What will be the biggest sustainability trends in 2019? - Sustainability Spotlight

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Already the most significant long-term trend affecting drinks companies, climate change will top the 2019 agenda with an acceleration in greenhouse gas (GHG) emission reductions urgently needed. Agricultural supply chains will be a prime focus as companies come under pressure to reduce their indirect 'Scope 3' emissions. Ben Cooper investigates.

If it were possible, climate change will be an even bigger issue this year than 2018

If it were possible, climate change will be an even bigger issue this year than 2018

A report from the United Nation's Intergovernmental Panel on Climate Change (IPCC) in October, warning just how off the pace global efforts to address climate change are, briefly brought the world to rapt - and justly-alarmed - attention. As the narrower fixations of the age reclaimed their contrastingly-undeserved monopolisation of the news agenda, there could be a feeling that it was just another exposition of the risks of climate change. All it has to say to the global community, and to its drinks manufacturers, is that an issue that was already incontestably the gravest threat humankind is facing, remains so.

In fact, the report is in no way going over old ground. It adds a huge amount of detail on the current situation and outlook, while crucially conveying a palpable sense of urgency, almost emergency. Its core conclusions suggest that the jolt to the system was badly needed.

Grim outlook for Paris goals shapes companies' GHG priorities

Achieving the 1.5°C goal is still possible, the IPCC concludes, but would require "rapid and far-reaching" transitions in land use, energy generation, industrial systems, transport and the built environment. Net human-caused CO2 emissions will have to fall by around 45% by 2030, against a 2010 baseline. Even the less-ambitious Paris aim of restricting temperature rise to "well below" 2°C is now in doubt, with global warming of 3°C by 2100 likely on current trends.

The UN Environment Programme's (UNEP) Emissions Gap Report 2018 projects that the level of ambition of countries' Nationally Determined Contributions (NDCs) to global reductions will have to increase by a factor of three to remain within the 2°C target, and fivefold for the 1.5°C scenario.

The Emissions Gap Report highlights the role non-state actors (NSAs), which include companies, might play in accelerating progress, but says "current impacts are extremely limited and poorly documented".

"Many more of the over 500,000 publicly-traded companies worldwide still can, and must, act"

More than 6,000 companies have pledged climate mitigation action, the report states, but "many more of the over 500,000 publicly-traded companies worldwide still can, and must, act".

While climate policies require long-term thinking, the onus now appears to be on how companies can accelerate progress in the short term. How they extend their targets, and how quickly they do so, is critical in light of the IPCC's 2030 objective.

Indirect pressure: Agriculture key to the Scope 3 challenge

Drinks companies specifically will come under increasing pressure in 2019 to set reduction targets for indirect (Scope 3) emissions, or include Scope 3 in their total-footprint reduction targets. Scope 3 includes all emissions from the areas of the value chain, upstream and downstream, not under a company's direct control, excluding those from power generation. Covering areas like agriculture, distribution, packaging and the post-consumer phase, they generally constitute the largest proportion of the GHG footprint. However, they have to-date not received the focus this warrants chiefly - though not entirely - because they are under the control of third parties.

Reducing emissions from farming is a critical component in achieving the global 2030 reduction target

Of these, the most significant from the GHG standpoint is agriculture, which accounts for around 25% of total GHG emissions. Reducing emissions from farming, then, is a critical component in achieving the global 2030 reduction target.

Agriculture has become an increasingly-prominent element in companies' sustainability strategies, particularly over recent years. However, this does not appear to correlate with benchmarking or target-setting of agricultural GHG emissions.

A recent survey of Scope 3 engagement among 50 of the largest US food and beverage companies by sustainability non-profit Ceres found only eight - The Coca-Cola Co, Danone, General Mills, Kellogg, Mars, Nestle, PepsiCo and Unilever - set Scope 3 targets inclusive of emissions from agriculture. Ceres said it was surprised how low the number was, particularly as many companies in the survey have been stepping up engagement in sustainable agriculture.

Companies have prioritised agriculture primarily because of concerns about the fragility of supply chains. Agritech initiatives may often have GHG reduction benefits and, over the long term, may be increasingly aimed at building climate resilience into supply chains. However, many of the programmes that companies are running in farming communities also target social issues, such as gender, education, poverty and child labour.

Balancing competing priorities

Farming is an area acknowledged to present many very significant sustainability issues, threatening both companies and the farmers themselves. Reprioritising policy to favour reducing GHG emissions may not fit with a company's priorities. Moreover, companies are increasingly aligning with the UN Sustainable Development Goals (SDGs) and their programmes may be making specific contributions to other UN aims. Those with an overarching view of the UN 2030 Agenda for Sustainable Development will be aware that too dramatic a shift to emissions could undermine progress elsewhere.

Unpicking all this and arriving at an appropriate level of ambition for drinks companies' agricultural emissions reductions will not be easy. The SDG framework may be helpful in the process, as will the IPCC's report.

Indeed, the granular detail the IPCC provides should increase understanding of how climate impacts a company's other sustainability interventions, notably in relation to water scarcity and food security in different temperature scenarios. It should also help shape long-term strategy.

New guidance on Scope 3 emissions has recently been published by Ceres and the Beverage Industry Environmental Roundtable (BIER), while a diverse group of partners launched a compendium of Scope 3 guidance at the COP 24 climate conference in Poland in December.

Stretching targets required as the hard yards begin

With the UN calling for a step change in greenhouse gas emissions, there is possible reputational risk in prevarication

Organisations such as CDP and the Science-based Targets Initiative are leading the corporate sector towards the incorporation of Scope 3 reductions into climate strategies. With the UN calling for a step change in GHG emissions, there is possible reputational risk in prevarication.

The recent campaign targeting soft drinks and water firms on the issue of marine plastic pollution revealed powerful brands to be extremely exposed as progress had been too slow. Stretching targets and bold commitments are sometimes needed to break through on intractable problems.

In the face of relentless campaigning, major drinks companies have launched more ambitious commitments on plastic recycling. Signing up to the New Plastics Economy Global Commitment offers reputational armour against a highly-threatening issue. Signatories sign up to a raft of commitments, including a pledge to set an "ambitious" target on use of recycled content.

They are also tasked by the Global Commitment to report on progress annually. Regular public reporting from signatories, coupled with the unprecedented public interest it has generated, should ensure this campaign maintains considerable momentum in 2019.

Meeting enhanced targets will involve working closely with suppliers - and trusting them. Effectively, these companies are staking their brand image on their suppliers' undertakings that they can meet the higher demand for recycled PET (rPET) and, for that matter, on consumers throwing enough bottles in the right bin.

Forget the low-hanging fruit of the early days. These are the hard yards

However, drinks companies may find themselves launching more sustainability initiatives and setting more targets in relation to parts of the value chain they do not directly control, because that is where some of the knottiest challenges remain, such as plastic recycling, Scope 3 emissions and the countless issues food and drinks companies face relating to agriculture. Forget the low-hanging fruit of the early days. These are the hard yards.

The breakthrough that campaigners achieved on plastic pollution - some 250 companies have signed up to the stretching goals and the shared vision of the Global Commitment - suggests the companies were not moving fast enough on the issue. It was a failure of the strategic decisions, but it was quite clearly not a failure of the idea of sustainability defining how a company operates. Rather, it suggested public sentiment on this issue was running ahead of where the companies thought they should be or could achieve.

If anything, it was a vindication for a business model that prioritises sustainability.

Millennials, Gen Z and the 'value' of sustainability

Much is made today of the trend towards conscious consumerism, led by the Millennial generation. It is often said that Millennials have shown themselves not only to shop in a different way, but have been standard-bearers too, with generations older and younger following their example. The first Gen Z consumers are now reaching adulthood and are expected to swell the conscious consumerism trend further.

The market that food and drinks companies are finding for products with higher ethical or environmental credentials confirms the conscious consumerism trend is real and growing. Meanwhile, the investments that so many companies are making in incubator funds, which invest in and help develop start-ups that almost always have a USP, speaks to the same trend.

Ultimately, these successful areas of NPD and investment are another strong vindication for sustainability, even though they would not be seen as part of a sustainability strategy.

The coming year will see further discussion of the value of sustainability to a company, and more debate about how much influence sustainability concerns should have on business priorities. At the same time, much work is being done on how to measure and compare sustainability criteria, particularly in order that the value of sustainability initiatives can be better understood by investors and reflected in the share price.

Indeed, growing investor interest in a wider range of sustainability issues will be another trend to watch in 2019.

Five trends to watch for in 2019

  • Climate change & greenhouse gas emissions

Companies will be under pressure to step up Scope 3 GHG reductions after UN call for urgency

  • Climate change & sustainability strategy

IPCC insights into how climate impacts on other issues will help inform a longer-term strategy

  • Plastics challenge & stretching targets

More ambitious targets and reporting pledges will keep sustainable plastics in the spotlight

  • Sustainability & the market opportunity

Conscious consumerism will continue to grow as Gen Z buying power increases

  • Sustainability & business development

Better measurement of how to improve the understanding of sustainability and its value

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