Sustainability in 2024: How businesses can transform for eco-conscious success

A common mistake companies make when transitioning to a green economy is to plan for the world as it currently is, as opposed to the world it’s rapidly becoming.

Miguel Sossa-Mardomingo, Capgemini’s Vice President and Americas Sustainability GTM Lead, has worked at the intersection of business and the environment for over 20 years. He has helped many companies develop sustainability roadmaps, achieve carbon neutrality, educate their supply chains and consumers on resource conservation, and so forth. At Capgemini, he is helping commercial and municipal clients achieve critical sustainable goals and understand the role climate funding plays in enabling their ambition.

“Sustainability is a team sport, a comprehensive issue that requires thinking and input from myriad partner ecosystems and every facet of consulting,” Sossa says. “At Capgemini, we recognize that ensuring a resilient and sustainable future is one of – if not the most important – imperatives of our lifetimes. Since joining, I have appreciated how sustainability is authentically at the core of who we are at Capgemini.”

Now is the time for businesses to take decisive action to be part of the global effort to reduce carbon dioxide emissions and mitigate the worst consequences of anthropogenic climate change.

We spoke to Sossa about what businesses should anticipate in the near future and how they can best position themselves to become major players in the burgeoning eco-friendly economy.

What major sustainability trends can we expect to continue throughout 2024?

One is that the regulatory world is shifting every day. For example, California recently announced SB 253 and SB 261, which focus on climate disclosures on businesses in the state. That means organizations need to look internally at how they’re capturing their environmental impact data today and making sure they can communicate this in a clear, concise way. Similar legislation is happening in the EU and the US with the SEC (Securities and Exchange Commission) Climate Disclosure Policy.

Secondly, investors are expecting more from companies regarding ESG (Environmental, Social, and Governance) performance, especially climate disclosures. Regardless of whether someone politically thinks ESG reporting is good or bad, broadly speaking most companies see that the transparency and accountability of joining sustainability programs and including ESG in what they bring to the market builds relationships with investors. The investment market is already pushing in that direction.

How about technology? Which tech trends should people follow in 2024?

Obviously, the big phrase at the end of 2023 was “generative AI.” We will see AI and big data continue to drive insights throughout all sustainability sectors. That includes analyzing the reporting data I just mentioned. These tools will help organizations identify ways to minimize environmental impacts and their effects on various communities while optimizing resource utilization.

Blockchain will still be prevalent in tracking the origin of sustainability claims, products, and materials. Hopefully, we will see a push toward digital twins as they enable us to do everything from climate mitigation and resilience strategy planning to creating virtual models of products and processes. These tools will help companies assess their broader environmental impact.

In addition to leveraging these technologies for sustainability, you know the ins and outs of securing government funding for the energy transition. What green infrastructure investments by the US government should businesses be aware of?

Well, we are actively engaged and advising our clients regarding the US government’s record climate funding: $2 trillion via the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction Act (IRA). That is a huge opportunity for businesses looking to transition, and the funds will be paid throughout 2024. But receiving this funding is only the first step. Organizations will need to know the proper way to use it.

Executives with a long-term vision for their companies will look for partners who can help deploy that funding in their manufacturing, work force development, etc. We will also see foreign investments continue to come in, particularly around green energy and hydrogen. So, there will be a heavy focus on infrastructure.

What are the main challenges preventing businesses from adopting more sustainable practices?

There is limited knowledge about sustainability issues all around. In the public sector, regulatory uncertainty and limited government support – despite the promising investments I just mentioned – hinder long-term investments. Meanwhile, in the private sector, pressure for short-term profits and limited access to capital for sustainable investments add another layer of difficulty.

It is hard for companies to integrate sustainability into existing operations, especially when they do not have access to necessary technologies. But it is also a company culture issue. Insufficient collaboration and limited knowledge sharing within organizations can hinder collective progress.

Should businesses try to integrate sustainability into existing business models or completely transform?

That depends on the nature of the business. Highly resource-intensive businesses, such as oil and gas companies, may require more significant transformation. Unsustainable business models need more transformation than those already aligned with sustainability principles. Pressure from consumers and investors can motivate either integration or transformation. Regulations can incentivize either, as well, depending on their specific requirements. Businesses will need to weigh the costs and benefits of each approach.

Capgemini’s A world in balance report found that companies are still struggling to track emissions throughout the value chain. Why is this difficult?

Without adequate visibility into supply chain emissions, many businesses do not have enough data for accurate calculations. The data they do have are heterogenous and inconsistent, which will require validation and aggregation. Suppliers might be reluctant to share sensitive data, hindering accurate tracking, and smaller businesses often lack the resources for tracking effectively in the first place.

This is especially true when it comes to scope 3 emissions, which come from operations not controlled by the company itself but indirectly affect the value chain. There is a simple reason for data inaccuracies across all sorts of companies regardless of size or sector: the best methods for tracking scope 3 emissions are still evolving and have not been standardized yet.

What kind of impact does the difficulty around tracking scope 3 emissions have on sustainability efforts?

It can be extremely damaging if not handled properly. Companies may feel compelled to simply ignore scope 3 emissions because they are upstream or downstream of their traditional purview. But scope 3 emissions can account for 70 percent or more of a company’s total carbon footprint, so overlooking them will severely limit opportunities to reduce one’s climate impact.

This might not be possible to ignore going forward, though, because investors and stakeholders are demanding greater transparency and governments are increasingly requiring disclosures. They need to adopt new tracking methodologies that will make the supply chain more resilient as they recover from pre-pandemic levels.

How can businesses start preparing for upcoming regulations around sustainability reporting?

Organizations will need to identify relevant regulations, analyze compliance requirements, conduct a materiality assessment to determine the most relevant sustainability issues for their business and stakeholders, and evaluate their data management capabilities. They will need data availability and completeness, as well as efficient collection and analysis processes.

At that point, organizations will need to design and build a reporting framework, which will require developing internal guidelines and assigning responsibilities. They should engage with stakeholders to understand expectations and make sure to communicate performance transparently. They should consider implementing governance and oversight mechanisms, such as a sustainability committee, and seeking external support from expert consultants.

Would a company be in good shape after taking these steps?

Well, they would have a tremendous head start and be well positioned to handle big shakeups. But sustainability requires continuous improvement and adaptation. Smart businesses will regularly review and update reporting processes, invest in ongoing learning, and benchmark against industry leaders.

It’s clear that business transformation is an ongoing process. But what steps can businesses take this year to accelerate their transformation journeys?

They can elevate their sustainability ambition (e.g., redefine success, set ambitious goals, embrace transparency), invest in transformational technologies (e.g., leverage data and analytics, adopt digital technologies, invest in innovation), reimagine business models (explore new value propositions, embrace disruptive innovation, and collaborate with ecosystem partners), build a culture of sustainability (e.g., embed sustainability in leadership, empower employees, incentivize sustainable behavior), and partner for collective action (e.g., engage with stakeholders, advocate for policy change, join industry initiatives).

What returns on investment are important to track when implementing sustainability transformation?

Organizations will want to monitor financial, environmental, and social factors. It is self-evident that companies will want to reduce costs, increase revenue, improve risk management, and increase access to capital. Executed correctly, sustainability initiatives can benefit a company’s bottom line. Environmental metrics to keep an eye on are emissions reduction, resource conservation, and biodiversity preservation. The social aspect includes tracking employee engagement, community relations, brand reputation, and talent attraction/retention.

Those are all the measurable factors companies should monitor. But there are also a few intangible factors that are still important: innovation, competitive advantage, futureproofing, resilience, and long-term value creation. These are not as easy to measure. Given that they are about positioning for the future, these returns are a bit more theoretical. But it is incredibly helpful for companies to have an idea of where they stand today to reap the benefits tomorrow.

How can businesses ensure they are heading in the right direction for both environmental responsibility and business success?

It is hard to overestimate the importance of vision and leadership. If embedded into core strategy and championed from the top, sustainability will reverberate throughout the company. You will see this through data-informed decision-making, innovation and transformation (e.g., investments in clean technologies, development of sustainable products and services, efficient operations), active collaboration with stakeholders, and transparency around sustainability performance.

But it is becoming clearer with each year that businesses do not need to choose between sustainability and profit. In fact, becoming more sustainable can be good for business. You just need the right plan in place and to understand what lies ahead.