Why 2024 is the year sustainability develops a credible business case

As we step into 2024 and the world grapples with an increasing number of climate disasters and their ever-growing cost, a paradigm shift is underway among global organizations.

In 2023, we saw a significant change in the understanding of the business case for sustainability among top leaders globally. The proportion of executives who thought it was clear tripled compared to 2022, as per the Capgemini Research Institute report.

Investments in sustainability initiatives remained flat between 2022 and 2023 and represented less than 1% of total revenue in 2023, while marketing budgets were equivalent to 9.1% of annual revenue on average.

Fast-forward to now, and sustainability is becoming a priority investment area, increasingly viewed as an opportunity to create value. At the end of 2022, only a third of organizations intended to increase their sustainability investments. Today, the proportion is over half.

It is good news that the private sector is fully grasping its responsibility to contribute to the transition towards a more sustainable economy and that it understands it is the only way to create sustainable value.

In the last year, we have seen a major surge in optimism among executives about the future of their organizations. Where business outlooks are positive, investments generally follow. But while over half say they’ll earmark more funds for sustainability in 2024, they must hone in on areas where they can make the most impact.

First, you can't manage what you can't measure, so companies' sustainability reporting capabilities need attention. While most organizations have a handle on their Scope 1 and 2 emissions, understanding and cutting Scope 3 emissions remains challenging: the proportion of companies that confidently measure Scope 3 emissions dropped in 2023. It's understandable, as these emissions are not within the company's direct control, but they also tend to be far greater than the organization's own emissions. It is paramount to ensure the company has internal and/or external resources to track them and ensure they go down properly.

Organizations can reap major benefits by putting funds towards implementing circular economy principles and sustainable product design. They can also implement more sustainable products and services.

Climate technologies (renewables, batteries, low-carbon hydrogen, carbon capture, and alternative fuels, among others) are an essential complement to behaviour changes.

Three-quarters of business leaders see them as a key lever to decarbonize their value chains and create new industries and business models. We see a significant dynamic in this area, whether in terms of innovation or investment, supported by political momentum, particularly in the United States, China and the European Union. However, as of now, a key hurdle is the added cost of these technologies. Innovations, such as hydrogen and carbon capture, are still costly, which, in turn, increases product pricing. And, while organizations say they would be willing to pay a 'green premium' of around 9%, the expense of low-carbon cement produced using carbon capture is estimated to be 75% to 140% higher than conventional cement.

At the same time, there are industries and products – such as electric vehicles (EVs) – where green premiums have fallen drastically, inspiring climate tech adoption. Unsurprisingly, our research confirms that the climate techs that are scaling up, such as EVs, solar power, wind and batteries, are mature from a technology standpoint, supported by incentives and favourable policy and close to parity with traditional tech in terms of costs. But to be scaled, climate tech must be made commercially viable. We will need significant mobilization across industries and borders, starting with governments.

Besides climate tech, companies should also leverage digital technologies, such as AI, digital twins and additive manufacturing. When adopted at scale, they will be essential in reducing development costs, increasing efficiencies and speeding up innovation processes.

Over half of organizations believe in the transformative power of technology to accomplish sustainability objectives and digital investment is set to double as a proportion of revenue over the next five years. If properly targeted, this increased digital adoption could achieve considerably more reductions in greenhouse gas emissions and energy consumption than it already has.

These evolutions will shape an eco-digital era^TM: a new and emerging business landscape that is more interconnected, data-driven, accessible, and sustainable. With the integration of mainstream digital technologies – such as data, analytics and cloud – coupled with innovative advancements, such as generative AI, augmented reality and virtual reality, we will see reimagined business models contributing to a broader societal impact.

Navigating the opportunities presented by the eco-digital era^TM requires a new, strategic approach. Organizations need to:

• Focus on identifying efficiencies to streamline processes and drive significant cost savings.

• Ensure a harmonious integration of immediate wins and long-term sustainability.

• Invest newly unlocked resources into digital and sustainable transformation initiatives.

• Make sustainability an intrinsic part of products and services.

• Forge partnerships that amplify sustainability efforts and contribute to the broader ecosystem of positive change.

Organizations have only scratched the surface of what can be achieved by harnessing digital technologies. One thing is for sure, the sum will be greater than the parts and will be key to unlocking a sustainable future.