitigate potential impacts (Article 7); bring to an end or minimise actual impacts (Article 8); establish and maintain a complaints procedure (Article 9); monitor the effectiveness of the due diligence policy and measures (Article 10) and publicly communicate on due diligence (Article 11). The “controversial” article 25 on Directors Duty of Care, is still in the text approved by the parliament.

The legislation – which many consider to be ground breaking –  will now be reconciled with the Council and the Commission after which member states will adopt it into national legislation. Similar legislation is already in place in several countries, including France, Germany, the Netherlands and Norway. A useful summary on CSDDD from the EU Parliament can be found here.

A roadmap towards a more Sustainable Economy (in Sweden)

The Swedish National Coordinator for Agenda 2030  (Nationella Agenda 2030 Samordnaren) recently launched a roadmap for the transformation to a more sustainable economy (in Swedish). The roadmap has been developed together with a reference group of experts, companies and other actors. The recommendations are directed towards both political decision makers and, to a lesser extent, the society at large. There are 14 recommendations, including a proposed review of the fiscal framework, a reformed tax system, adding new ways of measuring development besides GDP, and introducing and expanding pricing on CO2. The purpose of the roadmap is to contribute with suggestions and ideas on how to make the economy an engine of change in the transition towards sustainable development.

I believe the roadmap deserves to be read and discussed!

Too much uncertainty

I believe that a normal reaction to being, is stress and discomfort. There are several reasons, for one: the latest IPCC-report (which was discussed in last month’s newsletter) is a reminder of what is likely to happen with regard to our climate, and as you probably know the situation is similarly worrying when it comes to biodiversity (read more here on the state of biodiversity). In addition, billions of people are going to bed hungry, live in areas affected by conflict or live under authoritarian, non-democratic rule. This, naturally, makes for uncertainty that makes many companies – or investors – hesitant to invest in solutions.

I frequently talk to companies who are reluctant to invest in developing markets because of the uncertainty, and the reputational risks, they face if something goes wrong, or sometimes even for being on a particular market. At the same time, there’s a need for much more investments in these markets, not less. Whatever we have achieved in terms of climate smart solutions, decent working conditions and (possibly) more inclusive or fair ways of doing business in one part of the world, should be shared.

Disclosing sustainability information to avoid risks is one way, but as important, is to learn from each other and actively share in a sense of “we are in this together!” We need stories helping – inspiring – us to see that things can get better!

But things are also getting better (for example in Georgia)

When I’m writing this, I’m on my way back from Tbilisi, Georgia. A country that I visited a few times in the late 1990’s. I like coming back to countries. Because often, contrary to what I tend to presume, I find that things have gotten better.

Georgia is a very pleasant country to visit, despite its many challenges. It was nice 25 years ago as well, but I also notice what statistics confirm: many things have gotten better.  Many things can, I’m sure improve but it is inspiring to see the graffiti on the walls in Tbilisi, to hear about how people dared to protest laws they disliked, how life expectancy have increased, years of schooling has improved, poverty has dropped and how the economy has grown. And, despite the current economic slow-down around the world, development is still taking place in many, if not most, developing countries. (read more about the Human Development in Georgia).

This is not to say that Covid, the war in Ukraine and economic down-turn and the climate crises doesn’t come at a cost for people and businesses, but fact remains that we have been able to turn things around for the better before, so we ought to be able to do that again.

Emission trading system – a success that we can learn from

The European Emission trading system is about to be expanded. It is a system that has existed since around 2005, and it is built on the “polluter pays principle”. At times it has been accused of having a limited impact, but now I think most observers would agree that it has in fact been very successful and one of the drivers of the decreasing emissions in Europe (read more). The new rules increase the overall ambition of emissions reductions by 2030 in the sectors covered by the EU ETS to 62% compared to 2005 levels.

New sectors to be included in the system includes (but are not limited to) maritime transport, building, road transport and emissions from aviation. Enlarging this system would perhaps be one of the best ways of creating incentives for companies to invest in more climate smart solutions as well as finding ways of avoiding emissions all together. Read more here.

Aviation fuel – finally something is moving?!

The European Parliament and member states on April 25 agreed that fuel suppliers must ensure that 2% of fuel made available at EU airports is renewable (SAF) in 2025, rising to 6% in 2030, 20% in 2035 and gradually to 70% in 2050. (read more)  This, in my view, is a very important step forward. It will take time before we have electrified airplanes or other renewable sources of energy and since eg the car fleet is easier to electrify, I would wish that as much as possible of todays aviation fuel is replaced with renewable fuel.

It is, by the way, possible to do reduce your impact already today. I, and companies I have worked with, have done this through the Fly Green Fund. Expensive, yes, but perhaps flying ought to be more expensive util there are better fuels? Besides, reducing your impact is a great feeling when you do your climate impact assessment!

Sustainability reporting – a way of learning!

Ok, be prepared for a slight overload of acronyms: CSRD, ESRS (which is the reporting standard to be used by companies when reporting according to CSRD) developed by EFRAG, and CSDD (the upcoming human rights and environmental due diligence directive) are a couple of EU directives that are believed to move the frontiers when it comes to sustainability.

In my view, European companies are adapting to a new reality. I’m not claiming that companies, generally speaking, are doing enough, but in my experience, awareness is growing and many companies are certainly moving in the right direction. If you are doubtful, have a look at the sustainability report of companies. They are in my view certainly better today than only a few years ago. Smaller companies, however, are facing a more challenging time.

I am currently working with at least two companies that have decided to analyse and disclose their material impact even though they are not obliged to, which I find encouraging. One example is B-corp certified Chiesi Pharma. What I particularly like about their sustainability report, is that they are brave enough to disclose achievements as well as areas where they are still struggling. In that way I find that it is also a valuable tool for others to look at, taking on board some of Chiesis lessons. It’s sweet and short : read it 🙂

If you feel you need to learn more about how your company can become more sustainable there are plenty of guidelines out there, but I also think you can learn from reading a few sustainability reports from peers that you find serious. Good luck!