2020 was the year that none of us expected. Across society and business, we learned in the hardest way how precious life on a healthy planet can be—and we learned to respond to disruption. Now, one year after most of us first heard its name, COVID-19 is still having a devastating impact in many parts of the world both in terms of the health crisis and economic disruption. However, as we turn the corner toward Spring in the Northern Hemisphere, there are many positive trends and breakthroughs we see welling up from the disruption, giving us hope that a green recovery from the pandemic is possible and already underway.
Looking back at our 2020 sustainability trend predictions, most stood the test of COVID, and some even accelerated in the surge of sustainability’s new importance. In many ways, the crisis has catalyzed corporate climate and sustainability action, acting as a dry run for companies to see how they will tackle an expanding range of environmental, social and governance (ESG) challenges. Although we continue to navigate a disrupted world, our Schneider Electric experts see many reasons to be hopeful about the role that sustainability is playing in this new normal.
Predicting the future can be risky business these days, but these sustainability trends are based on the here and now. Read on for 10 reasons to be hopeful in 2021.
1. We’re in a year of climate action breakthroughs
Companies today are faced with an unparalleled opportunity to meet the moment and the urgency of the climate crisis. According to climate science, limiting global temperature increases to 1.5 degrees Celsius above pre-industrial temperatures (or less) is key to mitigating the worst impacts from climate change. Unfortunately, recent data shows we’ve already reached 1 degree C increase on average. Reaching neutrality around 2050 is the ultimate pathway that society must align with to meet that 1.5C limit. In the nearer term, between now and 2030, we need to make aggressive reductions of emissions.
Against that backdrop, we’re faced with a key opportunity for an inflection point in 2021. Per recent data from the Climate Action Tracker group, most global emissions are covered by large nations. Mid-century and zero emission goals set by nations will have a large impact, like China announcing it would achieve net-zero emissions by 2060, the U.S. returning to the Paris agreement, and the European Union increasing its commitment from 40% to 55% reduction by 2030. Furthermore, corporate climate action got an amazing boost in 2020. It was a record year of companies committing to the Science-Based Targets Initiative (SBTi). To date, 1,245 companies, have joined the global standard for climate action, and the number rises daily. We’re also seeing a positive response to companies not only talking about goals to reduce emissions but making ambitious net zero commitments.
To hear how some companies are tackling climate action, listen in on our recent webinar with Faurecia, Charles River Laboratories and WBCSD.
These commitments send a strong signal to corporations and nations alike on the importance of climate action. An additional opportunity for businesses in 2021 is to partner with governments to understand emission levers among each industry and policies that should be adopted for businesses to accelerate action. As we head toward COP26 in Glasgow at the end of 2021, climate change is at the top of the agenda, and there is much ambition we’re looking to achieve in this critical year.
Contributed by Erik Mohn, Director of Sustainability; Louisville, KY (USA)
2. Sustainable investing is moving from niche to center stage
January 2020 will be remembered as a historic milestone for sustainable finance: many experts consider the open letter of global investment manager BlackRock, informing CEOs of the firm’s commitment to sustainable investing, as the ultimate convergence of finance and sustainability. It confirmed that mainstream investors increasingly believe that ESG metrics have a direct impact on risk and return.
Since then, the pandemic has shaped our global economic and financial order at an unprecedented magnitude. Yet sustainable finance appears to be only accelerating: analysts found evidence that ESG-related investments have outperformed traditional benchmarks in the crisis. And in its 2021 CEO letter, BlackRock doubled-down on its commitment to sustainable finance. In the letter, Larry Fink asserted without question that companies that embrace sustainability and the net zero transition will drive better returns. Consequently, a growing number of investors say they are taking sustainability considerations into account in all or part of their portfolios.
Learn more about what Fink’s 2021 letter means for corporate climate action
Regulation is backing up the sustainable finance trend: The EU’s Sustainable Finance Action Plan includes a complex mix of legislative measures including Taxonomy Regulation, Sustainability Disclosure Regulation, Climate Benchmarks Regulation and a proposed Green Bond Standard to channel significant investment towards sustainable activities. The UK follows a very similar approach to greening financial systems and mobilizing finance for clean and resilient growth.
Sustainable finance is gaining pace in the U.S. as well. According to S&P Global, the pandemic’s exposure and related risks were driving factors for the extraordinary growth of sustainable investments in 2020: green bonds grew to 3.4% of market share in the municipal market, compared to just 0.03% market share only 7 years ago. Sustainable finance will soon become the new norm and companies that are able to clearly articulate how they address and perform against material ESG issues will benefit most.
Contributed by Chris Crawshay Jones, Director Energy & Sustainability Consultancy; London (UK)
3. Net zero companies, net zero cars, net zero continents
In 2021, the concept of net zero has been permeating our conversations with most of our clients. In the past year, we have seen almost daily announcements of carbon reduction initiatives: 1,633 companies globally now recognize the transition to a zero-carbon economy is the only way to secure sustainable economic growth and prosperity, the Science-based Targets Initiative surpassed the 1,000-company milestone, a growing number of countries including the world’s biggest emitter, China, have legally binding net zero targets and the EU pledged to become the first carbon neutral continent by 2050, unleashing 750 bn € to focus on this goal in the green recovery.
While net zero commitments are everywhere, there are still many discussions on what exactly constitutes net zero (and, maybe more importantly, what it is not). Governments, NGOs, advisors and industry agree that net zero is a ‘systems problem’ that requires science-based target setting and processes to prevent double-counting or greenwashing to secure a trajectory that preserves our planet from devasting temperature rise above 1.5 degrees C. Fortunately, in parallel to these key discussions, we have seen great action taking place with corporate commitments driven and endorsed at CEO-level associated with fast-paced decarbonization programs in companies ready to embrace the transformations.
Contributed by Gabriel de Malleray, International Consultancy Director, Paris (France)
4. Renewable energy’s powerful chain reaction
The rapid growth of renewable energy across the globe is showing no signs of slowing down. New markets and ways to procure renewables are opening up, giving corporate buyers increased opportunities to address their renewable energy strategy with an array of tools across a wide range of geographies. The Brazilian market will be good to keep a close eye on, with a variety of buyers continuing to sign and explore deals. Vietnam will likely continue to see an uptake of corporate interest with the roll-out of the Direct PPA program, and South Korea is showing interesting movement that should open up the market for corporate players in 2021. The European market continues its steep upward trend boosted by the cross-European call for a green recovery. With the roll out of the EU Green Deal, it’s increasingly important for corporates to keep up with regulatory changes to ensure they are acting on the best opportunity at the optimal time.
Schneider Electric experts are closely evaluating emerging markets for renewable energy, and working with clients to ensure they act on the opportunities that best suit their individual portfolio. Members of the NEO Network get first access to our local market reports for countries around the world.
In addition to new and maturing geographies, we are seeing increased ambition from companies to move beyond Scope 2 and address their Scope 1 and Scope 3 emissions. Supply chain decarbonization continues to move up the corporate sustainability agenda, and more players are looking for new ways to address their Scope 1 emissions. We also see our clients turn to the commodities market to explore energy attribute certificates (EACs) and carbon offsets in many regions around the world. These markets are often very complex and subject to a range of market dynamics—something that definitely remains true in 2021.
The global renewable energy scene will continue to expand and accelerate as the year progresses, but with growth comes increased complexity and market nuances. It’s more important than ever for corporate buyers to stay up to date with market changes and regulatory developments, to ultimately identify their optimal solution to procure renewables.
Contributed by James Lewis, Director of International Cleantech; Boulder, CO (USA)
5. Biodiversity rises to the top of the sustainability agenda
Biodiversity has not been widely considered as a pressing concern on this list of trends in recent years. However, the COVID-19 crisis has reminded us of the importance of a balance with nature—critical not just for personal pleasure, but for avoiding the next potential pandemic. Close to three-quarters of emerging infectious diseases in humans come from other animals. Land-use change and wildlife exploitation are disrupting the ecological processes that keep such diseases in check. To date, biodiversity is being destroyed at an unprecedented rate, with 25% of all plant and animal species now threatened with extinction.
It is long overdue that countries and companies begin to focus on biodiversity, strengthen collaboration with other entities and integrate considerations into their economic recovery plans. During the 4th edition of the “One Planet Summit”, 50 governments committed to safeguarding 30% of the world’s terrestrial and marine ecosystems.
Listen to Schneider Electric CEO, Jean-Pascal Tricoire, speak at the summit about the role of industry in biodiversity, and learn how our approach and experience can help map a path towards no net loss of biodiversity for all corporations.
Additionally, the European Commission announced a substantial investment to research on biodiversity. As investors increase pressure on industry to address climate change, many companies are looking now into science-based targets for nature to understand their impact on biodiversity and set meaningful targets. At Schneider Electric, we have committed to executing local biodiversity conservation and restoration programs and to net zero loss of biodiversity at 100% of our more than 200 sites worldwide and across our supply chain. At the UN Biodiversity Conference (CBD COP15) in Kunming in May 2021, we will underscore the role of businesses, as we strongly believe that restoration of biodiversity can be best achieved in a public-private partnership.
Contributed by Rebeca C. Mednoza, Sustainability Consultant, Budapest (Hungary)
6. Digitization is shaping a sustainable future
Companies that are tackling the climate change challenge find that it is critical to deploy analytics powered by connected, centralized and reliable data. Layer AI and machine learning on top of this digital foundation, and you can more accurately predict what’s going to happen, operate more efficiently and identify opportunities to innovate in real-time.
With the pandemic forcing so many of us to work from home, it’s become abundantly clear that digital has revolutionized the way we work together and the way we live together. The next step is using digital tools to revolutionize the way we live with our environment. The internet of things (IoT) connects everything around us to big data, allowing us to leverage the synergy of human and machine intelligence to make sense of data and find immense opportunity to decarbonize the global economy.
Watch this video to hear two of our technology experts discuss how customers are pairing digital innovation with human expertise to become more efficient across their operations and accelerate decision-making.
In 2021, digital continues to massively disrupt notions of efficiency and sustainability. This transformation and its complexities are giving way to a new era of energy. Grid operators and consumers are investing in smart technologies to manage more sophisticated, real-time energy inputs and outputs. These smart tools and access to the robust data they provide are paving the way for intelligent energy and resource management systems for homes, buildings, industries and cities.
But there is a gap. By 2030, there will be 125 billion connected devices worldwide. Yet, only 45% of the data that is collected is usable, leaving significant opportunities on the table. As we look toward the opportunity of digitizing to meet the call for climate action, increased automation and digitization paired with human expertise in analysis and application will allow companies to rapidly convert data into meaningful insights and solutions. In 2021, companies should look to be more efficient across all operations through digital innovation.
Contributed by Jeff Floyd, Vice President of Global Data Operations; Louisville, KY (USA)
7. Redesigning resilient supply chains
For most organizations, the COVID-19 pandemic required drastic, unexpected pivots to redefine business operations and priorities. Supply chain disruption is one of the most reported challenges—more than 80 percent of organizations reported their supply chains being negatively impacted by the crisis. Consequently, many organizations are now redesigning their supply chains to be more resilient, understanding that the pandemic is likely just one of many disruptions in the future. Besides digitization, localization and more agility, prioritizing sustainability across the supply chain to withstand environmental and regulatory disruptions and meet evolving customer expectations is a key trend we see taking hold in 2021.
Listen to our On-Demand webinar to hear sustainability experts from Walmart, The J.M. Smucker Co., and Schneider Electric share best practices for supply chain decarbonization.
During the past year, we saw strong evidence that resilience and sustainability are inherently linked. Sustainable companies have outperformed their competitors and the most resilient organizations have maintained focus on their sustainability goals. Environmental risks and impact don’t end at your organization’s office door. Investors, consumers and policymakers want to see companies taking responsibility for their value chain and purchasing decisions. Many of our clients are on that journey with us, from helping suppliers access renewable energy to bottom-up supplier engagement programs.
Contributed by Ekaterina Tsvetkova, Head of Sustainability Consultancy, Budapest (Hungary)
8. Data as a foundation to aggressive climate commitments
The momentum on corporate climate action today is tremendous, driven in large part by increasing investor pressure for ESG transparency and disclosure. 2020 was a major milestone for corporate climate action commitments, so many companies are recalibrating their goals and considering the evolution of their sustainability strategy. As organizations shift to bolder sustainability commitments, such as net-zero targets, it’s important to maintain transparent reporting and data quality across your operations and within your value chain.
A key challenge when making these aggressive commitments will be understanding where and how to collect data across the value chain, not only to set these targets but to also track meaningful progress over time. To form a foundation for next-generation sustainability goals, start by identifying the areas across your company’s greenhouse gas (GHG) footprint that require varying levels of data while continuing to be transparent with stakeholders on limitations and obstacles.
We expect to see many more corporations announcing aggressive sustainability goals throughout 2021. Having a cohesive communications strategy that is authentic, sincere and accurate in regards to the targets and strategy you’re setting to achieve them is imperative to position your brand as a leader.
Contributed by Anna Pierce, Sustainability Services Manager; Louisville, KY (USA)
9. Exciting new sustainable ways to work and travel
The dramatic but temporary environmental bounce back during the pandemic reminded us of the beauty and preciousness of our nature. With global travel at record lows and many people working from home, previously clogged beaches and jam-packed streets were left empty, giving wildlife greater freedom to roam. Pictures of Chinese blue skies, deer on Tokyo’s streets or crystal-clear channels in Venice were a silver lining during an otherwise dark period, but they surely come with the bittersweet truth of huge economic damage: around 9 in 10 flights globally were grounded during spring 2020 and tourism is expected to have declined over 70% in 2020, back to levels of 30 years ago.
Read about the disruptive power of fleet electrification, and how to manage this transition for your company.
So what does the future of work and travel look like? While many of us probably don’t need another staycation, most predictions show we will not go back to normal post-COVID. Working from home will stay a common practice and many of us will keep some habits of more sustainable traveling. Mobility itself is changing with the final breakthrough of electrification. A battery-powered personal car or corporate fleet charged by certified renewable energy is an important statement on reducing pollution. Although many people see ‘rangy anxiety’—the fear of running out of battery—as a big drawback to electric vehicles, in truth, it only takes some adjustment to think differently about planning your journey.
Contributed by David Hunter, Director of Market Studies, Dunfermline (UK)
10. Microgrids for greener & more resilient sites
During the last 12 months, many companies experienced a new level of disruption. According to an analysis from the UK’s Office for National Statistics, 65% of British employees were working remotely during lockdowns, and many sites and public buildings were closed. Meanwhile, some organizations sites like hospitals, data centers, pharma production or logistic centers experienced disruption of a different kind due to increased activity.
Society is rethinking critical infrastructure, and microgrids often come into play as part of this by enabling a greener and more reliable site infrastructure. Green electricity is key for the net zero carbon future and as such, acts as a powerful trigger for microgrids. Using renewable energy sources reduces the carbon footprint, and the flexibility options provided by the microgrid intelligence support the green business case. Microgrids also resonate with two other big trends under green recovery: Hydrogen fuel and electric vehicles (EV) – both best enabled within the smart structure of a microgrid.
Contributed by Andrew McKenzie, Microgrid Lead UK & Ireland; London (UK)