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ESG Weekly News Update: May 26, 2023

General ESG News

GreenBiz: How a global treaty could solve the plastic waste crisis

  • In Paris next week, a UN-sponsored group of nations, businesses, and activists will meet to discuss a treaty for curbing plastic pollution around the world – the Global Treaty on Plastic Pollution. The biggest question is whether the measures being considered will be enough to solve the ongoing plastic waste crisis.

  • The treaty’s final draft is expected to be prepared in 2024, with discussions about potentially banning or phasing out certain polymers and plastics to help reduce the dispersion of microplastics into the air, water, and soil.

  • CDP has also announced that it will start collecting data about companies’ use of plastics to gain greater visibility into their impacts.

  • Ultimately, what is needed is a curbing of demand for plastic products coupled with a dramatic increase in product lifespans and improved recyclability.

  • The issue of balancing supply and demand is the one plaguing treaty negotiators the most and will require actions like investments in improved recycling infrastructure, consumer education, and potentially taxes on virgin materials.

  • While businesses have concerns, there is also a benefit to having uniform standards and requirements, instead of different governments and organizations pushing for and prohibiting different things.

Fast Company: Inside Gen Z’s conflicting passions for both sustainability and shopping

  • Conversations around sustainability and conscious consumption have become mainstream, especially for younger generations. When surveyed, Gen Z consumers state that they are more interested in buying products secondhand, bringing reusable containers to the store, avoiding disposable items, and choosing products made from recycled materials when compared to baby boomers and earlier generations.

  • However, Gen Z’s climate concerns and sustainable aspirations conflict with their love of shopping, and this is seen in their continued loyalty to fast fashion and mass retailers.

  • Because of this dissonance, retailers who can help reconcile Gen Z’s love of shopping with their sustainability interests stand to succeed with the emerging generation of shoppers. To meet this challenge, brands must:

  • Make sustainable living accessible.

  • Strive for net-positive impact.

  • Design away the broken status quo.

Sustainable Brands: Made to Measure: How to Tailor Marketing for Unique Demographics

  • In a saturated marketplace, it can take time for a sustainability-focused brand to build awareness and recognition. Over the last few years, Logical Position partnered with sustainable lighting brand Revolve LED to revamp its digital marketing strategy, resulting in a roadmap for other brands to find similar success:

  • Learn about the buyers and their values

  • Grow brand awareness

  • Build customer trust, especially through outside accreditation

  • Speak authentically

  • Sell where the customers shop.

  • Sustainability-focused brands face the challenge of cutting through the noise, and the best way to do this is to home in on the specific needs of their target demographics and create a thoughtful, customized digital strategy.

Sustainable Brands: The Balancing Act of Employee Engagement and ESG Goals

  • Employee buy-in and partnership are integral to accomplishing ESG goals. Channeling employee passion is crucial to integrate ESG across a business.

  • An IBM study found that 80% of employees want to help their company reach ESG and climate goals.

  • Providing employees tools to contribute to company sustainability goals will both help to incorporate employee knowledge and increase engagement.

  • Transparency on ESG efforts with employees is crucial to gain trust and continue to engage in the learning process as the ESG space continues to evolve.

  • Active engagement to ensure that ESG efforts are cross-functional allows sustainability to be integrated into the whole business.

ESG News: Asia-Pacific Countries Adopt 10 UN Resolutions Reaffirming Commitments to Protect the Planet and its People

  • 1,000 stakeholders and government representatives were present at the 79th session of the Economic and Social Commission for Asia and the Pacific (ESCAP), where the re-commitment to reduce greenhouse gas emissions was made.

  • Over half of global emissions are produced in these regions.

  • Difficulties experienced in least-developed countries, small developing states, and landlocked developing countries contribute to the increased risk and vulnerability of these locations due to climate change.

  • The resolution recommendations included:

  1. Promotion of clean energy technologies and use of climate change-related statistics

  2. Strengthening regional action and partnerships

  3. Environmental protection commitments

  4. Supporting countries in “special situations”

  5. Improved understanding of the connection between climate and ocean

  6. Sustainable urban development.

Investment Trends

ESG Clarity: Private equity gets net-zero guidance

  • The Net Zero Investment Framework (NZIF) Component for the Private Equity Industry has been designed by the Institutional Investors Group on Climate Change (IIGCC), Ceres, and Anthesis.

  • This guidance establishes a consistent approach for measuring progress toward net zero, with an emphasis on the decarbonization of portfolio companies.

  • The guidance aims to standardize target setting, engagement, and reporting between limited partners, general partners, and portfolio companies.

Companies and Industries

Bloomberg: Why It’s Time to Rethink Fashion’s Biodiversity Strategy

  • The COP15 UN Biodiversity Conference and G20 summit in 2022 have highlighted the role of nature in supporting the private sector, as well as the need for nature-based solutions for protecting biodiversity. The World Economic Forum even cited biodiversity loss and ecosystem collapse as one of the top four global risks in the next decade.

  • Despite these warnings, the fashion and textile industries have been slow to develop goals and roadmaps for mitigation.

  • Biodiversity loss is both a physical and transitional risk for fashion, with heavy reliance on land and water, as well as complex global supply chains.

  • To guide businesses in their journey toward addressing nature-related impacts, tools and frameworks like the Task Force on Nature-Related Financial Disclosures (TNFD) and the Science Based Targets initiative (SBTi) are helping them focus their efforts and disclosures.

  • In the fashion industry, commitments to protect natural capital have been slow to materialize. At the COP27 conference, the Global Fashion Agenda and UNEP launched their ‘Fashion Industry Target Consultation’ initiative, which calls on fashion stakeholders to define concrete targets for making the industry net positive.

  • Within the industry, individual players are also taking steps toward better biodiversity management, with a wave of initiatives, commitments, and funding put in place by some of the world’s biggest brands, some of which have faced criticism for their sustainability strategies in the past.

GreenBiz: ‘Net positive hospitality:’ Hotels, resorts agree to 5-year sustainability strategy

  • One year ago, the Sustainable Hospitality Alliance (representing more than 50,000 properties worldwide) published its vision to become ‘net positive.’ Now, the group has released its five-year strategy for how the sector can positively impact the environment, economy, and communities.

  • As part of the new plan, members of the Alliance have committed to a range of initiatives, such as introducing standardized sustainability metrics across the industry.

  • Industry experts note that the travel and tourism industry could cut emissions by 40% by 2030, and while the industry is still not moving fast enough, momentum is growing. Members of the Alliance believe their work can help accelerate this transition.

GeenBiz: Teetering on the traceability tipping point

  • Food and ag companies are facing increasing scrutiny into their supply chains, and this attention is forcing these companies to adopt regenerative and just models.

  • Both the EU and the U.S. have taken action to encourage traceability through regulatory action, seen in the form of the EU Corporate Sustainability Reporting Directive (CSRD), the EU Deforestation Free Regulation (EUDR), and the USDA’s Partnerships for Climate Smart Communities.

  • Beyond regulation, there is a business case for transparent supply chains, and companies that achieve this will be better positioned to capitalize on the business opportunities promised by sustainability progress.

  • According to experts in the industry, companies can accelerate their traceability initiatives using four approaches:

  • Engaging employees across departments,

  • Using emerging technologies for digital infrastructure,

  • Simplifying supply chains wherever possible,

  • Starting small and soon.

Reuters: Heat insurance offers climate change lifeline to poor workers

  • In developing areas experiencing impacts of climate change, parametric insurance policies are structured to provide aid when extreme, predetermined, thresholds have been met.

  • High temperatures, wind speeds, and even rainfall amounts can trigger payments.

  • The long-term financial feasibility of parametric insurance is unclear since a more frequent occurrence of climate risks will cause the payouts to deplete funds ahead of schedule.

  • Proactive government efforts to help communities “implement better strategies to defend against weather extremes” could potentially increase the trigger threshold and preserve funds.

  • As heatwaves are likely to become more frequent, insurance payouts provide funds for vulnerable workers to protect their health and survive the difficult conditions they experience.

GreenBiz: Why Nespresso and other big companies are becoming certified B Corps

  • Ninety of the more than 6,400 certified B Corp companies are multinational.

  • The impact of obtaining a B Corp certification as a multinational company with an expansive supply chain has a rippling and significant impact.

  • The assessment bar for multinational companies is higher and the “B Movement Builders” program provides B Corps certified mentors (ie Danone and Natura&Co) to guide multinationals through the application process.

  • With a focus on continual improvement, multinational companies seeking B Corp certification must engage with suppliers, stakeholders, best practices, and community partners.

  • The B Lab is currently finalizing new standards to be released in 2024. This update is in response to criticism of the existing system, and to evolve with the needs of social, governance, environmental business impact, and the importance of climate justice.

ESG Ratings, Reporting, and Standards

Financial Times: EU’s new green reporting rules are ‘impossible’, businesses say

  • Financial officers of the European Round Table for Industry (ERT) are requesting that “the taxonomy,” EU’s sustainable investment rules, are delayed until they can provide clear, consistent guidance.

  • While the taxonomy is intended to be a classification system with activity thresholds to indicate the activity’s harm or benefit to the environment, it ‘disregards and contradicts existing, robust EU legislation,’ noted BMW finance director, Nicholas Peter.

  • Peter provided the commissioner with feedback on the taxonomy as being an additional burden to the current reporting standards required in the EU, and not elsewhere.

  • Peter also provided suggestions to improve the legislation, so that its expectations are clarified and a complete expectation for products to be “classed as green” would be outlined.

  • As more legislation covering additional environmental objectives is due this year, Peter and the ERT urge the existing taxonomy must be “evaluated and improved before expanding it.”

ESG Today: G7 Leaders Support Development of Global Sustainable Disclosure Standards

  • At the G7 Summit in Japan, leaders of industrial nations made announcements supporting their Paris Agreement commitments, as well as the development of the ISSB’s forthcoming corporate reporting standards.

  • It was recently announced that the new standards will go into effect in January of 2024, with companies disclosing against them in 2025.

  • One of the key issues discussed was the need to mobilize financing to reduce emissions and facilitate climate-resilient development. The leaders also recognized the need for businesses to implement “credible corporate climate transition plans” to meet their net-zero goals.

Government Policy

Financial Times: UK awards first round of carbon storage licenses

  • The UK government has awarded its first round of carbon storage licenses, marking a step in its efforts to develop an industry to capture and store CO2 emissions from factories and other fossil fuel-intensive businesses.

  • There are currently no active carbon storage sites in the UK, but the government aims to store about 30 million tonnes each year by 2030.

  • The large number of applications for the first round of licenses indicates the growing appetite and commercial case for this technology, especially considering the surge in prices for heavy emitters.

  • Many of those offered licenses are oil and gas producers who are looking to repurpose their depleted fields for carbon storage.

ESG Clarity: U.S. DOE Invests $51 Million in America’s Electric Vehicle Charging Network

  • The Biden-Harris Administration has announced the $51 million Ride and Drive Electric funding opportunity through the Bipartisan Infrastructure Law to help facilitate the electrification of the transportation sector. The program will be administered by the Joint Office of Energy and Transportation.

  • The Administration also announced the launch of the National Charging Experience Consortium, led by the DOE’s Idaho National Laboratory, which aims to advance convenient and reliable charging solutions that are made in America.

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