The output of 2022 United Nations Climate Change Conference, or COP27 as it is widely known, is seen as a disappointment in terms of substantial progress towards the main sustainability goal of limiting the global temperature rise to 1.5C. Within the context of a war in Europe, the global cost of living crisis (or recession), and ongoing and accelerating international trade wars, it is clear that politicians’ and CEOs’ focus on the sustainability challenge has often been distracted.
As a consequence, the deglobalization trend is having an impact on sustainability goals – they are, in effect, becoming more regionalized and localized. It is not all bad news – the Council of the EU gave its final approval to the Corporate Sustainability Reporting Directive (CSRD) on 28 November, requiring more detailed reporting on sustainability matters, social rights, human rights, and governance factors. These rules will apply to all large companies and all companies listed on regulated markets other than micro enterprises, with some exemptions for listed SMEs during a transitional period until 2028.
More significantly – especially given recent rulings and antitrust fines for (usually US-based) companies like Google, the regulations will also apply to non-European companies with a turnover of $150+ million in the EU. This underlines the leadership role in sustainability goals by the EU and is an indication of the direction of travel over the long term. However, in an economic environment which is witnessing trade wars, technology intellectual property battles, and a move towards ‘friend-shoring’ for reliable supply chains, the deglobalization effect of trade is bound to impact sustainability goals and their attainment.
Global sustainability – it’s complicated
Essentially, things are going to become more complicated. When it comes to the battle between NPS (Net Promoter Score), ESG (Environmental, Social, and Governance) and EPS (Earnings Per Share), listed enterprises have a fiduciary duty to shareholders which can take precedence in many cases over what might be seen as ‘softer’ issues like customer satisfaction and environmental responsibility. In the long run the latter two are of greater importance, but if your share price is tanking and you need to cut costs and staff to keep your own highly-paid job, priorities tend to change strategic focus.
With customers, talent, and investors generally committed to global sustainability, the journey is clear. However, today there are economic rocks in the road. Different regions, governments, and regulators are now more likely to ‘adjust’ their commitments to sustainability goals, but in the end ‘there is no planet B’ and sustainability should remain the number one long-term priority for any enterprise, consumer, politician, employee, or investor.
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