Given the current challenging economy, it is essential that companies keep abreast of sustainability trends as they evolve, and understand the direct impact on business performance to remain competitive.
Consumers still want to positively impact the environment, and expect companies to play their part in democratising sustainability; therefore, understanding the sustainability landscape will help companies to identify risks and seize new opportunities.
Euromonitor International has identified five key trends affecting the global sustainability agenda in 2023.
There is unanimous agreement that 2023 will be a challenging year across global markets. Economic recovery after the pandemic has not been as fast as expected, while the Russian invasion of Ukraine has put extra pressure on consumer and business budgets due to supply chain and energy disruptions.
Despite goods and services prices increasing globally, consumers’ sustainability awareness remains strong, with two thirds of global consumers worried about climate change, and also willing to play their part to positively impact the environment.
Sustainable solutions can, and should, be affordable, so consumers do not struggle when seeking more conscious habits. Despite economic uncertainty, consumers keep demonstrating interest in sustainable products to remain true to their values, opting for products that use inputs such as water and energy more efficiently, which consequently helps them reduce costs. Circular solutions such as second-hand and previously owned products are also gaining traction amongst global consumers as, according to Euromonitor’s Voice of the Consumer: Sustainability Survey, fielded January to February 2022, 34% of global respondents mentioned their willingness to buy these products.
Brands that help consumers to adopt sustainable lifestyles will be better-positioned, and therefore preferred, when conscious consumers see increasing disposable incomes again.
From net-zero to carbon-negative targets
Net-zero pledges have become mainstream in companies’ sustainability reports, as a way to demonstrate environmental commitment. In fact, 57% of global professionals mentioned their company is planning to develop products with carbon-neutral claims, according to Euromonitor’s Voice of the Industry: Sustainability Survey 2022, fielded January 2022. In addition, products carrying carbon-neutral/reduced carbon claims globally increased by 38% during 2020/2021, according to Euromonitor´s Sustainability Opportunity Tracker (15 countries in seven industries).
Companies are not yet ready to go beyond net-zero, as only 19% mentioned having a net-zero carbon strategy in place
Source: Euromonitor's Voice of the Industry: Sustainability Survey 2022
Intergovernmental Panel on Climate Change (IPCC) experts argue in their latest climate change mitigation report that, to mitigate climate change and avoid a rise in global temperatures over 1.5˚C-2.0˚C, offsetting carbon solutions are not enough, and urge the need for carbon-negative (or climate-positive) strategies to accelerate global economies’ transition towards low-carbon systems.
Carbon-negative means generating environmental benefits by removing more CO2 from the atmosphere than what is produced. For this to be achieved, companies need to measure direct (scope 1) and indirect (scope 2 and 3) emissions. Most companies struggle to measure scope 3 emissions, as they still need to work more closely with their suppliers. Only 18% of global respondents mentioned they are currently investing or planning to invest in supporting their suppliers to decrease carbon emissions, according to Euromonitor’s Voice of the Industry: Sustainability Survey 2022 , fielded January 2022.
Addressing circularity through collaboration
In order for companies to return to the environment more than they take from it, circular models are needed, as they provide resilient solutions with a triple impact on businesses, people, and the environment.
By circulating products and materials, eliminating waste, and regenerating nature, circular models can help businesses to overcome some of the barriers to investment in sustainability, such as high costs, lack of internal knowledge, and implementation difficulties.
But, in order for circular models to succeed, there is a need for collaboration. Therefore, it is important for companies to align with international standards and get advice from experts, such as the United Nations or the Ellen MacArthur Foundation, to pave the way to efficient and impactful implementation. Also, businesses should work with key stakeholders such as governments, suppliers, and competitors to build scale economies that allow the acceleration of the transition.
Thorough regulatory environment
Stakeholder pressures on companies keep rising. Around 70% of global professionals mentioned their companies face at least some pressure from competitors, governments, and consumers, according to Euromonitor’s Voice of the Industry: Sustainability Survey 2022. Therefore, for companies to remain competitive and relevant in such fast-evolving sustainability environments, proactive collaboration with key stakeholders is crucial.
Environmental catastrophes are becoming more frequent, so stricter regulations, such as extended producer responsibility (EPR), and waste management and recycling policies, are expected to be seen in more markets to channel efforts towards governments’ long-term sustainable targets.
64% of global professionals believe climate change will affect regulation (more stringent climate policies)
Source: Euromonitor’s Voice of the Industry: Sustainability Survey 2022
Private-public alignment is necessary to accelerate the transition towards circular models. Proactively using renewable energy, reducing waste and reusing materials will not only help companies to be ahead of legislation, but also demonstrate their interest in being part of the solution.
Greenwashing: Sustainability claims under scrutiny
Companies have been struggling to communicate sustainability to consumers. In fact, only 10% of global professionals consider that their company is very effective at communicating sustainability to consumers, according to Euromonitor’s Voice of the Industry: Sustainability Survey 2022. In the period 2021-2022, product packaging and product claims rose 6.0 and 2.4 percentage points respectively in the share of global respondents, as efficient ways for businesses to communicate sustainability and improve their brand positioning.
However, companies need to back-up their announcements and messages on certified claims, considering upcoming stricter regulation, as governments and savvy consumers are demanding transparency and accountability.
It is not enough to just claim that the products are “better for the planet” or “more sustainable”, if there is no arguable evidence behind these claims. This is why specific claims such as natural, organic, and vegan enjoyed outstanding momentum during 2021, according to Euromonitor´s Sustainability Opportunity Tracker.
There is plenty of room for penetration in most markets, as the share of digital shelf remains low. Therefore, communicating sustainability through specific claims will still open up opportunities for companies to penetrate and improve their positioning in 2023.