Key ESG Trends for 2023: Part 1
Key ESG Trends for 2023:PArT 1
13 January 2023
Here, we offer a glimpse into the future to predict some key ESG trends for 2023. Sustainability is becoming higher on the agenda for many governments and organisations around the world, so it is expected that more attention will be placed on sustainability issues in 2023. For this first part of the blog series we consider how countries are balancing the need for national energy security with a drive towards sustainable energy, and whether nuclear power is a suitable option. We also summarise some new ESG legislation in the EU, looking at updates to the Sustainable Financial Disclosure Regulation, and the Digital Service Package.
National Energy Security vs Sustainable Energy Transition
Net zero goals are becoming increasingly common, with one fifth of the world’s companies having net zero targets as well as countries working towards their Nationally Determined Commitments which they pledged to achieve in COP agreements. But going into 2023, there could be a toss-up between national energy security and sustainable energy. In the UK the first new coal mine in three decades has been opened, new permits have been offered for oil and gas extraction and the government had even previously planned to overturn a moratorium on fracking to boost national energy reserves. This shows that during this turbulent time following Russia’s invasion of Ukraine, the need for energy could come at a cost to sustainability. Some countries such as Denmark and New Zealand had already diversified their energy supplies in a sustainable way before the war. They are therefore more able to balance energy security with their path to net zero, but other countries are less well prepared.
Nuclear Energy
One response that some countries are adopting going into 2023 is a higher reliance on nuclear power, such as Germany, South Korea, Japan, Belgium, France, The Netherlands and the US. Some of them are abandoning plans to shut down nuclear power stations which could have an immediate effect on access to energy.
Recently, there has also been a breakthrough in science with nuclear fusion technology, where scientists have been able to produce more energy from a reaction than the amount they put into it. This could be positive for the future of sustainable energy, since it would avoid most of the nuclear waste that is produced in nuclear fission (the current available nuclear power). It is an important topic for sustainability going into 2023, however it is unclear at this point how long it could take for nuclear fusion to be an accessible form of energy.
EU Sustainable Financial Disclosure Regulation
There are also some new ESG regulations for the EU which certain organisations will need to act upon in 2023. Firstly, there is an update to the Sustainable Financial Disclosure Regulation (SFDR) which aims to make sustainability credentials of financial products more transparent and therefore reduce greenwashing. In Q3 of 2022, companies dealing with asset management, insurance and financial advice were required to report on key performance indicators adverse to sustainability targets, and in Q3 of 2023 a broader range of institutions will be required to do this. It is hoped that the policy will dissuade the financial sector from channelling capital into unsustainable activities and focus on sustainable activities instead.
EU Digital Service Package
In November 2022 there were also new EU regulations introduced specifically concerning governance, which some organisations will have to consider in 2023. The new policy is called the Digital Service Package, which includes the Digital Markets Act (DMA) and the Digital Service Act (DSA). At the moment, companies such as Amazon, Google and Facebook have a massive influence as ‘gatekeepers’ between people using the platforms and the products and services that the users buy. These platforms can also change the way in which society is run, affecting democracy and the economy. The Digital Service Package is therefore intended to make online platforms transparent and accountable to reduce barriers to business across the EU. In theory this will make the playing field more even, so that the best companies rather than just the biggest companies will be able to thrive. It will also help with ensuring that illegal content is removed efficiently, and that vulnerable users such as minors will be more protected.
Let’s hope that energy security will be achieved in a sustainable way, and we will be watching this space to see whether countries address this issue with nuclear power in 2023. We also anticipate positive changes to the financial sector and digital platforms through the new EU legislation. Stay tuned for part 2 of this series, which will take a look at food sustainability, critical minerals, employee relations and indirect emissions reporting.