globalEDGE Blog - By Tag: sustainability-in-global-business-series

The influence sustainability has on the global market is rapidly increasing. As more and more people value the environmental impacts of their purchases, demand for sustainable fashion is quickly increasing. Companies that incorporate sustainable initiatives into their products have the potential to grow significantly in the near future. As of 2022, 78% of consumers in the Netherlands incorporate sustainability into their purchasing decisions. Additionally, younger generations value sustainable products more than earlier generations, with Generation Z valuing them the highest. 75% of Generation Z value buying sustainable products over purchasing name-brand products.

Sustainability is top of mind for consumers, companies, and governments around the world.  As renewable energy becomes more feasible and technology advances us toward a cleaner future, it is apparent that resource availability, future profits, and the state of our planet will be dependent on the choices made in the next few decades.  The sustainability landscape changes year to year to reflect the newest regulations and trends, so reports are released regularly to keep up to date.  Let’s look at the updated sustainability trends by industry.

The world population grows at a staggering rate each decade, and it is only continuing to increase. Currently, our world population is at 7 billion, but by 2050 it is estimated that the population will reach 9 billion. In order to fit the needs of the rapidly growing population, there needs to be a major increase in food production—approximately by 70%. This raises the question of how? How can the population be fed healthy, wholesome diets without harming the environment? Different countries and regions are trying to come up with solutions to fit the needs of the growing population.

In a legally-binding agreement reached in last years' COP21 conference, over 195 nations pledged to reduce carbon emissions from 2020 onward. The ultimate goal of the conference was to adapt measures that would keep global temperatures from rising 1.5 to 2 degrees Celsius. The passing of this agreement--the first of its kind--appears indicative of the current worldview of climate change. Most world leaders are now unified in the idea that climate change is an increasingly urgent global concern. As a result, the pressure to utilize renewable energy sources has never been higher. Such resources, including hyrdo-electric power, wind turbines, and solar cells, are growing in both popularity and efficiency. Now, the goal is to deviate totally from fossil fuels, both in daily energy use and in international business.

Cap and trade programs are being implemented in many countries and regions all over the world. A cap and trade program is a system that sets a “cap” limiting the amount of pollution a company, institution, or household can emit. The trade aspect of the program refers to a market where companies buy and sell allowances depending on if they will be over or under the cap. In essence, it’s a polluter-pays principle. Cap and trade allows the market to decide where emissions can be condensed with the lowest cost, while cutting down on the pollution that is causing climate change.

A Socially Responsible Investment (SRI) is an investment that is considered socially responsible because of the nature of the business the company conducts. Essentially, when using an SRI framework, an investor not only considers a company’s financial information but also the way in which the company operates. A major trend in recent years with SRI is the sustainability and environmental impact of a company. The Forum for Sustainable and Responsible Investment’s (US SIF) Report on Sustainable and Responsible Investing Trends in the United States found that as of 2013, approximately one out of every six dollars under professional management in the U.S. was invested according to SRI strategies. This number is staggering, especially when put in the context that the United States lags behind many other nations in Socially Responsible Investment.

Environmental, Social and Governance criteria (ESG) are the standards that investors are increasingly using to evaluate a corporation’s operations and performance. About one-third of companies have reportedly received inquiries from sustainability analysts, and ESG criteria have started to shape their business strategies. Investors seeking companies that meet ESG criteria value returns, but don’t prioritize profits over companies that don’t fit into their ethical frameworks.

The concept of sustainable business practices is gaining traction on a global scale. Investors and customers alike are placing a greater emphasis on sustainability and green business initiatives. As a result, companies around the world are being forced to innovate, or risk falling behind their competitors and out of favor with customers and investors.