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Sustainability Trends
A focus on sustainable initiatives has become vital in continuing the success of our society, which is demanded by consumers and producers. With increasing awareness of the climate crisis, more individuals are understanding the value and necessity of implementing ways to combat climate change within their own company and in their means of consumption.
President Joe Biden has publicly announced his plan to create a more sustainable future with his version of a Green New Deal. This legislation is a crucial framework for addressing the climate crisis, laying out the ways it will embrace initiatives on a larger scale to meet the scope of this challenge. It will also encourage the interconnectedness of our economy and environment. By harnessing talent and innovation in the energy sector, the Green New Deal allows previous environmental threats to quickly become opportunities to revitalize the U.S energy sector coupled with an economy-wide growth effect. Creating new, sustainable industry practices will simultaneously create manufacturing and high-quality jobs in urban and rural areas across the country. Also, as a result of the plan, many sub-sectors will experience a secular tailwind and it will drive growth in areas such as electric vehicles, alternative power, carbon offset technology, infrastructure, and agricultural conservation.
Biden’s plan centers around the goal to ensure the U.S. achieves a 100% clean energy economy and reaches net-zero emissions no later than 2050. While ambitious, acting promptly to mitigate climate change is imperative. This plan not only makes a historic investment in clean energy and climate research but also incentivizes rapid deployment of clean energy innovations across the economy. With this timeline in mind, successful sustainability companies will be those that can achieve rapid growth in a short period.
Specific B2B trends and environmental solutions that have emerged across the industry include supply chain analytics, B2B carbon offsetting, and a need for companies to focus on employee retention. In supply chain analytics, companies are given insight into their manufacturing impacts on the environment and how they can decrease any negative effects. Supply chain analytic startups are an ideal solution that not only provides climate analytics but also serves areas along a company’s value-chain to increase efficiency and decrease costs. This solution helps sourcing and identifying potential opportunities according to sustainable criteria. Companies are also turning to carbon offset technology and emissions tracking software to become carbon neutral. The carbon offsetting market previously peaked in 2008 but has recently resurged as companies have more cash on their balance sheet. Finally, employees remain mindful of business operations and have increasingly demanded that their companies improve their sustainable practices. It has been surveyed that millennials would take a pay cut to work at a more sustainable company, with 40% responding that they have chosen a job due to the company performing better on sustainable choices contrasting with only 17% of boomers. Employee retention, which reduces company turnover costs, is thereby increased with sustainability as 70% of surveyed millennials say they would stay with a company following a strong sustainable plan. Companies should look to their sustainability efforts as a way to boost retention and mitigate climate change.
Many companies have adopted plans to create more sustainable accountability within their companies. One such way is with ESG criteria to track a company’s energy use, waste, pollution, and natural resource conservation. This criterion gives the company a score according to their impact on the environment. Not only does this motivate companies to improve their practices to appear more attractive to investors but it also, in turn, helps investors avoid companies that pose a greater financial risk due to environmental practices. Investors held $11.6 trillion in assets chosen by ESG criteria at the beginning of 2018. By basing investments off of this criterion it leads to avoidance of support for companies in industries like coal mining, and inhumane treatment of animals along with companies with historical risk factors like BP (oil spill) and Volkswagen (emission scandal), which leads to dropped stock prices for the company and customer avoidance in consumption. In December of 2019, 631 investors representing $37 trillion in assets signed a letter calling on governments to step up their effort in climate change. Since 1995, when the US SIF Foundation initially measured the size of the sustainable investment strategy at $639 billion, these assets have increased more than 18-fold, which accounts for a compound annual growth rate of 13.6%. This increasing awareness and rallying of investors will further move along the initiative for companies to adopt new solutions to their practices of attaining this ESG criteria ranking.
With sustainability now being perceived as a social issue, people are more willing to engage with and support companies providing technologies like carbon offset trackers. There is a social construct behind the climate crisis and accountability held not only for the companies but also for consumers in their everyday habits. President Biden is expected to implement climate plans to build a stronger, more resilient nation. As President, Biden will use the convening power of government to boost resilience efforts. Strides to reduce the impact on the environment need to be backed by the government. 71% of global emissions are produced by a mere 100 companies, mostly in the coal, gas and oil sectors of nonrenewable energy. Policies like carbon taxes and emission targets will impact the companies. This change, however, will not be headed by the US federal government but rather by individual states and other countries, with the federal government potentially following in behind. For instance, Canada has established a green bank and provinces have been enacting climate-friendly policies. Along with this, in the European Union, an agreement has been made to cut collective greenhouse gas emissions by 55%. States like California have taken a lead on climate change by implementing stricter auto emissions standards, acting as an example for other states to follow.
The urgency in the climate crisis creates a need for strong corporate governance and incentivizes entrepreneurs and investors to look for investment opportunities differently than in the past. With new practices implemented like ESG criteria along with pressure from the government to create a net-zero emissions goal in a few short years, there will be changes and an expected rise in alternative energy, new manufacturing opportunities, and infrastructure development to create new jobs and boost the economy while saving the planet.
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By Maddy Siegel, Analyst at Hillside Ventures