Euromonitor International has identified climate action, circular economy, commodity price volatility, resource security and environmental pollution as the five key trends affecting the global sustainability agenda.
Keeping abreast of these trends as they evolve beyond the pandemic and understanding the link between them and business performance will help companies to identify risks and new opportunities related to sustainability.
Globally, average consumption of renewable energy has been rising, with China leading the way. However, COVID-19 caused a crash in oil prices which made renewable energies far less competitive and delayed work on certain solar and wind projects in 2020.
Despite initial concerns, solar and wind energies have become the two most resilient energy sources due to COVID‑19 lockdown measures. While electricity output for all other energy sources fell between 2019 and 2020, solar and wind experienced an estimated increase of 1.6% in final consumption.
The shift to renewable energies is expected to continue, as action to reduce carbon emissions remains a priority for companies, consumers, investors and governments. According to Euromonitor International’s Voice of the Industry: Sustainability Survey, 2021, 42.3% of professionals stated that their company is investing or planning to invest in the switch to renewable energies.
Source: Euromonitor International from International Energy Association (IEA)
Factette: 80% of professionals working across all FMCG sectors consider climate change extremely or very important to the business, with the biggest impact on expected to be in consumer demand (Euromonitor International’s Voice of the Industry: Sustainability Survey, 2021) (fielded in June 2021).
Moving from a linear to a circular world is not only a way to decouple economic growth from the use of resources and avoid unnecessary waste, but also a powerful tool to reduce emissions and combat climate change.
The circular economy, which was gaining traction pre-pandemic among consumers and businesses, was negatively impacted by COVID-19. In June 2021, around one fifth of professionals reported a pause or delay in initiatives related to waste and recycling. Euromonitor International’s Voice of the Industry: Sustainability Survey, 2020 had already highlighted activities such as renting and buying second-hand products being badly affected by the outbreak.
This pandemic-induced consumer behaviour is set to see a reversal of trends in 2021. Only 13.5% of surveyed professionals expect lower demand for second-hand products to be a permanent change (as noted by Euromonitor International’s Voice of the Industry: COVID-19 Survey, 2021), while most professionals (74.2%) report planned investments in recycling initiatives over the forecast period (2021-2026) as highlighted by Euromonitor International’s Voice of the Industry: Sustainability Survey, 2021.
Scarcity of resources, volatility of pricing, environmental damage, cost reduction and reputational benefits are strong drivers for a greater transition to the circular economy. Europe is currently leading this transition, with the region driving global efforts related to the circular economy at the centre of its New Green Deal.
Source: Euromonitor International from Eurostat
Factette: 74.2% of professionals report that their company is currently investing or planning to invest in recycling initiatives over the period (2021-2026) (Euromonitor International’s Voice of the Industry: Sustainability Survey, 2021) (fielded in June 2021).
Commodity price volatility
The fluctuation in commodity prices has important business implications as it can impact profit margins. Understanding the dynamics and outlook for these commodities is important for businesses to help to manage price risks and make budget allowances.
The COVID-19 pandemic hit both the demand and supply of energy, metals, and agricultural commodities, resulting in substantial price volatility. In April 2020, prices of energy commodities fell by 60.5% compared to January 2020, with record lows for oil (down by 71.1% between January and April 2020). It took until February 2021 for energy prices to return to pre-pandemic levels, with coal, natural gas and oil prices soaring in the third quarter of the year, with these expected to remain high in 2022.
The continual increase in energy prices throughout 2021 appears to have affected prices of other commodities (especially food and metals) through increasing production costs due to higher energy costs, domestic inflation, and exchange rates.
Factette: Commodity fuel energy prices index reached a 10-years historic low of 29 in April 2020
(Euromonitor International from World Bank)
Growing consumption and competition for finite resources alongside climate change is increasingly putting at risk raw materials’ production, supply, prices and trade. This implies business risks on multiple counts such as disruptions to the supply chain, increasing costs of production, and/or the introduction of new regulations and taxes to discourage extraction.
In a world highly dependent on resources extracted in emerging and developing countries, eco-innovation and cross-sector collaboration is key to reducing costs of resource- and energy-efficient technologies. Improving resource efficiency in these countries is required to achieve sustainable development and green growth.
Source: Euromonitor International from Eurostat, WU Global Material Flows Database
Factette: 52.6% of professionals working across all FMCG sectors reports that sustainability is
extremely important to improve business resilience to unexpected risks or challenges Euromonitor International’s Voice of the Industry: Sustainability Survey, 2021)
Despite huge improvements in air quality in urban and industrial areas during COVID-19 lockdowns, air pollution continues to be a growing problem globally, due to a quick rebound following the first peak of the pandemic.
With concerns over environmental pollution rising globally and threatening public health, an increasing number of businesses are promising to decarbonise supply chains, logistics and portfolios, creating opportunities for innovation in clean products, services and technologies.
51.8% of surveyed professionals report that their company is investing or planning to invest in pollution-related initiatives between 2021 and 2026. One fifth of them expect investments in electric vehicles, one quarter of them in initiatives to support their suppliers to decrease their emissions, while only 13% foresee investments in the development of carbon capture technologies (Euromonitor International’s Voice of the Industry: Sustainability Survey, 2021).
Source: Euromonitor International form the Environmental Sustainability Index, 2020
Note: The Pollution pillar ranks the performance of 97 markets using six indicators condensed into three categories: Air Quality, Water Pollution and Municipal Solid Waste. It uses per capita CO2 emission and waste indicators, with all indicators contributing negatively to their corresponding categories. Best performing country ranks number 1 and worst performing country ranks number 97.
Factette: Only 7 in 10 of professionals reported a delay or paused in their company’s pollution
initiatives during the peak of the pandemic in 2020 (Euromonitor International’s Voice of the Industry: Sustainability Survey, 2020)