What is in store for sustainability in 2023?

Climate readiness – 2023 is, in part, a ‘preparation’ year for companies to get ready for new regulations and standards going into effect in 2024.

“Start now” is the mantra for regulations and standards that were announced in 2022 and will go into effect in 2024.

Early bird companies will have a smoother ride in 2024 should they start prepping now –

• EU’s CSRD and ESRS first reporting year is 2024.
• We are coming closer to a global baseline of sustainability-related financial disclosure with ISSB finalizing their IFRS2 climate standard in June 2023.
• CDP will incorporate and require ISSB standards in 2024.

In effect in 2023 –

• GRI’s revised standards, released in 2021 are in effect in 2023.
• GRI 13 Sector Standard: Agriculture, Fishing and Aquaculture goes into effect in 2024, but is available now and companies can get a jump start by completing in 2023.
• SBTi Financial Sector and TCFD Reporting Guidance on identifying and managing climate-related financial risks through SBTi-FI target setting in combination with adoption of TCFD recommendations is released in January.
• Science-based targets (SBTs) for Nature V1 will be available for immediate use by companies in March 2023.
• The Taskforce on Nature-Related Disclosures (TNFD) will release a Beta version v.04 in March and their final recommendations in September 2023.
• CDP will add additional biodiversity questions to their 2023 questionnaire, in addition to the six added to 2022’s version.

Elsewhere in 2023 –

Investor demands for companies to report on their climate risk are going to continue to grow as well as expand to include nature-based risks.  

In the EU

• In early 2023, the EU Commission is set to propose a significant overhaul of EU’s electricity market, including the decoupling of electricity and gas prices.
• A new European Hydrogen bank is on the horizon, proposed by the EU Commission, and is set to invest €3 billion to kickstart the EU hydrogen market.
• The EU will take action to reduce waste and the environmental impact of waste, specifically with a focus on food and textile waste.

 In the US

• Activities related to the Inflation Reduction Act (IRA) will ramp up fast now that the act is in effect.
• A decision will be made on the SEC proposed climate disclosure rule.  Question is – What will rule look like? Watered down? On par with EU regs?
• We will also see what kind of legs the partisan political backlash against ESG and sustainability has. We suspect that the backlash can’t compete against investor demand, though it is going to try.

Lastly, it is likely that 2023 will address other issues brought to prominence in 2022 – expect to see the following:

•  An increase in solutions to address data quality and acquisition for scope 3 as well as for nature-related data
• Increased debate and clarification around carbon offset issues
• High focus on emerging tech solutions to climate change, fueled by IRA
• Continued fight against greenwashing, with companies increasingly challenged on their climate change and sustainability efforts by regulators and investors

We see 2023 as a year that builds on the significant events of 2022 (see our previous post), with sustainability increasingly becoming business as usual.