Top 3 Climate Trends to Watch for 2024: Navigating the Net-Zero Transition
2024 is unmistakably clear that regulation is serious about achieving the 1.5 degree target! This is changing the economy as well as the associated financial and private sectors.
Why? Because customers want products that do not only claim to be climate-friendly, banks want to see a fast and low-risk transition and investors want to own climate-compatible shares. In this dynamic realm of transformation, 2024 is poised to be a watershed year where climate management transcends from a mere ‘ESG’ trend to an indispensable aspect of business.
Let’s delve into the top three predictions for how climate transformation will shape the corporate landscape in the coming year.
1. Climate Data becomes Financial Data!
Climate-relevant data goes far beyond the ESG-buzzword; it will be woven into the financial DNA of companies. CFOs are already contemplating the impact of climate change on financial outcomes, and the integration of climate performance data into financial reporting is becoming standard.
On top, the creation of sustainability procurement roles signifies a growing recognition that every buying decision is a potential step towards net-zero. Making it a top priority to gather, monitor and report climate-relevant data not only of the own company, but of suppliers, business partners and purchased products along the supply chain.
With the expansion of climate disclosure and sustainability reporting, driven by Scope 3 rules and global regulations, even non-public entities supplying major corporations will need to manage their climate data to report their greenhouse gas emissions, climate targets and reduction efforts. This shift accelerates a significant transformation across various supply chains, emphasizing the need for a comprehensive approach to assess the climate performance of suppliers and business partners.
2. Regulation drives increasing Corporate Climate Disclosure
Climate will remain a hotly debated, especially amid international heat records, controversy elections and legislative changes. Companies need to be transparent and accurate in their external communication on climate targets, transition plans and reduced emissions, considering the rising anti-greenwashing laws.
Key Regulations for Climate in 2024:
● Corporate Sustainability Reporting Directive (CSRD) by the European Parliament.
– Targets large EU companies and non-EU companies with significant EU activity.
– Expands non-financial reporting to climate data, broadening the scope to ca. 50,000 entities.
● Corporate Sustainability Due Diligence Directive (CSDDD) by the European Parliament.
– Targets large EU companies and non-EU companies with large European Union undertakings.
– Aims to ensure businesses address climate impacts in their value chains globally.
● Carbon Border Adjustment Mechanism (CBAM) – landmark tool to fight carbon leakage and one of the central pillars of the EU’s ambitious Fit for 55 Agenda.
3. Supply Chains at the Heart of Decarbonization
The important role of sourcing to meet climate ans environmental targets rises drastically. It is driven by the international Science-Based Target initiative and recent laws mandating Scope 3 reporting.
The intersection of environmental and climate considerations will be most apparent in supply chain management, where companies are compelled to prioritize both sustainable practices and climate performance of suppliers and their products.
As the fight against greenwashing intensifies, 2024 will witness clearer legal definitions on ‘net-zero’ and ‘climate neutral’, with weightier consequences for companies engaging in misleading claims and intransparent practices. With the EU leading the way in eradicating greenwashing through new rules, businesses will need to embrace measurable performance criteria not just for compliance but as an opportunity for a holistic transformation.
Getting Climate Ready!
In summary, 2024 marks a pivotal moment for climate, where companies move beyond mere compliance to view decarbonization as a catalyst for fundamental business transformation. The integration of climate-relevant data into financial practices, expanding regulations, and the increasing significance of supply chain to reduce Scope 3 emissions underscore the fast evolving corporate landscape of climate disclosure. It’s not a trend; it’s a transformative force shaping the future of every business.
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