The Next Economy
Diversity, Slavery, Future-Fit Workplaces:
SustainAbility's 10 Trends for 2015

From historic climate change marches and bold advocacy by companies on the price of carbon to global economic volatility and heated debates on inequality, 2014 was a year of accelerated awareness and action for sustainable development.

Our Ten Trends for 2015 distills SustainAbility’s thinking over the past year and forecasts the issues that will shape the sustainable development agenda in 2015.

1. Scales Tip on Global Climate Change Action

With rising civic activism, surging numbers of corporate commitments and more decisive action by local and national governments, global climate change diplomacy is showing new signs of life. The November 2014 deal between the US and China to cut emissions by 2030 breaks the longstanding impasse over the relative responsibilities of rich and poor nations to take action.

• In December, 200 countries signed the Lima Accord, which, for the first time in history, commits all nations to cutting GHG emissions. In early 2015, every country will submit detailed domestic policy plans that will form the basis of the treaty to be signed in Paris next year.
• The US and China struck the first major deal between an industrialized and a developing country on climate change. The US pledged to cut emissions 26-28% below 2005 levels by 2025, while China agreed to peak emissions around 2030.
• More than 25 countries have pledged $10 billion to the Green Climate Fund, established to help developing nations adapt to climate change.

What's Next: There is genuine — though still cautious — optimism that the international community may finally agree on a meaningful and lasting framework for decarbonization in 2015.

2. Water Makes Waves

From droughts in California and Ohio to continuing water shortages in India and Brazil’s Sao Paolo, the impact of water scarcity on populations, economies and companies has been felt worldwide. Global water stress is fast becoming a major economic, political and social issue, and a supply chain risk to which companies are responding with a range of initiatives and innovations.

• The World Economic Forum identified “water crises” as one of the top 10 issues of greatest concern to the global economy in 2014, the third highest risk ranked overall.
• A growing number of companies recognize water scarcity risks as material and are including them as a financial concern in annual reports. For example, Dr. Pepper Snapple Group noted that water supply challenges could put $2.5 billion of its future sales at risk.
• Investments in water infrastructure development including watershed payments, water risk management tools, consumer engagement programs and environmental impact bonds are emerging as innovative and promising ways to alleviate, and perhaps benefit from, the water scarcity challenge.

What's Next: As pressure to address the challenge builds in both the public and private sectors, 2015 will see even more concerted action to understand and act on water-related issues with an emphasis on collaboration and system-level solutions.

3. Incumbents Face a Growing Number of Credible Threats

New technologies, shifting consumer preferences, and a growing movement of social entrepreneurs and other innovators are disrupting traditional business models and drastically altering existing markets. In 2014, companies in a number of industry sectors — automotive, electric utilities, banking, retail, food and more — began coming to terms with increasingly viable threats to their businesses.

• Transportation is undergoing radical transformation as companies such as Uber, BlaBlaCar, and Lyft, in addition to the explosion of bike-share programs, have consumers rethinking how they travel. Disruption from within is also accelerating as electric cars become less mysterious and less expensive and further open consumer minds to more sustainable innovation.
• Utility companies and appliance manufacturers must contend with disruptive technologies introduced by newcomers such as Apple and Google, who are experimenting with ways to make home energy use more efficient.
• Crowdsourcing of finance spearheaded by such innovators as GoFundMe, Kickstarter and Indiegogo is challenging the banking industry's existing model and offering new ways to provide capital for innovative solutions.

What’s Next: While not all of this disruption has sustainability as its goal, a new generation of products and services — and whole new approaches such as the sharing economy — are finding increased credibility and impact, and making the notion of a more sustainable economy more tangible.

4. The Clock Is Ticking for Energy Companies

While uncertainty continues to dominate the future outlook of the energy sector, record gains by renewables, the rise of the fossil fuel divestment movement and growing momentum for a global climate change accord are placing pressure on traditional energy companies to demonstrate that they’re serious about global warming. Coal, oil and gas companies acknowledge climate change-related risks, but few have taken sufficient action to signal their acceptance of and commitment to the need to transition.

• The International Energy Agency predicts that solar will become the dominant source of electricity by 2050. Renewable energy made record gains in 2014 with drops in technology costs and rapid expansion of capacity and investments.
• Utility giant E.On’s announcement that it would split its operations to focus on clean energy raises the prospect of success for Germany’s Energiewende program that aims to entirely eliminate fossil fuels.
• The fossil fuel divestment movement saw gains in 2014, with increased civic participation and over $50 billion divested by more than 180 institutions and close to 700 individuals. The notion of “stranded assets” is gaining recognition as a risk factor affecting mainstream investment decisions.

What’s Next: Falling oil prices are likely to temporarily slow the rapid ascent of renewables, but that will not relieve oil, gas and coal producers from the need to reinvent their roles in the emerging low-carbon economy.

5. Reimagining a “Future Fit” Workplace

Shifting global demographics are compelling businesses to reconfigure labor practices and accommodate a multi-generational and increasingly diverse workforce. While living wage questions continue to dominate the conversation about fair employment practices, companies are recognizing that wages and contracts are only part of the puzzle.

• Forward-looking companies recognize the skills and tenacity of older workers and are developing creative ways to accommodate their needs, including offering half-retirement contracts, prioritizing senior worker skills in hiring, creating new positions, and changing ergonomic settings.
• To meet the needs of younger workers, Starbucks announced that it would provide funding for employees to receive a college education. Subsequently it also announced upgrading its scheduling software to enable managers to make work shift schedules more family-friendly.
• Malaysia is offering companies tax incentives if they establish nurseries and allow for flexible working hours, thus enabling mothers to participate in the workforce.

What’s Next: Workplaces that are fit for the future will implement the broader drivers of wellbeing such as flexible working hours and schedules, terms of contracts that are beneficial for both employers and employees, larger investments in training and education, and adaptability to employees working until a later age.

6. Corporate Diversity, Beyond Gender

Although gender continues to lead the workforce diversity conversation, stakeholders and companies are turning their focus to additional dimensions of inclusion such as race, ethnicity and sexual orientation. Technology firms made a big leap in 2014, disclosing employee data reflecting gender, racial and ethnic underrepresentation and acknowledging the need to change.

• Silicon Valley giants Yahoo, Google, Facebook, Twitter and Amazon made headlines in 2014 after finally disclosing their diversity figures. Tech companies are under increasing pressure from stakeholders, including civil rights activist Jesse Jackson, to tackle the predominantly “white male” composition of their workforces.
• Apple CEO Tim Cook’s coming out publicly highlighted the extent to which LGBT discrimination remains an unresolved and rarely discussed issue in the corporate world.
• Next year will see more companies announcing diversity targets that go beyond gender. For example, KPMG’s goals will be set across gender, race, disability and sexual orientation.

What’s Next: In 2015, companies will be expected to demonstrate their commitment to diversity through ambitious targets and goal-setting — but if Apple’s CEO coming out as gay to bring visibility to the non-discrimination issue is any indication, the corporate sector still has much to do make diversity part of its organizational DNA.

7. Pressure Rises on Corporations to Eradicate Slavery

The number of global human rights violations have been rising in recent years, with a large share of infringements attributed to workers’ rights violations, land grabs and illegal supply chain practices in emerging markets. As stakeholders point out the limitations of supply chain audits, companies have been pressured to raise accountability standards and implement new measures.

• Human rights violations have risen by 70% in the last six years, according to Human Rights Watch and Maplecroft. Government repression and conflicts have been key factors accounting for the increase but many violations are also attributed to corporate actions.
• The Modern Slavery Bill that was debated in the UK Parliament will require businesses to report efforts towards eradicating modern slavery from their supply chains.
• Pope Francis has called for more action to combat human trafficking and slavery by appealing to consumers to not buy goods manufactured by exploited workers. The International Labor Organization estimates that forced labor generates $150 billion in illegal profits each year.

What’s Next: In 2015, the UK is set to pass the Modern Slavery Bill, one of the first laws of its kind in the world, but it will take many more years of concerted advocacy by stakeholders to see a shift from voluntary to compulsory regulatory frameworks on slavery and other human rights issues.

8. Ethics Deficit Haunts Banks and Corporations

Questions about the state of ethics continue to plague large multinationals and banks following a year marked by bribery scandals, penalties on the finance sector and reports highlighting lack of transparency across industries. Multiple companies have fought accusations of avoiding paying their fair share of taxes by moving tax domiciles abroad.

• In what is becoming an increasingly normal pattern, Barclays, Bank of America, JPMorgan and HSBC were among many financial institutions accused of bending the rules to make profit and that faced significant regulatory fines and other penalties as a result.
• OECD countries agreed on a series of measures to reduce “tax avoidance by multinational companies” and the US government issued new rules as well. Burger King, Pfizer and Walgreens had to fend off accusations of attempting tax inversion.
• GlaxoSmithKline and Tesco suffered blows to their reputations after, respectively, being found guilty of bribery by Chinese courts and overstating profits.

What’s Next: While European and US governments have taken steps in 2014 to clamp down on tax inversion, they will introduce even stronger measures in 2015. That said, it will take many years for regulators, stakeholders and businesses to move the needle on the issue.

9. Companies Set for a Larger Role in International Development

As the dividing lines between industrialized and emerging markets blur, multinational corporations have been progressively promoting economic growth in the developing world and contributing to solutions to complex global problems like poverty. The role of companies is set to further accelerate as UK agencies and the EU strengthen their focus on the participation of business in international development.

• The United Nations will finalize a set of 17 Sustainable Development Goals (SDGs) in 2015. The proposed goals cover broad themes: ending poverty and hunger, and improving health, education, and gender equality. They also include specific targets for reducing inequality, making cities safe, and addressing climate change.
• The UN Global Compact is reviewing ways that businesses and financial institutions can support priorities of the post-2015 agenda. Together with the Global Reporting Initiative, the UN Global Compact has created an international network of professionals and is working with forward-thinking companies to implement a guide that supports businesses in assessing their impacts, aligning their strategies with the SDGs, and setting company goals.

What’s Next: The United Nations will finalize 17 SDGs and their implementation will be a crucial test of the private sector’s appetite and aptitude for larger involvement in global social, political and economic affairs.

10. The Promise of Consumer Engagement

Corporate sustainability leaders have recognized that achieving long-lasting change requires reaching beyond company-wide initiatives. As corporations look for innovative ways to engage consumers in positive behavior change, millennials are a key demographic, with the number of youth engagement initiatives on sustainability and environmental issues growing steadily.

• 29 leading corporations and non-profits including Coca-Cola, IKEA and PepsiCo have joined forces to launch Collectively, a digital platform intended to engage millennials in sustainable lifestyles.
• Several companies have published research about the success of marketing initiatives specifically targeting millennials. But findings are mixed, with some indicating millennials as key drivers in sustainable consumption while others show no significant variations across age groups.
• The number of apps that enable consumers to live more sustainable lifestyles and make ethical buying decisions has seen huge growth, from information on product credentials to the availability of sharing economy services.

What’s Next: With the increasing use of social media platforms, we will see more innovation in this sphere in 2015 — although not all research supports the claim that deeper engagement leads to more sustainable consumption patterns. Companies will look for stronger evidence to back up marketing initiatives as they also expand efforts aimed at other age groups.

This post first appeared on SustainAbility’s blog.