Kategori: sustainablity

“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!

The latest IPCC report

 

The most recent IPCC report reveals no news. As usual it is a summary of current research – and a grim reminder of how troublesome our situation is. The report also highlights some opportunities, not least the reduced price of renewable energy. This is not a small thing, but there are still several reasons why we should feel really worried: temperatures are now 1.1 degrees above pre-industrial times, and we need to immediately reduce our emissions if want to have even the slightest hope of staying beyond 1.5 degrees of warming.

The consequences of the global warming are already now obvious and include increased sea levels, water shortages and more extreme weather.  There is still hope, but as the scenarios in the picture below (from the report) shows, we need to act – but even if we act we should also prepare for a warmer climate. Most businesses (if not all?) will be impacted, one way or the other.

Personally, I still believe that there is time for a green transition, and I think that this transition will entail both new technologies and new behaviour. But for the transition to take root – to be sustained – it will also have to be just. This brings us to…

Corporate due diligence for human rights and the Norwegian Transparency Act

 

Have you heard of the Norwegian Transparency act? Or Åbenhetsloven, as it is called in Norwegian. It’s an interesting piece of legislation that came into force in Norway July 2022, and applies to larger companies resident in or offering services or products in Norway. The act aims at promoting companies respect for (fundamental) human rights and decent working conditions. It further requires companies to carry out due diligence assessments and to disclose (publish) an account of their assessments.

The assessment shall be carried out in accordance with the OECD Guidelines for Multinational Enterprises, and is many ways similar to the proposed Corporate Sustainability Due Diligence Directive (which I touch upon in this previous Newsletter) – though I suspect that it will be some what less “heavy” for companies to report according to the Norwegian act than the CSDD in its current form.

“The Transparency Act requires enterprises to conduct due diligence assessments, meaning that they must look at both their own business, their supply chain and their business partners to find out where the biggest risks are”
(Section 4 of the Act)

The due diligence assessment shall cover the entire supply chain but, the act also stresses the principle of proportionality, meaning that context, severity and probability of any adverse impact should be taken into consideration. It is estimated that 9000 companies are directly bound by the act. The assessment mus be published (at least) on the companies website and the first dead-line is 30 June 2023. In addition, companies have a duty to provide information to anyone who requests to know how it addresses actual or potential adverse impacts.

Personally, I very much look forward to see how the act will unfold and what this may imply in terms of companies respect for human rights. I think it will fairly soon impact many more companies than those who are directly obliged to report in accordance with the act, and even companies outside Norway.  It is also worth noting that there is similar legislation in force or being proposed in several countries, for example France, Germany and the Netherlands  (Here is a link to an interesting chart/summary) and with CSDD being approved we will see similar legislation in all European countries.

Change is coming!

 

Do we need more guidelines?

In all honesty, I often find guidelines unhelpful. I know that is partly me, but I think that as soon as you engage with a complex problem, a guideline will tend to ask the wrong questions. Or ask too many questions, which makes you spend time on issues that are not the most relevant. The same is true, I think, for many sustainability frameworks, ESG-ratings and reporting directives. Good results require knowledge, curiosity, and a firm interest in focusing on what is material. That doesn’t imply that guidelines and directives are not good, only that I find that for those who wants to stay ahead, they probably also need to go beyond the guidelines.

I have thought of the role of guidelines when reading new EU legislation relating to reporting (the Taxonomy with its minimum safeguards as well as CSRD) and due diligence (upcoming Corporate Sustainability Due Diligence Directive).
The new legislation relies on two of the most influential guideleines when it comes to sustainability: the OECD Due Diligence Guidelines for responsible business conduct   and the UN Guiding Principles on Business and Human Rights. I think that these are great instruments. But I’m not sure how many business people who find the documents hands-on and useful. Perhaps because they are, well, guidelines directed towards a very broad spectrum of companies. They have helped us deepen the entire discourse around sustainable business, but that doesn’t make them the most valuable of tools. Therefore I think that this kind of guidelines are useful as an introduction but you need to sit down with someone with knowledge about the context as well as the business in order to make good sense of the guidelines.

Having said all that, there are of course a number of guidelines and templates that are of great value to anyone working with sustainability. The other day, for example, I came across this guide for inclusive sourcing. A good starting point for companies who wishes to improve on their sustainability work in general and diversity and inclusion in particular. For those who wish to take their supplier code of conduct forward aligning to relevant ILO-conventions as well as the UN Guiding Principles. I find the Responsible Business Alliance provide some good support. Read more here. For those who wish to go a little further and learn and develop together, I would recommend you to have a look at  the approach chosen by for example Chiesi, who have developed a Code of Interdependence.

The war in Ukraine

It is now slightly more than a year since Russia’s attempt to a large scale invasion of Ukraine. And still no peace in sight. The war, and the concept of war, feels so…unfashionable. We don’t have time for this.

When I wrote about the invasion a year ago, I was immediately asked if I thought investments in the arms industry could ever be sustainable. (I wasn’t able to give any straight answer). That discussion was fairly intense for some time and opened up other avenues not only focusing on whether it is legitimate to produce arms or not (see for example this article). Maybe it’s only me but I find that this discussion hasn’t continued with the intensity that I had expected. I think one of the reasons is the recent debate around the shortcomings of ESG-ratings; ratings tend to be blind to context. Sasja Beslik has written insightful on this at a number of occasions, eg here .

When the war ends, I hope the discussion on sustainable investments will continue to evolve in all its complexity. What is sustainable at one point in time or in one location, may not be as sustainable in another. And right now, I believe that producing and selling arms that allows countries to defend themselves is necessary.

Why do some people join violent extremist groups?

The other week UNDP published an interesting report on what drives people into extremism in Africa. The report shows that lack of job was, among the 2000+ interviewed, a more important driver for people to join extremist groups than religious ideology. To me, that is a strong reminder of the importance to also address the social aspects – and the justness –  in the green transition we have ahead. Lack of jobs, poverty, broken social contract, bad education….it is in all our interest to address the underlying push and pull factors behind violent extremism. Or in other words: we need more green inclusive growth.

Among nearly 2,200 interviewees, one-quarter of voluntary recruits cited job opportunities as their primary reason for joining, a 92 percent increase from the findings of a groundbreaking 2017 UNDP study. 

Take care!

PS If you are Swedish speaking and interested in  aid, trade and sustainable development, you may want to read this short piece that I wrote on LinkedIn

 

In this month’s newsletter, I highlight some of the more prominent sustainability issues that I think we will hear more about in 2023, through the lens of three presentations I have given recently.

For those interested in the latest on the EU – US trade discussions relating to sustainable investments I would recommend this piece (in Swedish but an older version is available in English) from Anna Stellinger from the Confederation of Swedish Enterprise. And if you are interested in what happened in Davos, have a look at this summary.

During 2023 I think we will see more companies that will openly declare their ambition to balance profit and value creation for people and planet. We will also see more actors – both public and private – that share their challenges and lessons learned.

1. In early January I gave a presentation on the 2022 sustainability achievements at a company I have worked with for a few years, a pharmaceutical company called Chiesi Pharma. It’s a successful company, both in terms of profits and in terms of the value it creates for its different stakeholders. The success can be measured by an increased score on the company’s B-Corp certification, but what impresses me the most, is that Chiesi Nordic is also wiling to disclose and learn from the goals that it has not met. And the company is willing to spend time and energy – showing leadership – on influencing others in its ecosystem.
   
   In 2023, a fair amount of the sustainability agenda among companies will come from employees who wish their employers to address material risks when reducing their negative footprint and improving their positive contributions on people and planet.
2. Mid-January I gave a presentation for a MedTech company which was more of an introduction to how a company can gain value by becoming more sustainable. As usual, I started with the challenges we have ahead, but also with some of the improvements we have seen during the last decades (partly thanks to fossil-fuel doped growth). I then spent some time on my favourite topic, the importance of a materiality analysis; of doing “the right things”. From the discussion that followed, I took with me the keen interest from all levels of the company, in sustainability and on focusing on what is most important. That energy!

   I do believe that in 2023, regulation and incentives from the EU will be main drivers for the transition towards more sustainable business practices, to some extent also beyond the borders of the EU.

3. Late January I made a presentation at a Round Table at the Swedish Embassy in Pretoria. The Round Table was about challenges and opportunities with regard to a “Just Green Transition”, and more specifically how Sweden and climate smart products developed by Swedish companies, can contribute to a greener and more just future. During the Round Table we spent some time talking about the development in Europe regarding increased regulation around sustainability disclosures (e.g. the Taxonomy, CSRD and the coming Corporate Sustainability Due Diligence Directive). Not everyone was convinced about the greatness of disclosure, and I personally agree that regulation on disclosure will not be enough.

And here are some other sustainability issues that I will keep an eye on during 2023…

-How companies and governments will operationalise the conclusions from COP 15 on biodiversity

-How ESG-disclosure standards will evolve, both through voluntary agreements and through regulations to curb green-washing

-Access to clean and affordable energy (and I think it’s time to look beyond Europe)

-The evolution of new business models and innovation where sustainability is an integrated part of the business model (often, but not only, circular models where the “waste” of one process, is the “food” of another. Keep your eyes on e.g. the textile industry!)

-Social sustainability. This will partly be driven by regulations on human rights due diligence and minimum safeguards (from the Taxonomy), but I also think that companies who previously have donated money a little a little “erratic”, will get more professional and to a larger extent look for shared value.

-Carbon taxation. Who will joint the ride?

-Investments. Sustainable investments are likely to continue to grow in 2023. The most interesting development, however, will be how the American and European public spending and investment race will evolve. Will we see European companies with climate smart products moving to or setting up new businesses in the US?

And finally, I wish (and think) that we will see more companies and countries sharing technologies and experiences for the betterment of all of us. A little like when Volvo, in the 1950’s, decided not to patent the three-point seatbelt. This will also include, I think, a slightly new take on aid, trade and sustainability – interestingly enough probably fairly aligned with the general approach of the 2030 Agenda for Sustainable Development!

 

Stay tuned & stay safe!

It was a shitty year, but actually a lot of great things also happened in 2022…

I think most of my readers are quite aware of the many challenges we’ve faced during 2022. The list of evils is long – and it doesn’t stop by the backsliding with regard to the 2030 Agenda, the war in Ukraine (which I wrote about in this Newsletter), the climate crises and our inability to fully prevent or deal with its consequences (read more here), the biodiversity crises, food crises, populism and authoritarianism, tensions around Taiwan, economic slow down and the inflation, the crack down on women’s rights in Iran and Afghanistan… to mention some of our shared threats.

However, there were also many good things that happened in 2022 that we should acknowledge. Allow me to point to some of our achievements in this annual review.

…for example:

The European Parliament and EU member states agreed on a more ambitious emissions trading system, which is expected to reduce industrial carbon emissions. There is a plan for phasing out companies’ free allowances and new sectors, such as transports and buildings, will be included. In addition, more money will be made available to green transition and for green innovations.

Climate change investments in the US. A part of Biden’s Inflation Reduction Act is directed towards investments in clean energy reduction and tax credits for cutting carbon emissions. The bill is controversial in Europe as it favors investments in the US and thereby risks distorting competition, or free trade. However, it is generally seen as giving a boost to green investments as it will increase demand for green energy and green innovations as well as to force other countries to pay more attention to – i.e. find ways of supporting – green investments.

Ethiopia. The war in in and around Tigray calmed down and was replaced by some form of fragile peace. Other countries that seemed to be moving in the right direction include Iraq (which had a new government installed), Mozambique and possibly Yemen.

A new agreement on biodiversity was reached at COP15! After years of negotiations (and postponements) a landmark agreement was reached in Montreal in December. Among other things, a framework and targets were agreed to address pollution, overexploitation, and unsustainable agricultural practices.  Perhaps not as grand as the Paris agreement on climate, but hopefully equally influential.

The EU is becoming a sustainability champion! In addition to the Emission Trading System mentioned above, some milestone decisions were taken regarding everything from a provisional agreement reached between the council and the parliament to set up a new fund to help vulnerable citizens most affected by energy and transport poverty, to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDD). Well, those are not ready yet, you may argue. True, but things are now moving quickly and some of the minimum safeguards regarding not least human rights, are becoming more and more operational. See for example this very useful paper from the platform on sustainable finance (from October 2022) that gives advice on the application of the Taxonomy regulation.

Malaria. Last year a vaccine against malaria was given a go ahead by WHO and there are now hopeful signs of a new, even better vaccine with “world changing potential”. There are still some final trials going on but the vaccine, that is reported to give an 80% protection, is said to be very promising and agreements to produce 100 million doses/year have been signed. This could save millions of lives. Read more

The private sector is taking a lead in the transition! Despite some governments slowing down in the transition towards more sustainable economies, the private sector proved to be quite resilient and has even stepped up. Especially regarding their commitments to the Paris Agreement. (see e.g. this previous Newsletter). Very hopeful.

Green steel. Production of steel is estimated to cause c:a 8% of the worlds CO2 emissions. Good thing than, that green steel from companies such as Swedish Hybrit and H2 Green Steel  is (or are about to) start the production of steel more or less without any CO2 emissions. And despite a higher price, there seems to be some demand as well. We need more of it!

Fusion energy. In what the US Department of Energy described as a “major scientific breakthrough”, researchers in California managed to produce more energy from fusion, than the energy needed to power the process. Certainly, a step towards clean energy. Read more.

Protection of forests. The debate on how forests are best used is intense in many parts of the world. However, science seem to be in agreement with regard to the importance of protecting large rainforests, such as the Amazon. The new administration in Brazil, together with Indonesia and the Democratic Republic of Congo reportedly started talks about forming “an OPEC of rainforests”. – and the new minister of environment in Brazil, Marina Silva, is an Amazon activist.

These are but a few of all the good news from 2022!

There are lots of more things to be said for example on fossil free energy, on sustainable investments and impact investments, on science, friendships, peace and love.
If you are specifically interested in innovations, you may want to read this piece, and if you are Swedish speaking and interested in global development, this may be of interest.

So, how was 2022 for We-ness?

Very well, thank you. We have supported and given advice to some eight companies and organization, ranging from pharma and medtech to recruitment, industry associations, an impact company, global development (including the UN) and more.

Among other things I have worked with
-materiality analysis and
-preparing sustainability plans,
-in finding ways of supporting small and medium sized companies in developing economies,
-in strengthening partnerships for impact investments,
-in sustainability reporting,
-in reviewing how companies can become more sustainable and have a greater impact, (including B-corp certification)
-in defining impact,
-with agrobusiness in Albania and with
-concretizing the concept Just Green Transition and
-with the minimum safeguards of the Taxonomy regulation.
-I’ve coached leaders and I have given lectures.

In summary: I have learned a lot and I’m deeply grateful to all the companies and individuals that I’ve worked with for what we have achieved together.

We are all change makers! Happy new 2023!