It's that time of the year when we all assess what's behind us, unwind and make plans for the future. Just to make it clear right at the beginning, make sure to put climate on your agenda, because our future depends on it.
If anything has taught us that urgent action is needed, it's the discourse and the whole awakening happening around climate change this year. I salute that and made it my mission to fight this most pressing problem of today. Every single day matters, even more so moving forward.
Here are my five outlook trends for 2022 noting important areas we need to pay attention to.
1. Companies need to find solutions as regulations tighten
Whether we like to admit it or not, most companies are last minute when it comes to regulating CO2 emissions. Simply because the pressing issue has been here long enough to know we should have started yesterday. Which is why putting a date on corporate sustainability and obligatory reporting is all the more important.
Some 50,000 large and/or listed EU companies with more than 250 employees or more than 40 million in revenue will have to find a solution to manage their CO2 footprint as it will be mandatory by 2023 under the new Corporate Sustainability Reporting Directive (CSRD). Starting from January 2023, the companies in scope of the new Directive will have to publish their respective sustainability reports in January 2024 with data from the previous year.
What makes all of this more plausible is the fact nowadays we have technology making it easier to calculate our impact on the climate. And it comes as no surprise that as the regulatory environment is tightening further, that leads to the increased need for corporate CO2 management solutions.
Here's why such tools are extremely important. According to a new global BCG survey, 85% of organisations are concerned about reducing their greenhouse gas emissions, and 96% have set targets for reducing emissions in at least one scope. Yet only 11% have cut their emissions in line with their ambitions over the past five years. Respondents say their inability to measure accurately and exhaustively is the leading roadblock - just 9% measure their total emissions comprehensively. BCG surveyed 1,290 organizations with 1,000 employees or more and revenues ranging from approximately $100 million to over $10 billion—across nine major industries worldwide—to find out how they were measuring and reducing their greenhouse gas emissions.
So the number one outlook for next year is not only the need for leadership to incorporate the concept of sustainability, they also need to execute their ideas based on the data.
Which is why organisations establishing a sound basis for their sustainability claims will be a key theme in 2022, and data will form an integral part of that process. Systems capable of capturing the data, which can then be subject to independent verification, will simply need to be put in place.
2. Employees are choosing and they want their work to have social impact
There’s a lot of noise happening around climate change, and I am glad to see employees being more vocal about it in the workplace. The biggest and most significant change that we’ve seen in the world of recruitment is the shift to a candidate-driven market.
Whether we call this era The Great Resignation, as propelled by the US media, or The Great Reshuffle, the fact is there are more jobs than candidates. Why does that matter? Job seekers hold more power than ever before and they want meaningful work. That leads to the fact that ESG and sustainability issues are now firmly on the boardroom agenda. The demand for organizations to take action will grow more intense in 2022.
We can already back that up with data. By 2025, millennials will make up three-quarters of the workforce, bringing strong views on social and environmental responsibility. 70% of employees are more likely to work for a company with a strong environmental agenda, making the salary issue secondary. According to the US Bureau of Labor Statistics report, 60% of Gen Z want jobs that have a social impact. Climate protection is their greatest concern.
Therefore, sustainability not only becomes a necessity in aligning your business strategy, but also a crucial point in your recruitment strategy. As an employer, you will need to communicate your values and follow up with actions. For example, we live what we preach and we calculate and offset the carbon footprint of each of our employees.
As Google's CEO says
Companies that fail to go carbon-free will lose the talent war.
And that has never been more accurate than now. A recent Korn Ferry survey shows 55% professionals believe employee turnover will increase in 2022; 83% of employees would be more loyal to a company that supports them in contributing to social and environmental issues.
In short, you will have to address climate change in your business if you want to attract top talent.
3. Carbon reduction is backed by science-based targets
The change has already begun and the world is transitioning to a zero-carbon economy. This is non-negotiable. And it’s a race we all need to be a part of. We all know the number one business ambition here - it’s limiting the warming of our planet to 1.5°C.
We need more science-based targets to drive carbon reduction making our way towards net zero. And I believe there will be more forward thinking and innovative companies joining that path.
Science-based targets do not allow carbon offsetting to achieve targets. They show companies how much and how quickly they need to reduce their greenhouse gas emissions to prevent the worst effects of climate change.
More than 2,200 companies worldwide are leading the zero-carbon transition by setting emissions reduction targets through the Science Based Targets initiative (SBTi). What’s important to note is that 1,029 of those companies had their set targets officially approved by SBTi, including large corporations such as The Economist Group, AstraZeneca, Ørsted and CVS Health.
The SBTi’s new Net-Zero Standard is the world’s first science-based certification of companies’ net-zero targets. The validation process will open for corporates in January 2022.
Companies will be required to set both near and long-term science-based targets across all scopes. These included near-term targets covering the next 5-10 years, with longer-form targets capped at 2050. The SBTi has clarified that science-based net-zero targets will require companies to achieve deep decarbonisation of 90-95% before 2050. From that point companies should neutralise unavoidable emissions through offsets and removals. Crucially, the SBTi states that carbon offsetting and removals cannot exceed 5-10% of a company’s emissions, although this is sector dependent.
To date, more than 300 companies have made a commitment to reach science-based net-zero before 2050 through the SBTi’s Business Ambition for 1.5C campaign.
This is a true test to the company’s ambition and integrity.
4. Carbon removal requires quality narrative and action
Time to deal with big numbers, as carbon removal is all about that. The Taskforce on Scaling Voluntary Carbon Markets consultation identifies that at a minimum, 2 gigatons of carbon removal is needed by 2030. Achieving this requires a 15-fold surge of voluntary action by 2030, compared to what occurred in 2019.
Instead of just avoiding emissions, we need to remove them from the atmosphere. Alongside nature-based solutions, we need the engineered ones too and that leaves us with a clear argument to scale up carbon removal in the carbon markets.
There are technological options for carbon removal, but the industry, however, is still in its infancy and needs to develop quickly.
The need for cost-effective carbon removal solutions is urgent. The International Energy Agency reports that around 30 carbon capture and storage projects have been approved since 2017 — the ones already in operation sucked up around 40 million metric tons last year. But that’s a teeny-tiny amount compared with the roughly 35 billion metric tons of carbon the industrial and agricultural worlds spit up annually.
Research published in mid-January in the journal Nature Communications suggests that creating a "wartime" response to climate change by investing 1.2 to 1.9 percent of GDP in DAC innovation and deployments could stimulate the removal of 2.2 to 2.3 gigatons of CO2 per year.
Climate scientists modelling pathways for stabilising warming at 1.5°C (the goal of the Paris agreement) assume that a carbon removal industry based around one method may need to be around 40% the size of the current fossil fuel industry.
When we translate the current state to numbers, it is said that the global carbon capture and storage market is expected to reach $4.9 billion by 2026.
Corporate demand for carbon removal projects is not only rising, it’s outstripping supply. We need to build the narrative around quality carbon removal.
5. Is climate tech Germany’s next "exportschlager"
The global tech industry plays a significant role in fighting climate change. Innovation as well as data is on the forefront of this battle. That being said, it doesn’t come as a surprise that the thriving tech ecosystem is growing.
Climate tech investments have skyrocketed in the past five years. Almost five times more investments were made since the Paris Agreement in 2016. That being said, this year has been a record one in climate tech investments raising almost $32 billion. And it’s important to note that the amount is expected to grow in 2022.
Looking at regions, Europe is the fastest growing when it comes to climate tech with investments growing seven times since 2016. Europe is the fastest growing climate tech region, with investments growing 7 times since then, while Germany and the UK are home to the most climate tech startups.
According to Sifted.eu, Germany is leading the way in most climate tech sub-sectors. It has the most startups working on sustainable building, energy, circular economy, smart mobility, agriculture, biodiversity and zero pollution.
Europe plays a leading role in climate action when it comes to regulations, investments, the start-up scene etc...
The message for this year couldn’t be more simple and clear:
Let’s all continue to do our part to contribute to a more sustainable future moving forward to that goal each day. No action is not an option.
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