Year in Context 2024

by Sarah Walkley | Jan 23, 2025 | Blog

2024 has been marked by growing regulation — increasing sustainability reporting requirements and legislating issues from nature to supply chain due diligence. And with most businesses experimenting with artificial intelligence (AI), regulators also attempted to rules in place.

While the focus for years has been on climate and the environment, social issues gained greater attention. Two-thirds of companies expect to spend more on addressing social sustainability over the next few years.

As we embark on a new year, Context reflects on the events of the previous 12 months and what they mean for business. We also consider what lies ahead and how best to prepare.

01. Growing commitment to protect and promote nature

New frameworks and benchmarks increase the structure on assessing nature impacts, but concrete actions are still lagging.

Over 500 companies have pledged to use the Task Force for Nature-related Financial Disclosures (TNFD) framework for reporting — with more set to follow suit. A year-long pilot by the Science Based Targets Network (SBTN) to develop validated targets for nature ends in January 2025. Approved targets will be listed on a new tracker, helping the next wave of companies to set goals. The TNFD is expected to release updated guidance on nature transition planning following its consultation.

Despite the pledges, there’s still some way to go. Of the companies reviewed in Nature 100’s first benchmark, two-thirds have a nature commitment — for 45%, this covers the full value chain. But only 13 organisations have kicked off a comprehensive materiality assessment.

Governments too are dragging their heels, with 85% failing to deliver their first national biodiversity strategy and action plan (NBSAP) before COP-16 in October. One bright spot — the US published its first National Ocean Biodiversity Strategy recognising the need for greater marine protection, as Norway approved deep sea mining in its waters.

In 2024, European regulators reinforced the need for greater action, approving the EU Nature Restoration Law. Member States must create National Restoration Plans aiming to restore at least 20% of degraded areas by 2030. The EU later delayed the Deforestation Regulation by 12 months as smaller suppliers struggled to implement the necessary due diligence.

Top tips to prepare for the year ahead

1. Conduct a materiality assessment. Understand your nature-related impacts, risks and opportunities, so you address them.
2. Develop a holistic, integrated strategy. Taking a comprehensive approach to nature strategy embeds it into the wider sustainability strategy and business model.
3. Set targets to restore and prevent biodiversity loss. Aligning with SBTN guidance will ensure targets are relevant, measurable and support international ambitions to reverse biodiversity loss by 2030.

02. Circularity comes of age?

The 2024 Circularity Gap Report officially declared the circular economy a megatrend.

Articles and discussions on the circular economy have increased threefold over five years. In parallel, companies, including IKEA, Cisco and Dell, have integrated circular principles into their sustainability strategy — prompted in part by new ISO standards on material reuse.

More than one-third of Fortune 100 companies are expected to announce circularity goals within the next 12 months. Pressure is mounting on more companies to follow suit — especially the 40,000 private companies and smaller businesses coming within scope of the Corporate Sustainability Reporting Directive from 2026. They need to assess the importance of resource use and circular economy for their business as part of a full double materiality assessment.

With its Ecodesign for Sustainable Products Regulation (in force since July), the EU is encouraging companies to incorporate circular considerations from the outset. And companies have growing options for materials reuse at their disposal. In 2024, researchers identified new ways to make biodegradable plastics from textile waste, to recycle cement and to reuse carbon fibre panels from cars and trains. But use of secondary material dropped by 20%.

National governments are also aiming to stimulate circular thinking across the economy. To date, more than 75 countries have a national circular economy action plan in place — another 14 are in the pipeline. While broadly welcomed, there are growing concerns about potential loopholes — for example, due to differing rules on export of electronic waste.

Negotiations for a Global Treaty on Plastic Pollution progressed, but at the end of the fifth session there was no agreement on reducing plastic production and talks rolled over into 2025.

Top tips to prepare for the year ahead

1. Explore how circularity supports wider strategy. Reduced resource use has significant cost benefits as well as helping to deliver wider sustainability ambitions. Define your circular ambition and set quantifiable targets.
2. Educate employees on circularity. Ensure design teams have the knowledge and skills they need to design products and services to use fewer materials and with repair, reuse and recycling in mind.
3. Seek out cross-industry collaboration. The transition to a circular economy will require systemic change, only achievable through widespread partnership and collaboration.

03. AI dominated the headlines

Artificial intelligence (AI) has been widely adopted, but regulation is only just starting to catch up.

Nearly three-quarters of businesses have started using generative artificial intelligence (Gen AI) and growth shows no signs of slowing. The AI market is predicted to reach $1,339 billion in 2030 — more than six times its current size.

As 2024 progressed, the environmental impacts of this rapid technology growth became clear, with the UN Environmental Programme publishing the most detailed lifecycle assessment to date. It revealed, for example, that AI could represent 35% of Ireland’s energy use within the next year.

Google’s emissions soared 48% due to AI, despite using the technology to identify efficiencies.

As use of AI has grown so too has concern about its ethical, social and environmental impacts. The EU approved the Artificial Intelligence Act, requiring human monitoring of all systems. Stricter standards apply to high-risk applications for health, education, work and critical infrastructure. The Act also calls for standards and reporting on energy efficiency to reduce AI’s environmental impact.

Colorado became the first US state to legislate on AI, while Senator Markey introduced the federal Artificial Intelligence Environmental Impacts Act 2024 to accelerate study of AI impacts and stimulate voluntary reporting.

This regulatory push will mean that businesses and governments will have to get to grips with the issues around AI in 2025 and put plans in place to address negative consequences. To build and maintain customer trust, AI will need to be deployed ethically, securely and transparently, while minimising bias.

It’s also time to focus on the business benefits. Stakeholders want to hear how organisations are using AI to deliver positive results — whether to augment products, optimise processes or create better offerings for customers.

Top tips to prepare for the year ahead

1. Familiarise yourself with emerging standards. Initiatives including the Software Carbon Intensity standard aim to bring a harmonised approach to measuring AI impacts.
2. Ensure robust governance. The EU AI Act will come into full force in early 2026. Now’s the time to ensure policies and processes are in place guiding responsible AI use.
3. Start collecting data. While reporting is currently voluntary, there are growing moves to track AI’s energy use. 2025 is the year to start measuring.

04. Social issues are still overlooked by many companies

Companies and regulators are increasingly shining a spotlight on social issues.

Companies spend one-third of their time and sustainability budget on social issues — and around 40% on environmental challenges. Despite 66% of companies in the US and Europe predicting growing budgets for addressing social sustainability challenges, 26% have little or no awareness of the main issues in their industry — leaving them exposed as regulations increase, particularly around supply chains.

Companies operating in the EU would do well to prioritise supply chain management. Over three-quarters of companies have not integrated responsible procurement into their sustainability strategy. Adoption of the Corporate Sustainability Due Diligence Directive (CSDDD) will require mandatory human rights and environmental due diligence across the supply chain for large organisations from 2027.

In 2024, addressing employee engagement and wellbeing was also confirmed to make good business sense. Over 80% of executives believe that stronger commitments on employee rights would help them attract high-quality talent, appeal to new customers and increase profitability.

This comes as US companies roll back their diversity programmes. Issues including burnout, rapid skills development and adapting to the gig economy have been found to negatively impact the wellbeing of almost half of workers globally.

Discussion of human rights was never far from the headlines in 2024. The European Parliament gave final approval to the Forced Labour Regulation banning the import and sale of products suspected to be made using forced labour. In the UK, a landmark ruling relating to the import of cotton from China put increased pressure on the National Crime Agency to investigate allegations of supply chain mismanagement. Meanwhile, concerns emerged about the human rights record of COP29 host country Azerbaijan.

Top tips to prepare for the year ahead

1. Map your value chain and assess risks. It is essential to understand your company’s actual and potential social impacts and put in place plans to address them.
2. Publish commitments. As regulation increases, companies face growing pressure for transparency about their impact, but many are failing to be open about their human sustainability goals.
3. Publicly report impacts and due diligence processes. CSDDD requires companies to produce an annual statement on its potential and actual adverse impacts and due diligence measures.

05. Sustainability leads challenged by reporting

Sustainability leaders became increasingly concerned about the reporting burden in 2024.

Over 70% of sustainability professionals indicated that a growing focus on reporting was taking them away from the real work of delivering their sustainability goals. It has proved a particular headache for companies facing reporting requirements across multiple jurisdictions. One in three companies also have sustainability goals due to expire in 2025. They need to carve out time alongside reporting to evaluate progress and reflect on future challenges with a view to setting new targets.

Complying with the Corporate Sustainability Reporting Directive (CSRD) topped the list of challenges. It became a reality for 12,000 companies in 2024. In June, the majority of sustainability professionals polled were confident that they would be ready by the year-end deadline. But relatively new requirements, such as disclosures on biodiversity, circularity and workers in the supply chain, were proving challenging.

All eyes will be on this first wave of reports in 2025 and the extent to which their reports are deemed compliant. Watching particularly closely are the large private companies that need to prepare for their first mandatory sustainability report in 2025.

Despite long being an advocate for more reporting, there were signs of a slowdown in Europe, as 17 Member States failed to ratify the CSRD by the September deadline. This led to baby steps towards a simplified reporting regime consolidating multiple requirements — a new Omnibus Simplification Package is due out in February 2025.

Outside Europe, mandatory reporting is on the rise, with new rules taking effect in India, Singapore and Hong Kong. Canada and UAE announced plans to make reporting compulsory for larger organisations. The UK progressed with endorsement of the IFRS Sustainability Disclosure Standards — moving closer to adopting it as a successor to the Task Force on Climate-related Disclosures.

Top tips to prepare for the year ahead

1. Survey your sustainability universe. For those facing mandatory reporting for the first time, build a solid base by conducting a thorough double materiality assessment.
2. Update your strategy and targets. Based on the outcome of your materiality assessment, update targets to establish clear ambitions for 2026 and beyond.
3. Revisit your communications. With so many new regulations, it can be hard to know what good looks like. Review stakeholder needs and how you share your story with them, learning from peers — especially if they take a different approach.
4. Keep an eye to the future. Determining ‘materiality’ is challenging, but crucial as regulation increases. You may have to report a broader set of issues in future, especially as the Corporate Sustainability Due Diligence Directive approaches.

Supporting you in the year ahead

We can’t tell you exactly how things will play out in 2025, but we do know that there will be ever greater demand for action.

We’re helping clients to navigate the evolving sustainability landscape through strategy, reporting and communications support. If you’d like to chat about how we can help you prepare to face this and other challenges, please get in touch.

helen.fisher@contexteurope.com

www.contextsustainability.com

The rise and rise of corporate sustainability

by Peter Knight | Oct 16, 2024 | Blog

Corporation: an ingenious device for obtaining individual profit without individual responsibility.

Ambrose Bierce penned this definition sometime between 1881, when he began a weekly newspaper column, and 1906, when a version was published in The Devil’s Dictionary. This period was also the high tide of the Robber Baron era in the US, when the words “corporate” and “responsibility” seemed barely compatible. For example, John D. Rockefeller’s Standard Oil empire controlled around 90% of the oil market until it was disbanded for breaching anti-trust legislation in 1911. Businesses exploited their legal freedoms to keep wages low and profits high. Safety was not a priority and children were put to work in the mines, mills, and factories. The first UK Factories Act protecting children was passed in 1833, but several riveters and their child assistants were said to have been accidentally sealed into the double hull of Brunel’s Great Eastern steamer, launched in 1859.

Attitudes changed, partly through legislation and partly because of the paternalism of tycoons who lived their Christian (often Quaker) values — Cadbury, Rowntree, and Lever among them. These became companies that decided it was good business as well as good morals to sell trustworthy products — an early example of the famous “win–win” where business benefits by doing the right thing. William Hesketh Lever, who built a fortune selling affordable soap, provided houses and leisure facilities for his workers near Liverpool in the UK. His Port Sunlight Village, founded in 1888, became synonymous with responsible business values.

Product safety was seen as the responsibility of the purchaser and occupational safety the responsibility of the worker. But gradually the public became outraged at finding sawdust and slaughterhouse workers’ fingers in their ground beef, and governments legislated. The first Sale of Goods Act protecting consumers in the UK was passed in 1893. In the US, the Pure Food and Drug Act began to protect consumers from adulterated food in 1906.

Trade unions also gained legal status towards the end of the 19th century and tougher labour laws reined in employers’ freedoms. The first environmental legislation also appeared during this period — the UK Alkali Act was passed in 1863 and Yellowstone became the first US national park in 1872. But the environment remained exposed to exploitation by ever-expanding economies hungry for natural resources.

During the first half of the 20th century the emphasis was on tightening labour laws and consumer protection. Government action was the priority, rather than corporate activity. It was in the 1960s that US economist Milton Friedman developed his famous (and controversial) concept that: “the business of business is business”.

When the environmental movement took off in the 1960s, corporations were not the first target. But pressure groups began to change their aim when it became obvious that legislation was not the full answer. Companies also became an easy target when they were involved in chemical disasters such as Seveso in Italy, or when their discharges caused US rivers to catch fire.

With labour issues covered by trade unions and legislation, consumer issues became more prominent with the rise of activists such as Ralph Nader in the US. In the UK, social issues also rocketed to prominence in the early 1980s after riots highlighted the threat to business from social deprivation and a lack of wealth distribution. Business in the Community was formed in 1982 to harness the tradition of Port Sunlight-style paternalistic concern towards mending Britain’s broken cities. In the US, however, the environment remained the most significant corporate sustainability issue, fuelled partly by the growth of intergovernmental activity.

The first intergovernmental gathering to tackle the issue was the 1972 Conference on the Human Environment in Stockholm. In 1983, the UN put together a Commission to report on why the developing world was not developing and the environment was not being protected. This World Commission on Environment and Development (also called the Brundtland Commission after its chair, the Norwegian then Prime Minister Gro Harlem Brundtland), reported in 1987. It championed the concept of sustainable development, introducing the now standard definition: “progress that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

A year later, the World Meteorological Organization and the UN Environment Programme (UNEP) created the Intergovernmental Panel on Climate Change (IPCC) to assess the science related to climate change. Since then IPCC has issued six assessments based on the work of author scientists around the globe.

Few observers realised that this idea of meeting the needs of the present — a present in which billions of people lack basic necessities — made sustainable development a radical concept. Many politicians and business leaders in Europe, Canada, and parts of Asia and Latin America became excited about this neat way to join environment and development concerns: economic growth in ways that do not rob future (bigger) generations of resources such as fresh water, topsoil, clean air, fish, and trees.

In the political vanguard were unlikely environmentalists Margaret Thatcher and George Bush senior. Better known for “small government” doctrine, both leaders made significant sustainability interventions. In her 1988 speech to the Conservative Party annual conference, Thatcher declared: “It’s we Conservatives who are not merely friends of the Earth — we are its guardians and trustees for generations to come… No generation has a freehold on this earth. All we have is a life tenancy — with a full repairing lease”. Echoing Thatcher in 1990, George Bush told the IPCC: “We know that the future of the Earth must not be compromised. We bear a sacred trust in our tenancy here and a covenant with those most precious to us — our children and theirs”. While few environmentalists celebrated either politician’s track record in office, the lyrics of Dylan echoed, the times they were a-changin’.

Further evidence of change came with the UN Conference on Environment and Development (the Rio “Earth Summit”) in 1992. The Earth Summit spawned the Conference of Parties (COP) and the launch of the UN Framework Convention on Climate Change.

Business began to engage seriously with sustainability post Rio. The conference was midwife to the Business Council for Sustainable Development, which subsequently married the environmental group from the International Chamber of Commerce to form the World Business Council for Sustainable Development (WBCSD). Also in 1992, Business for Social Responsibility (BSR) formed in the US to help companies be better citizens. By this time, Business in the Community in the UK had already established Business in the Environment, in 1989.

The 1990s were the decade of globalisation, the internet, and the rise of ethical consumerism, including socially responsible investment (SRI). Television began to broadcast gory details of what companies were doing in African river deltas and Asian sweatshops. Consumers began to realise they could make a difference, encouraged by ethical brands like Ben & Jerry’s and The Body Shop.

The three legs of sustainability — environmental, social, and economic — came together in the anti-globalisation movement. Riots in Seattle in 1999 formed around the World Trade Organization (WTO). But the main targets were the multinationals that were allegedly destroying the environment, exploiting workers, and causing economic havoc in developing countries.

Companies, under increasing pressure from consumers, investors, and others to disclose how their practices impacted the environment and society, began publishing sustainability reports. While helpful, this created a dilemma. How were stakeholders to evaluate and compare company practices, impacts, and risks? In July 2000, the UN again stepped in, launching the UN Global Compact (UNGC), a set of nine (now ten) guiding principles related to human rights, labour, the environment, and anti-corruption. The goal was to work with company leaders to get them to adopt sustainable and socially responsible policies, and to report on implementation.

A UNGC report arguing that environmental, social, and governance considerations should be factored into companies’ financial decisions first used the acronym ESG in 2004. Although it would be another decade before the term would become common boardroom-speak, it eventually gave investors and companies a way to split the complexities of sustainability into three manageable pillars.

By the end of the decade, companies could no longer opt out of corporate sustainability (CS). In 2010, nearly a billion people were on Facebook and Twitter and other social media — with the rise of these platforms, news of corporate disasters travelled faster, and backlash became more immediate. When three million barrels of oil seeped into the Gulf of Mexico following the BP oil rig explosion in 2010, over 700,000 people joined a “Boycott BP” Facebook group. Three years later, the Rana Plaza garment factory collapsed in Bangladesh, killing over one thousand workers. Consumers in more than 100 countries took to social media using #whomademyclothes to demand answers from brands. The anniversary of the collapse became Fashion Revolution Day — a signal to companies that the industry was indeed in need of a revolution.

Consumers and investors alike were holding companies to higher sustainability standards. Failure to meet their expectations carried quick penalties. When news broke in 2015 that Volkswagen was lying about its vehicles’ emissions, tens of thousands of tweets about the scandal flooded Twitter within a week. Within months, the company’s share price had fallen by nearly half.

Pressure on politicians increased. In September 2014, hundreds of thousands of demonstrators joined the People’s Climate March through New York City — the largest climate change march in history, with similar events in 156 countries. Governments took note. In 2015, 196 countries signed the Paris Agreement, a UN climate treaty legally committing its signatories to limit global warming to well below two degrees Celsius. Within two years, the Science-Based Target initiative (SBTi) and the Task Force on Climate-related Financial Disclosures (TCFD) provided the frameworks for industry to align with the Paris goals.

In 2018, 15-year-old Greta Thunberg skipped class to sit outside the Swedish parliament alone, holding a sign that said: “SCHOOL STRIKE FOR CLIMATE”. She returned every week, joined by more friends, teachers, and parents. Within a year, Greta had mobilised over four million people — many young — to march in climate protests in over 90 countries. By 2019, she’d become a regular invitee to UN climate talks. Leaders were listening.

Social issues rose up the agenda. In 2017, the Me Too movement was catalysed by reports of sexual abuse by film producer Harvey Weinstein. Millions took to the streets in the global #MeToo march to say “enough” to sexual harassment and misogyny. Then in 2020, a Minneapolis policeman killed African American George Floyd during an arrest — captured live on video by a bystander. Over 15 million Americans and others around the world marched in support of the Black Lives Matter (BLM) movement. Together, #MeToo and BLM sparked a global conversation on sexism and racism in corporations that complacently thought they were free from prejudice. Ever since, diversity and inclusion have been high on the corporate agenda.

In 2020, COVID-19 forced governments and corporations to look inward to protect their populations and employees from the virus and its economic impact. After fighting the pandemic, governments started battling each other over clean tech leadership using carrots and sticks.

In the US, Joe Biden’s Inflation Reduction Act offered a gargantuan green carrot with $369 billion of funding to attract energy security and climate change investment — targeting a 40% reduction in emissions by 2030. The EU’s Green Deal — a roadmap for a climate neutral Europe by 2050 — includes a raft of CS regulatory sticks, such as the 2023 Directive on Green Claims and the extensive Corporate Sustainability Reporting Directive (CSRD). Fearing a debilitating surge of green investment migration to the US, the EU quickly offered €250 billion of financial incentives, including tax breaks for investment in net zero technologies within the EU.

Sustainability’s brief history has taught us that interest among governments and corporations comes in waves, driven by science, events, and public opinion. What then are the prospects for CS as we head for 2030 and beyond?

Despite mixed signals from politicians, the underlying forces of change make us optimistic. Businesses have never been more aware of sustainability issues and most are committed to change — for good business reasons. Investors have decided that CS impacts the future value of their targets and are using their influence accordingly. Employees actively seek to work for companies with strong social and environmental principles. And in many areas, innovative technologies are beginning to solve long-standing sustainability problems.

We remain — as we have for over 25 years — fully committed to support our clients in channelling the forces of change to make a better, sustainable future for all.