In its recently released report, “ESG Trends in 2023”, global professional business services company PwC identifies five key focus areas for this year and beyond, writes the company’s energy transition lead partner, Varya Davidson.
In a supercharged environment where demand for renewable energy sources is fast outstripping supply and regulatory changes are shifting the goalposts, businesses can be forgiven for feeling overwhelmed. However, there are actions business leaders can take now that will significantly improve their environmental, social and governance (ESG) strategies in 2023 to help them glide across the shifting sands.
For some, it will be business as usual, but for others this will be a year of change and disruption as new regulatory practices coincide with rising demand for transparent business ethics and integrity. This presents enormous opportunities for Australian businesses to get on the front foot, attract investment and build resilience.
Failure to do so is no longer an option.
To ensure businesses are ESG fit in 2023 and beyond, PwC has identified five key trends to keep abreast of.
Increased focus on ethics and integrity
From new clothing lines to food brands, it is difficult to pass a billboard or online advertisement that doesn’t promote a brand’s sustainability credentials. Made from bamboo, ethically sourced, packaged in biodegradable containers – these are not simply marketing ploys, rather they are a response to consumers and investors putting money where their values lie and basing their purchasing behaviors on criteria dominated by sustainability and ethics.
However, gone are the days when creative accounting could sell any story because consumers, investors and regulators grow wary of greenwashing. Any public claims must be transparent, substantiated and supported by strong data or analytics.
Including digital platforms that record important ESG data will be crucial to any business strategy moving forward.
Prioritising supply chain security, resilience and transparency
The end product is no longer the only thing under the consumer and investor microscope. Every step of the process – from paddock-to-plate or extraction site, to electric vehicles – must be considered. Embedding new technologies that allow for recycling or circularity will be looked upon fondly, as will sovereign capabilities.
A hot tip will be to dive deeper than tangibles and consider cybersecurity and digital resilience. Hacks and data breaches can grind operations to a halt and cause investors to abort mission. To safeguard against this and prepare for anticipated demand in Scope 3 emissions reporting, PwC recommends businesses start to build skills and commence gathering data that will soon be required.
The shift to renewable energy sources and transition to net zero has presented a huge opportunity for Australia to upskill and reskill its workforce. This ensures the end goal of ESG stretches beyond achieving net zero and delivers a thriving, socially just and sustainable future.
The time is now to engage with the workforce of today and tomorrow to guide recruitment and upskilling. Businesses that successfully embed ESG into all their operations will attract and retain the best talent as workers search for employers that match their values.
First Nations inclusion and empowerment
A critical pillar of any organisation’s ESG performance should be its relationships with Australia’s diverse First Nations communities. Partnerships such as the Western Green Energy Hub (WGEH) in Western Australia – which involves the mining sector, Traditional Owners and global leaders – will likely become a blueprint for positive economic and social impact.
The WGEH will enable ultra-scale renewable energy projects with transformational power that will take place across many generations and deliver mutually beneficial outcomes for all key players.
Where trusted relationships can be formed, and respect demonstrated, there is a very significant opportunity for business leaders to partner with First Nations groups across Australia for mutual long-term benefit. This includes employment and procurement opportunities and, more importantly, innovative wealth sharing and ownership prospects.
PwC anticipates that with a heightened focus on First Nations inclusion, Australian businesses will increasingly be expected to ensure decisions are made with free, prior and informed consent.
Dynamic political landscape with expanding regulatory changes
The US Government’s Inflation Reduction Act (IRA) has sparked a global race for green subsidies, which is turbocharging investment in renewable energy projects and has triggered a swift response from other international players, such as the EU’s Green Deal Industrial Plan. There is growing demand for government action to shore up Australia’s status as a potential green energy superpower.
Furthermore, reforms to the Safeguard Mechanism should prompt Australia’s high emitters of pollution to pore over their decarbonisation roadmaps and target swift emissions reduction measures.
Staying ahead of the curve will pay dividends down the track as policy changes come in thick and fast. The opportunities attached to the energy transition and shift towards ESG transparency are enormous, but so are the challenges.
Significant gains can only be achieved if business leaders act decisively now to support a thriving and sustainable Australia for generations to come.
To read PwC’s “ESG Trends in 2023” report, visit pwc.to/3KDWVlp.
Varya Davidson is PwC Australia’s energy transition lead partner who is an expert in transformational change and sustainability strategy, with more than 25 years of consulting experience with energy and resources organisations across Asia-Pacific, Europe, Middle East and the Americas.