Monday, May 20, 2024

The Top ESG Trends Reshaping Business Over The Next Decade

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As we approach the year 2035, businesses will have more to contend with than simply maximizing revenues and profits. Companies will increasingly be held to account not just for their financial performance but also the impact their activities have on the environment and society.

This means environmental concerns will be even more critical to long-term sustainability and resilience than they are today. And the incentives for businesses to pursue policies that uphold principles of inclusivity, diversity and social justice will be greater, too.

As environmental and social governance (ESG) becomes increasingly synonymous with sound business practices, these are the key trends that I believe will shape the world of business over the coming decade as businesses attempt to navigate an ethical and responsible path through what looks set to be tumultuous times.

The Regeneration Revolution

Today and in recent decades, the focus of environmental governance has often been on damage limitation. Reducing pollution, minimizing emissions, and slowing the rate at which industries are burning through the planet’s non-renewable resources.

By 2035, we’ve realized that this isn’t enough, and a paradigm-shift is well underway towards regeneration, renewal and the establishment of circular economies.

Companies understand that rather than simply doing less harm, there are a myriad of incentives – one of which is survival – for proactively rebuilding and restoring ecosystems.

This revolution will be driven by technological breakthroughs in fields such as the bioengineering of new recycling solutions, regenerative agriculture and carbon capture. And reforestation schemes will help to address the legacy of industry’s irresponsible and wasteful past.

Companies that embrace this paradigm shift will find that they build resilience against the by-now undeniable environmental shocks that are disrupting industries and economies across the globe, as well as developing competitive advantage by catering to the needs of increasingly eco-aware consumers.

ESG At The Heart Of The Boardroom

By 2035, the boardroom agenda has undergone a seismic shift, with issues of ESG no longer considered peripheral to business strategy but firmly driving the corporate agenda. Companies that don’t make this change are putting their reputation at risk, driving away investors and drastically endangering their chances of long-term survival.

Factors driving this include shifting shareholder expectation, as investors look beyond the short-term and towards companies that demonstrate real resilience, sustainability and social responsibility. And consumers increasingly base buying decisions on how closely businesses align with their own growing awareness of environmental and social issues.

Additionally, initiatives focused on diversity and inclusiveness have changed the fabric of the boardroom. Business leaders from a wider range of backgrounds and with broader perspectives bring their skills and experience to the table, enabling a new understanding of the complex challenges and opportunities of the times.

This means “greenwashing” and paying empty lip service to ESG strategies will no longer fly – and real, measurable progress towards achieving goals becomes the most important metric.

Automated Society

Thanks to the rise of automation and artificial intelligence (AI), within ten years, society has undergone a fundamental rethink of the way we uphold principles of inclusion, welfare and social justice.

The fact that the AI revolution will impact jobs can’t be denied. Within ten years, it’s highly likely there will be fewer people employed in roles that can be easily automated, such as call center workers or data entry clerks. But new roles will be created, too, and many of these are likely to be more highly skilled (and higher paying) than those that are lost. Managing the impact of these changes so that they don’t disproportionately affect already disadvantaged groups or undo advances that have been made in diversity in recent years will be high on the agenda.

There will also be increased focus on navigating the challenges and societal implications of the AI-driven, algorithmic workplace, ensuring that bias doesn’t drive a growth in inequality and personal privacy isn’t eroded.

As automation transforms society, social safety nets will also be a hot topic. We can expect more experiments involving concepts such as universal basic income to be underway, with countries progressing from piloting to policy-making.

ESG Goes Geopolitical

By 2035, ESG factors will be firmly interwoven across international trade relationships as well as the global power dynamic. Nations that have prioritized their track record on environmental and social issues are reaping the benefits of becoming more attractive partners for investment, trade and global collaboration initiatives.

As competition intensifies for access to the resources that are critical for making the transition to clean energy and circular economies – such as rare earth minerals and lithium – those nations that have acted responsibly to secure access will be at a strategic and economic advantage.

As the worst fears and predictions of today’s climate scientists are realized, nations that refuse to engage with international initiatives will increasingly become pariah states, facing sterner sanctions and consumer boycotts. Dealing with the patchwork of shifting regulations, standards and embargos will be a growing challenge to businesses and organizations seeking to engage in cross-border commerce.

Ultimately, we have to hope that responsible governments move towards policies of ethical action and transparency as they come to understand that this is the key to achieving security and economic success.

This will leave businesses and organizations with the tricky task of navigating a patchwork of regulations and standards.

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