Stakeholder Trends and Insights
COP21, Global Inequality, Resource Scarcity Among 15 'State of Play' Sustainability Trends

Today, think tank SustainAbility released its view of the key sustainability developments during 2015 in a webinar, “Mid-Year ‘State of Play’ Sustainability Trends.” Its latest research identifies 10 global trends and five region-specific trends in Latin America.

“These are not this week’s headlines,” clarified Mark Lee, Executive Director of SustainAbility. Instead, the trends highlighted in the webinar reflect long-term movements within the international sustainability community that his team expects will continue throughout the year and beyond.

Global Trends

Joining Lee, Rida Bilgrami, Manager at SustainAbility, introduced the 10 global trends, discussing the first three in detail:

1. Looking ahead to and beyond COP21

SustainAbility foresees a greater role for middle-income countries in the upcoming climate negotiations. In addition, private sector actors are increasingly pressuring governments to take a more progressive stance on climate change, and are cautiously hopeful that the upcoming meeting in Paris will produce an actionable agreement. Businesses will be instrumental in operationalizing the agreement, said Stefanos Fotiou, Head of Unit, Cities and Lifestyles at UNEP. “All should expect businesses will be key here,” he said. Fotiou also mentioned a potential global alliance of businesses across sectors to help implement the COP21 outcomes, though he could not release specific details.

2. Rising inequality, moving from awareness to action

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Companies are facing pressure by some shareholders and activist investors to reform compensation structures. In general, executive pay has continued to grow without corresponding growth in company revenue. Bilgrami cited a study of companies in the UK that pay below living wage are costing the country close to 11 billion euros a year, because taxpayers must subsidize benefits for those with low wages. She also noted a handful of CEOs starting to challenge status quo by agreeing to reforms.

Inequality goes beyond incomes, said Fotiou; it includes the disparities in access to resources and the basic rights to clean air and water. Addressing these issues should be a top priority in sustainability conversations, he contended. “For me inequality is something that will define how the world and the global stakeholders … will go forward.” Fotiou described how ‘we’re hiding behind GDP growth’; its financial benefits are delivered to a small portion of populations, while its environmental are disproportionately impacting the disenfranchised. Decoupling growth from its destructive social consequences will be critical to the future, he stressed.

3. Risks of impending technology breakthroughs

While there continues to be great optimism about what technology can deliver society, and “that optimism is justified to a certain extent,” Bilgrami said, there is also discomfort with its social effects. Notably, some groups are concerned about the risks of inequality and widespread unemployment from new technologies such as 3D printing and drones. As technology continues its rapid advance, “we wonder what the responsibility is for companies here,” Bilgrami said.

Other trends Bilgrami mentioned included:

4. Rising investment in clean energy

Particularly after Tesla’s recent release of residential batteries for renewable energy.

5. Water scarcity escalating on corporate agendas

Companies are viewing resource constraints as actual operational limits as opposed to theoretical limits to growth, said Kevin Moss, Global Director of the Business Center, World Resources Institute.

6. Emergence of waste and plastics on the global policy agenda

7. Race to shape the future of reporting.

“We will need to become much more serious on reporting,” Fotiou emphasized. A framework is needed to fit small and medium enterprises in addition to large corporates.

8. Cleaning up apparel supply chains.

9. New tactics to reframe the sustainability narrative.

Moss emphasized that companies performing the best are considering ways to turn resource constraints into opportunities for seeking new markets and growth.

10. Renewed momentum on deforestation

McDonald’s and other major brands are committing to curb deforestation associated with their supply chains.

Regional Trends: Latin America

Aiste Brackley, Research and Trends Manager at SustainAbility, introduced five emerging trends specific to Latin America:

1. Chinese investment brings opportunities & challenges

China is to invest $250 billion over the next 10 years in the region. While this investment will bring immense economic opportunity, Brackley noted that some feel “it comes at a price.” Chinese investment is also seen as a driver of environmental degradation and potential human rights abuses. Skepticism abounds over plans for the Chinese-backed Grand Canal of Nicaragua.

2. Divided energy landscape in the face of water scarcity

On one hand, Latin America is blazing the trail for renewable energy. On the other hand, energy production from fossil fuels has also surged. Some companies are responding with diversification of their renewable energy portfolio and increasing their use of natural gas.

3. The cost of corruption

High-profile scandals and lack of legal enforcement are stunting Latin America’s sustainability ambitions. The Petrobras scandal, in which top officials operated a kickback scheme to political parties on contracts worth $4 billion, cost the Brazilian economy substantially. “Corruption can paralyze this whole economy,” said Beat Grüninger, Partner at BSD Consulting in Brazil. 13 percent of Brazil’s GDP depends on Petrobras, he said, illustrating the importance of addressing this culture of corruption. If it remains, companies with Latin American supply chains will face increasing reputational and supply chain risks.

4. Public-private partnerships tackling climate change and water scarcity.

Moss stressed the essential role of non-state actors in catalyzing sustainability action. Governments alone are not capable of implementing change, he said; they need help from businesses, subnational actors like cities, and civil society. New models of multi-stakeholder activities are essential, he argued. These partnerships are beginning to emerge in Latin America.

5. Changing landscape of CSR leadership.

Latin America is increasingly considered a leading region in corporate sustainability, Brackley said. She cited the region as the fastest growing in terms of B Corp certifications as evidence of this trend.

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