by Mehmet Çakmak
* This is a part of our ESG article series prepared in partnership with Corpera Consulting and ACE Consultancy.
Over the past few years, environmental, social and governance (ESG) issues have been even more important than expected. ESG factors became a key area of focus for a range of stakeholders and companies. The rise of ESG factors is expected to continue through 2022 as ESG factors continue its supremacy in the business world. It would be no exaggeration to argue that ESG is a top priority for organizations across all sectors. Concerns about the environment, society, and governance (ESG) quickly grown to the top of the corporate agenda. Increasing regulatory and ESG reporting requirements and increasing public and shareholder pressure, reinforce the commotion surrounding ESG factors and encourage organizations to step up their efforts.
In a fast-changing landscape, it is essential to keep informed of the recent improvements for any organization that wants to stay ahead of the curve. Companies must not only be aware of future trends, but also integrate them in their sustainable development strategy to remain competitive. In 2022, how is this expected to convert into ESG priorities for your organization? What do we know about the 2022 ESG trends that can help us get ready for the coming year? In our previous articles, we discussed existing factors and the emerging developments in ESG world. In this article, we assess factors that will likely shape 2022.
From ESG investment trends to climate positive, here are five key sustainability trends for 2022:
1. ESG Investment Trends
ESG investment has increased since the pandemic and does not appear to decelerate in 2022. According to Bloomberg’s research, ESG investment is on the rise. ESG assets are projected to grow to US$53 trillion by 2025 and the ESG debt market of US$2.2 trillion is projected to grow to US$11 trillion in the same year (Bloomberg, 2022). From investors to consumers, who grasp the value of doing things sustainably, ESG assets, safeguard that of business remains appealing. Emphasis will be placed on more intimate ESG data in financial reporting, with regions including the EU and Asian countries, forming more standard frameworks for ESG disclosures. Companies will also place greater emphasis on clear ESG data under the Paris Agreement signed by Turkey.
2. Discussions Over “Greenwashing” Will Increase
Environmental, social and governance factors are at the core of ESG investment, which has gained popularity in recent years. ESG is a measure of the sustainability of an investment. Sad to say, with increasing consumer and investor interest in ESG factors, greenwashing is becoming more prevalent. Greenwashing is an erroneous representation of a product, service or investment, giving the impression that a product is more sustainable than it is in reality. According to the 2019 Accenture Chemicals Global Consumer, Sustainability Survey, more than half of consumers surveyed would pay more for recyclable products (Accenture, 2019). While there is such a demand from consumers, not every business is really looking for a cleaner planet or a more impartial society and can making false or deceptive claims about “greenness”.
3. From Net Zero to Climate Positive
Climate positive purses that an activity goes beyond the net zero carbon target to build an environmental advantage by eliminating supplementary carbon dioxide from the atmosphere (Fast Company, 2018). Although the term Net Zero is strongly entrenched in the vocabulary of sustainability, it is not always the case. Businesses go beyond net zero carbon emissions and ask how they can create a positive climate action by eliminating additional CO2 from the atmosphere. The climate positive appears to be the natural next step, as it focuses on taking action now in a way that will profit the future.
4. Increasing Importance of the “S” in ESG
Research concurs that there will be a noteworthy boost in the social side of ESG factors in 2022. According to the 2021 Schroders Global Investor study, over 57% of investors worldwide said that social issues had grown into more major to them during the pandemic (Schroders, 2021). Whether you spotlight your “S” efforts on internal issues like diversity or on external like community projects, presumably they will be on the radar in 2022.
Social topics like domestic legislation on modern slavery and other human rights, anti-discrimination standards, exual harassment, gender discrimination, racial discrimination and the impact of COVID-19 on businesses that will continue to interact with their employees will clearly gain more momentum. Considering Turkey in particular, it is not difficult to say that employee rights continue to occupy the agenda as observed in the recent strikes.
5. Transparent and Accountable Businesses
A report by the Economist Intelligence Unit (2021), commissioned by the WWF, demonstrates that an increasing number of people worldwide are worried about the future of the nature. The results include an astounding 71% rise in the popularity of sustainable product research over the past five years, with continuing expansion even throughout the COVID-19 pandemic. This means that companies must be transparent about their sustainability measures. It is not sufficient for companies to simply declare that they are green, socially responsible, and transparent. Consumers want facts and figures to find out why and if they are not given, they will go somewhere else. Companies must be sincere about their sustainability and speak clearly how they plan to enhance in the upcoming years if they want to retain customers, employees, and stakeholders.
For more practical guidance and advice on how to start your ESG journey or improve your ESG performance, take a look at our expertise.
Corpera Consulting and ACE Consultancy has a strategic ESG consultancy partnership. With Corpera’s industry leading social and governance management consultancy and ACE’s world-class environmental consulting services, we offer unique, all-encompassing solutions for investors and issuers navigating the intricacies of ESG consultancy.