Opinion: Will 2023 kill net-zero pledges? Climate trends to look out for next year

As climate continues to ascend the business agenda, Rachel Delacour, CEO of Sweep, Europe’s leading carbon management and reduction platform, shares her predictions on key sustainability trends that will impact the private sector.

From the death of net zero pledges to the opportunities arising from climate regulations, 2023 will be a catalyst for action in a climate impacted world.

The end of net zero pledges

Last year, it was clear that COP26 marked the beginning of a new level of excitement in the corporate world around net zero, with more than one-third of the world’s largest publicly traded companies having net zero targets today. The pressure to live up to these commitments often translates to relying on an offsetting model, which fails to prioritise footprint reduction and jeopardises a company’s financial health.

Instead, businesses will start to understand the need to focus on emission reduction and the transition to a low carbon business model, for example, through measuring and tracking their carbon data across their entire organisation and value chain, or the development of green products and services. Ultimately, those who take these actions will be the ones who survive in the long term and thrive in a society where progress will be increasingly monitored by regulators, employees, and customers.

Climate leaders will be the next CEOs. And they will be women.

The role of CEOs is changing now that understanding climate risks and opportunities has become vital to a business’s future strategy and reputation. Women commonly hold senior sustainability roles in businesses, so have the knowledge and skills required to move up to CEO and top executive roles moving forward. In fact, we have already begun to see this trend emerging. For example, H&M’s current CEO, Helena Helmersson, the first woman in this position at the company, started off her career as sustainability manager for five years before moving into a C-suite role.

In addition to the movement of women towards more senior C-suite positions, we will begin to see more male professionals following suit and moving into corporate sustainability to reap the opportunities this presents for climbing to CEO.

The year of regulatory reckoning

There are several new climate regulations, including the SFDR, CSDR, and EU taxonomy which will come into force in 2023. All of these create a stronger need for more easily auditable carbon data, without which businesses could face scrutiny from stakeholders, sustain reputational damage, and take actions that negatively impact their bottom line.

If businesses start to prepare for these regulatory changes now, it could work to their competitive advantage, particularly for UK businesses that will be prepared to face foreign climate regulations and anticipate climate risks and opportunities.

This isn’t the only change in regulation to expect within the next year. Whilst current regulations have traditionally focused on carbon emissions, biodiversity loss will become a key topic of discussion for companies, governments, and regulatory bodies following this year’s COP15. Eventually, these will catch up with regulations in place for carbon emissions and all businesses will have to account for their impact on biodiversity loss.

Carbon data will be the new gold

Accountability for carbon and ecological footprint will be vital in ensuring every business’s longevity and by extension, national sovereignty. To achieve this, carbon data is fundamental. This means companies with a solid decarbonisation strategy and an understanding of their carbon emissions throughout their value chain will be more resilient to carbon taxes at borders and climate disclosure regulations rising globally.

In doing so, these companies will also grow a credible climate brand reputation and can build a transparent climate strategy that maintains trust among investors and customers and helps businesses stand out as an industry leader, allowing them to get ahead of their competitors.

Exponential growth in investment for European climate tech

Despite the widespread recession, investors will remain confident in climate tech investment. Over recent years, Europe’s influential role in climate tech has been made apparent, and the region is well on its way to leading in climate tech globally.

In 2023, VC funding will have an increased focus on technologies that have the most potential to cut emissions. As well as the prospective financial gains of investing in this area, VCs will also benefit from reducing their own carbon emissions, which are largely dependent on their portfolio emissions. Climate action will remain a top priority for businesses in the UK and globally, as they recognise action as crucial for longevity.

Looking ahead

By integrating these key trends into their climate strategy, companies can get ahead of the curve and start to take action to futureproof their businesses, whether this is by breaking free from net zero pledges or turning upcoming climate regulations into an asset.

Photo provided by Sweep and illustrations by Camilo Huinca