Author: Laura Nodoph

Note: Further CSDDD developments – where the directive failed to receive final approval – were announced on 28th February 2024. You can read about what happened here.

The Corporate Sustainability Due Diligence Directive (CSDDD) is the European Union’s most recent response to the urgent call for more responsible and sustainable business practices. As an upcoming directive, it is designed to ensure businesses comply with established human rights, social, and environmental standards. Building on the foundation of the French “loi de vigilance” and the German Supply Chain Sourcing Obligations Act (LkSG), CSDDD addresses environmental impacts and human rights obligations along supply chains.

For businesses, the CSDDD represents a significant shift in operational requirements and business strategy. It demands transparency and accountability at unprecedented levels, requiring companies to critically examine their business models, strategies, and supply chains.

In response to the proposed directive, companies of varying sizes – specifically those with more than 250 employees and a global turnover of over 40 million euros – will be subject to its requirements. Penalties for non-compliance can reach up to 5 percent of global sales, a sizable financial risk for businesses.

As of 2023, the CSDDD is making significant progress through the EU’s legislative process. It is currently in the trilogue stage, where representatives from the European Parliament, the European Commission, and the European Council are striving to reach a consensus on the final version of the directive. Although the exact timeline for the CSDDD’s implementation is yet to be defined, it is clear that businesses need to prepare and adapt to its impending arrival.

This shift brings with it a range of new responsibilities for various roles within companies. From Compliance Managers to CEOs, Procurement Managers to HR and Marketing teams, and even Legal departments, everyone will be touched by the CSDDD’s influence in some way. The rest of this guide will provide you with a comprehensive understanding of the changes CSDDD brings to your role and how to best prepare for them.

 

Navigating Through CSDDD: What Changes for Your Role

The CSDDD, as a transformative directive, will impact the way companies function. Each role within an organization will find themselves having new responsibilities and changes in their usual tasks. It will also change the way on how different departments will have to work together to enable transparency throughout your business.

Understanding these changes is critical for employees at all levels. Here, we delve into the specific adjustments and adaptations required in various roles.

 

CSDDD: A New Era for CEOs

As a CEO, the CSDDD will necessitate a top-down review and potential restructuring of your company’s operational strategies. Meeting the directive’s requirements will be a multifaceted process that not only ensures regulatory compliance but also promises potential benefits like access to government funds and investor interest.

A CEO’s role will evolve to place greater emphasis on sustainable business strategies, demonstrating commitment to CSDDD principles in all aspects of the company’s operations. This means aligning the company’s mission, vision, and operational plans with CSDDD requirements, demonstrating compliance and showing a clear roadmap for sustainability transition.

The CSDDD is not just about avoiding penalties; it offers an opportunity to showcase your company as a responsible, future-forward organization. Embracing the CSDDD can attract positive attention from investors who prioritize ESG (Environmental, Social, Governance) factors, government entities providing support for sustainable businesses, and customers increasingly favouring businesses with robust sustainability practices.

To successfully navigate these changes, CEOs must stay updated about the CSDDD’s progression, engage with their teams about the directive’s implications, and incorporate sustainability as a core element of their strategic planning.

 

R&D Managers: R&D taken to a new level under CSDDD

The Corporate Sustainability Due Diligence Directive (CSDDD) could change the tasks of R&D managers in several ways. Most importantly, they need to look at their own operations and value chains to identify, prevent, end or mitigate the negative impacts of their research and development activities on human rights and the environment.

They will also need to conduct due diligence on their products and processes as well as those of their suppliers and subcontractors. To do so they need to develop and implement prevention action plans, monitor and report on their due diligence processes and outcomes, and consult with relevant stakeholders such as workers, trade unions, civil society organizations, and affected communities.

R&D managers may also need to align their research and development strategies with the Paris Agreement and the EU Green Deal while setting emissions reduction objectives for their operations and products and they will need to ensure that their directors are aware of and oversee the due diligence processes while integrating them into the corporate strategy.

 

Sustainability Manager: Broadened Responsibilities under CSDDD

As Sustainability Managers, the CSDDD presents an opportunity to further promote responsible practices within your organization. The directive significantly broadens the scope of sustainability management. Previously, the role mainly involved optimizing operations for minimal environmental impact and ensuring the company’s alignment with sustainability goals. With the CSDDD, the role expands to incorporate a more holistic approach to sustainability, encompassing human rights, social impacts, and more comprehensive environmental considerations.

Your primary task will be ensuring that your company’s value chain is transparent. Transparency in this context means that all stages of the value chain, from raw material sourcing to end-product delivery, must be traceable and accountable in terms of their environmental and social impacts. A crucial aspect will be ensuring the accuracy of reporting on decarbonization efforts. This might entail working closely with suppliers and other third-party associates to gather and validate data.

The broadened scope of the role may necessitate bringing in additional colleagues to manage the increased workload and complexity. Working together, you will need to keep each other, as well as other stakeholders, informed about CSDDD requirements and the company’s progress towards compliance.

 

The Role of Compliance Manager in the Age of CSDDD

For Compliance Managers, the CSDDD will add an additional layer of complexity to their role. Previously, their tasks revolved around ensuring compliance with a set of predefined guidelines and regulations. However, the introduction of CSDDD will require them to also ensure that materials, processes, and suppliers comply with the specific standards set out by the directive.

These standards pertain to aspects like environmental preservation, human rights protection, and ethical business practices throughout the entire supply chain. Compliance Managers will need to establish systems and processes to monitor these factors actively. For instance, they must ensure that all materials used in the company’s production process are sourced ethically and sustainably, and that all suppliers adhere to the human rights, social, and environmental standards set out by the CSDDD.

The role will extend beyond the company’s internal operations. Compliance Managers will also have to validate the compliance of suppliers and other third-party associates, requiring an understanding of these entities’ processes and the ability to assess their compliance.

Adapting to these changes will require Compliance Managers to acquire additional knowledge about the new regulations and to develop the ability to assess compliance in a more diverse range of areas. With these expanded responsibilities, the Compliance Manager’s role will be pivotal in ensuring the company’s successful transition to the new operational reality under the CSDDD.

 

Procurement Managers: Ensuring Supply Chain Compliance with CSDDD

In the realm of procurement, the CSDDD brings a whole new set of challenges and opportunities. As a Procurement Manager, you will be entrusted with the critical task of ensuring that all suppliers along your supply chain, including deep tier suppliers, are compliant with the legal requirements set forth by the CSDDD.

This responsibility involves not just identifying potential suppliers but also vetting them thoroughly to ensure their practices align with the directive’s stipulations. This may require setting up new processes or tools to facilitate supplier evaluation and risk assessment, particularly when considering potential substitutes and the impacts changes may have on procurement.

Collaboration will also be key in your role, necessitating open lines of communication and feedback mechanisms with suppliers but also internally with the compliance team. Regular monitoring and auditing may be required to ensure suppliers maintain their compliance, and that your procurement activities continue to adhere to the directive.

 

Supply Chain Managers: Tracing and Monitoring Under CSDDD

For Supply Chain Managers, the CSDDD will bring an increased emphasis on traceability and risk management. The directive mandates the identification of the origins of supplied goods, understanding how they were produced, and discerning the potential impacts these processes have on the environment, climate, and human rights.

This task involves mapping the entire supply chain, including deep tiers, and making this information accessible to all stakeholders. Challenges may be especially pronounced in the case of imports from developing countries, where checking the entire supply chain might pose a greater challenge.

Moreover, the role will involve the ongoing monitoring and control of an expanded set of risk factors in the supply chain. This will require the development of new systems for finding reliable data, incorporating it into your company’s risk management systems, and updating it regularly. While the task is demanding, with appropriate planning and tools, Supply Chain Managers can help their organizations transition smoothly into this new era of heightened sustainability and transparency.

 

Human Resources: Aligning Workforce with CSDDD

The CSDDD also significantly impacts the Human Resources department. The directive’s emphasis on ethical and sustainable business practices is an asset to attract and retain talent in the workforce. As an HR professional, your role in promoting and upholding these values becomes central to the company’s adherence to the directive.

This could involve incorporating CSDDD principles into company policies, staff training, and development programs. An understanding of the directive would also need to be integrated into the recruitment process, ensuring that new hires are aligned with the company’s sustainability goals. Regular communication with employees about the company’s CSDDD compliance efforts can help foster a company culture that values and supports sustainable practices.

 

Marketing: Enhancing Brand Perception through CSDDD

For Marketing professionals, the CSDDD offers an opportunity to improve brand perception and gain consumer trust. The commitment to sustainability, ethical sourcing, and responsible business practices stipulated by the directive aligns with the growing consumer demand for companies that prioritize these values.

To leverage this opportunity, Marketing professionals need to communicate effectively about the company’s efforts to comply with the CSDDD. Transparency about the company’s supply chains, environmental impact, and human rights policies can be used to engage consumers and differentiate the brand in the market.

Additionally, the Marketing department can collaborate with other teams to gather relevant data and stories, bringing the company’s CSDDD compliance journey to life in a way that resonates with consumers and strengthens the brand image.

 

Legal: Navigating CSDDD Compliance

The introduction of the CSDDD will significantly impact the role of Legal professionals within the company. Ensuring compliance with the new directive will require a comprehensive understanding of its stipulations and the ability to interpret them in the context of the company’s operations.

This may involve updating company policies, reviewing contracts with suppliers and partners, and advising other departments on legal requirements related to the CSDDD. Legal professionals will also need to stay abreast of updates to the directive and relevant legislation to ensure continuous compliance.

The increased complexity brought by the CSDDD requires collaboration across departments. Legal teams will likely work closely with Compliance, Procurement, and Supply Chain Managers, among others, to ensure that all facets of the company’s operations are in line with the directive’s requirements.

 

In conclusion, the CSDDD represents a significant shift in the business landscape, affecting various roles within a company. By understanding these changes and preparing accordingly, businesses can navigate this transition effectively, meeting their compliance obligations while seizing the opportunities that come with being a sustainable, responsible business.

 

Making Sense of the CSDDD: The Power of Collaboration and Robust Supply Chain Data

The CSDDD requires companies to operate in a way that is not only profitable but also minimizes their environmental impact and safeguards human rights. This paradigm shift brings to light the necessity for robust data and collaboration.

In this new landscape, companies are expected to demonstrate transparency and traceability across their entire supply chain. The ability to do so relies heavily on the availability of accurate and comprehensive data. Every link in the supply chain, from raw material extraction to the finished product, needs to be thoroughly examined for environmental impact, labour practices, and more. Therefore, investing in systems that can provide this level of granular detail becomes an integral part of CSDDD compliance.

Moreover, the scope of the CSDDD also highlights the importance of cross-functional collaboration. Ensuring compliance is not the responsibility of a single department but requires the collective effort of multiple roles within the company, including Procurement Managers, Supply Chain Managers, Compliance Officers, and more. Successful compliance with the CSDDD, therefore, requires breaking down silos and fostering a culture of collaboration within the company.

The CSDDD isn’t just about following rules—it’s about engaging in a meaningful journey towards a sustainable and equitable future. Through effective collaboration and leveraging robust supply chain data, companies can position themselves to navigate the upcoming changes successfully.

 

Conclusion: The 4 main takeaways

• Reflect on the changes that the CSDDD will bring to your specific role and your company. Consider what processes may need to be updated, who needs to be involved, and how your day-to-day tasks might change.
• Embrace the opportunities that come with the CSDDD. While the directive introduces new challenges, it also enables companies to demonstrate their commitment to sustainability and responsible business practices, enhancing their reputation among stakeholders. Understand the broader societal and environmental benefits of complying with the CSDDD, and take pride in contributing to these positive changes.
• Take proactive steps to prepare for the implementation of the CSDDD. Whether it’s educating yourself on the specific requirements, initiating discussions with your team, or beginning to assess your supply chain’s sustainability, there is much that can be done to ensure a smooth transition. Remember, the CSDDD journey is a collective one that involves every role within a company.
• The CSDDD is more than a directive; it’s a roadmap for businesses to contribute to a more sustainable and equitable future. By understanding the changes it brings and taking action now, you can ensure that your role and your company are ready to rise to the occasion

In the ever-evolving manufacturing sector, sustainability is a key concern and priority. As specialists in product lifecycle intelligence, we at Makersite are keen to share some crucial insights into the obstacles that come with recycled content calculations and how to overcome them.

In recent years, the manufacturing industry has seen a substantial shift in global sustainability regulations. Manufacturers are now expected to provide verified data on the recycled content of their products to meet stringent guidelines such as those defined by the EU Green Deal initiative and the Packaged Product Waste Regulations (PPWR).

Guesswork and unfounded claims no longer suffice; transparency and trust are now paramount, as highlighted in our cost of Greenwashing whitepaper. The cost of inaction is too great a risk to business operations.

Global Regulatory Shifts Pay More Attention To Recycled Content Requirements

As governments across the globe step up their commitment to sustainable practices, the introduction of mandatory recycled content requirements is becoming a game-changer.

This emerging regulatory landscape compels manufacturers and their supply chains worldwide to ready themselves for these changes as recycled content regulations start rolling out from North America to Europe. The regulatory momentum aims to catalyze the circular economy through the promotion of waste collection, processing, and recycling; incentivization of investments in innovative infrastructures; and the enhancement of environmental product and packaging design.

Consider, for instance, California’s approach, where penalties are imposed for non-compliance with specific standards based on post-consumer resin percentages. Plastic bottles, for example, are required to have a 15% recycled content as of January 2022, escalating to 25% in 2025 and reaching 50% in 2030.

In the United Kingdom, the Plastic Packaging Tax (PPT) came into effect in April 2022, targeting all packaging containing less than 30% recycled content. Similarly, under the EU Single-Use Plastic Directive, PET bottles must contain at least 25% recycled plastic by 2025, with the threshold increasing to 30% by 2030.

Such emerging trends underscore the increasing regulatory focus on recycled content and present a compelling case for all stakeholders to step up their sustainability efforts.

The Approach to Streamlining Recycled Content Calculation

Those involved in sustainability and circularity roles within large manufacturing organizations face an urgent need to adopt tools and methodologies that ensure precise calculation and reporting. An effective solution not only aggregates data from the entire supply chain for calculation but also identifies recyclable aspects within products, thereby creating a pathway to optimized design for circularity.

Data in Design: The Gateway to Circular Economy Success

To fully comprehend the vital role of design in achieving a successful circular economy, you only need to look at the Ellen MacArthur Foundation’s butterfly diagram.

 

 

This illustrates the two key cycles of circularity: the biological and the technical. Unfortunately, our current take, make, and waste economy is full with products that, due to their design, cannot be successfully integrated into either of these cycles and consequently end up as waste. A common example includes products that merge biological and technical materials, such as textiles combining natural and synthetic fibers, in a way that prevents their efficient separation and circulation.

Now, imagine if designers considered the product’s end-life right from the design phase, with a view towards fitting it into either the technical or biological cycles. This forethought could influence the entire life cycle of the product.

Technical cycle-bound products, for instance, would gain significantly from being designed for easy repair and maintenance and simple disassembly. Modular components that are replaceable, such as the Fairphone would extend their lifespan, and the choice of easily recyclable materials would simplify their circulation. Durability would also be a key factor, ensuring that the product can withstand the use of multiple users over time.

Meanwhile, if products like wooden furniture were conceptualized with the biological cycle in mind, the incorporation of biodegradable materials would be prioritized. A clear distinction between technical elements (like screws) and biological ones (like wood) would facilitate easy separation. Even auxiliary materials like glues and paints would be selected based on their biodegradability. Similarly, single-use items like takeaway food containers can be designed to be compostable, thus enriching the soil with the food remnants they often carry.

Linking Life Cycle Assessments and Circularity for Smarter Decisions

The challenge designers face when considering end-life of a product is the need for more understanding about their material and supply chain choices. Traditional product Life Cycle Assessments software (LCAs) have long been a cornerstone of environmental impact evaluation in manufacturing. These assessments measure the environmental impact of a product from its creation—extracting and processing raw materials—to its end of life—disposal or recycling. While LCAs provide an overview of a product’s environmental footprint, they come with their own set of challenges.

Product and Supply Chain Data Management

One of the most prominent issues is data management. Achieving accurate LCAs requires a wealth of detailed data, both about the product itself and its entire supply chain. Unfortunately, manufacturers often face a dearth of high-quality data. The data that does exist is frequently dispersed across multiple systems within ERP, PLMs and CAD, creating silos that prevent intelligent analysis.

Moreover, data from suppliers—a critical component of LCAs—is often incomplete or of poor quality. This scarcity and fragmentation of data severely limit the effectiveness of traditional LCAs, resulting in approximations rather than accurate assessments.

In contrast, advanced approaches to recycled content calculation, like we do at Makersite, aggregates data from the entire supply chain, offering detailed insights into each material and component of a product. This approach not only supports complex and granular LCAs but also supports decision-makers in identifying the most profitable trade-offs between recycled content, recyclability and circularity. Consequently, manufacturers can make smarter, data-driven decisions that boost sustainability and growth.

WATCH: See how Makersite can calculate recycled content in minutes

Staying Ahead: Aligning with Compliance and Sustainability Standards

In an industry landscape where regulatory compliance and sustainability form the cornerstones of success, manufacturers need to stay updated and responsive. Embracing solutions that allow precise calculation and reporting of recycled content positions them to confidently align with best practices, navigate regulatory frameworks, and fulfil their sustainability objectives. This is not just about surviving in the new age of green regulations; it’s about differentiation and seizing the opportunities that this shift presents.

If you’re keen on refining your sustainability initiatives and staying ahead in the complex world of environment, cost and compliance, we’re here to help. Book a demo with our team today and find out how we’re bridging LCAs with Circularity principles to support smarter, greener, faster decision-making.

The European Union (EU) is taking a significant step towards ensuring transparent and accurate environmental marketing practices with the introduction of the Green Claims Directive. This directive aims to regulate and substantiate environmental claims made by companies, prohibiting vague terms such as ‘net zero,’ ‘carbon neutral,’ and ‘eco-friendly’ unless they are adequately verified. In this article, we will explore the key aspects of the Green Claims Directive, the companies it applies to, its status, and how businesses can prepare to comply with the new requirements. 

 

Why was the Green Claims Directive put into place?

The Green Claims Directive was introduced to address the growing concern over misleading and unfounded environmental claims in the market; read more on greenwashing here. A study by the European Commission has shown that a significant portion of green claims, approximately 53%, provide vague or misleading information to consumers. Moreover, a staggering 40% of these claims lack any supporting evidence. The lack of verification is also a major issue, as half of all green labels offer weak or non-existent verification processes. This situation is further complicated by the existence of numerous sustainability and green energy labels in the EU, with over 230 sustainability labels and 100 green energy labels, each varying significantly in terms of transparency and reliability. The Green Claims Directive aims to tackle these challenges and promote more transparent and substantiated environmental claims to ensure consumers can make informed choices. 

 

What is the Green Claims Directive?

The Green Claims Directive builds upon the existing consumer protection framework and covers both business-to-consumer (B2C) and business-to-business (B2B) marketing. It specifically applies to voluntary explicit environmental claims and does not overlap with other Union rules governing environmental claims. Under this directive, companies will be required to substantiate their claims with scientific evidence, address significant environmental issues from a life-cycle perspective, and ensure transparency regarding offsets. While the directive does not prescribe a single method, it emphasizes the importance of using a comprehensive approach to evaluate environmental impact. 

 

What companies must comply with the Green Claims Directive?

The proposed requirements of the Green Claims Directive will apply to the vast majority of EU operating companies, including small and medium-sized enterprises (SMEs) and large public corporations across various industries. Even companies based outside the EU but targeting EU consumers will need to comply. However, micro-SMEs with fewer than ten employees or generating less than €2 million in annual turnover will be exempt from the rules. 

 

Green Claims Directive Status and Timeline

On March 22, 2023, the European Commission unveiled its proposal for the Green Claims Directive. Once the directive enters into force, Member States will have 18 months to incorporate it into their national legislation. While the expected timeline for the directive’s implementation is 2026, the duration may change due to the pace of EU negotiations on the final text.  

 

How to Prepare for the Green Claims Directive

To comply with the forthcoming requirements of the Green Claims Directive, companies need to establish a robust environmental claims management framework that prioritizes integrity, transparency, and data verification. 

• Review environmental claims: Conduct a comprehensive review of all existing environmental claims made across products, services, and marketing materials. Scrutinize the language used and assess the substantiation behind these claims. Identify and rectify any claims that may be considered vague, misleading, or lacking proper evidence. This thorough review will provide a clear understanding of areas that need adjustment to align with the anti-greenwashing regulations. 
• Establish rigorous substantiation processes: Implement robust processes to substantiate environmental claims. This may involve conducting comprehensive life cycle assessments (LCAs) to evaluate the complete environmental impact of products or services. Gather and analyze relevant data to ensure claims are supported by scientific evidence and transparent from a life-cycle perspective.  
• Prioritize transparency and accurate communication: Emphasize transparency and accurate communication when conveying environmental claims. Develop clear guidelines and internal policies for environmental marketing, ensuring all claims are supported by reliable data and verified by reputable third-party organizations. Provide detailed information about environmental initiatives, highlighting efforts to address significant environmental issues. Transparently disclose information about offsets and any limitations or trade-offs associated with the claims to build consumer trust. 

 

Conclusion

Adhering to the Green Claims Directive not only ensures compliance but also offers additional benefits for companies. Transparent and accurate communication of environmental impacts and performance reduces the risks associated with reputational damage and legal consequences arising from misleading claims. Non-compliance with the directive could result in legal investigations and fines of up to 4% of annual turnover. By adopting responsible environmental practices, businesses can enhance their brand value and cultivate consumer loyalty.

A little-known fact, greenwashing was first coined almost 40 years ago and was used in reference to a hotel policy in Fiji about reusing towels to save the environment.^[1] The policy was aimed at using the environmental sensibilities of guests to reduce laundry costs. Greenwashing, however, has become far more sophisticated than that. In this whitepaper, we’ll take a different look at greenwashing – why it’s a much-discussed topic today and what businesses can do to leverage this heightened attention to be more successful in the market. We’ll define greenwashing broadly as “advertising and public messaging to appear more sustainable than a company really is” and understand sustainability in its broader context of ESG. 

 

Why is being seen as green important?

A study commissioned by the European Union found that 53%^[3] of green claims on products and services make vague, misleading, or unfounded claims, and 40% have absolutely no supporting evidence. In the US, that number went up even higher, where 68% of executives themselves admitted to being guilty of greenwashing^[4]. But why do companies decide to greenwash? There are three main drivers that we see today:

 

More high-paying customers:

About one-third of consumers worldwide today are prepared to pay up to 25% more for more sustainable products. More than two-thirds of GenZ’ers are prepared to pay 10% more.^[5] By 2030, they will surpass millennials as the biggest spenders accounting for 27% of buying power.^[6] These two segments combined will dictate buying criteria of the future, and it’s already clear – they want products that are greener. 

This is not only limited to B2C companies – organizations embedded deep within supply chains are being challenged to support their customer’s initiatives in the consumer electronics, automotive, building, and construction industries. Suppliers that are not aligned with their customer’s ambitions are already being excluded as viable business partners for new product development. 

 

License to operate:

Regulations and standards are tightening around the world. For example, in 2023, the Corporate Sustainability Reporting Directive (CSRD) takes effect for 50,000 companies operating across Europe as well as foreign companies with significant business in Europe. Under the Green Deal of the European Union, regulations and directives about decarbonization, greenwashing, transition planning, circularity, sustainable finance, and several others will be rolled out. Examples next to the CSRD are the Corporate Sustainability Due Diligence Directive (CSDDD), the Ecodesign for Sustainable Products Regulation (ESPR), EU taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and more. Besides this becoming an issue about the license to operate, these developments are creating unprecedented attention in the media and on social platforms. 

 

Figure 1: Global Sustainability Reporting Rates. Source: KPMG

Cheaper capital to invest and grow: 

Another key driver for positioning a company as green is access to more and cheaper capital. With all the global commitments to decarbonization, immense sums of capital are being deployed to power this transition. According to a report by PwC, asset managers globally are expected to increase their ESG-related assets under management to US$33.9tn by 2026 from US$18.4tn in 2021.^[7] Companies that invest in sustainability can tap into various sustainable investment options, including green bonds, sustainable equity funds, and impact investments.

 

Greenwashing is neither good for consumers nor businesses. It leads to confusion amongst consumers which ultimately results in a loss of trust in such claims. A 2021 McKinsey^[8] survey found that 88% of GenZ’ers in the US don’t trust green claims from brands. It also creates an unfair playing field for businesses where companies that are genuine about their sustainability efforts are disadvantaged compared to companies that greenwash. Moreover, greenwashing directly impedes efforts toward sustainability by allowing companies to evade accountability for their environmental impact. By promoting themselves as environmentally friendly without taking substantial action, they avoid making necessary changes to their practices, which can harm ecosystems, contribute to climate change, or exploit natural resources.

 

 

Why does greenwashing happen?

There is a small proportion of companies that greenwash knowingly, one of the most famous ones being the Diesel scandal by German car producer VW – exploiting the green trend without doing anything to improve the sustainability performance of their operations or products. Marketing business-as-usual projects as sustainability initiatives, they employ sustainability specialists to ensure that they do this in the most innocuous way possible. However, most companies greenwash inadvertently, and there are three main reasons we have observed. 

 

The complexity of what it means to be sustainable

Sustainability is a broad topic, and while the Sustainable Development Goals^[9] provide a good framework for defining it, it is sometimes difficult to adapt these to a company. The 17 goals also manifest in multiple criteria, including things like water scarcity, climate change, social equity, etc. It is not only difficult to measure these in the context of a company and its products, but some of these criteria are also anti-correlated, i.e., improving one typically is at the cost of another. 

Ikea had that experience in 2020 when it launched a sustainability initiative. A non-profit organization accused them of greenwashing, as one of their wood suppliers illegally sourced wood from Russia. The problem: Ikea, like many other organizations, relied on the Forest Stewardship Council (FSC) certification, a voluntary forest certification system that aims to help organizations find wood sourced by strict environmental and social sustainability criteria. After the scandal, Ikea parted ways with the supplier. This case is a good example of the challenges of supply chain sustainability, even for companies that have good intentions.

Another aspect is – should environmental evaluations look at operations, including suppliers or the entire lifecycle of a product? Optimizing production and raw materials to reduce their impacts on climate change may negatively impact the product’s performance and vice versa, which is commonly the case for lightweighting applications in the automotive and aerospace industries. In the electronics sector, greening electricity supply for one’s own operations though commendable has a negligible impact on assembly operations compared to their use and impacts from the raw material supply.

Different jurisdictions have different requirements, and different products have different impact drivers. E.g., water scarcity is an acute problem for hot/arid regions while not so much for the Nordics. Excluding such a category from considerations in Norway draws attention from critics in Spain. Another example: certain recycled plastics have a lower impact in terms of carbon but can have toxic side-effects during use or disposal, which make them unsuitable for use in the food and beverage industry but perfectly fine for fashion or construction. Error by omission is one of the common occurrences of greenwashing.

Without the right tools, data, and expertise embedded within procurement and product development teams, understanding the tradeoffs is incredibly hard and paralyzes action. 

 

Lack of standards

There are insufficient standards that define what sustainability should mean for a company or a product. The reason for this is that different sectors have different challenges – e.g., paper and plastic sectors compete for the same markets, e.g., in packaging. Looking at fossil carbon results in a different winning product than when you look at water or resource consumption or land use change. So which criteria should be included, and how do you compare them? If you claim better performance on one criterion without mentioning drawbacks in some other dimension, you could be charged with greenlighting, even if this was done inadvertently. Performing a materiality analysis on your company and its products can avoid such situations. 

Creating a common standard is difficult, as the European Union found through multiple initiatives at the Corporate and Product levels. Lobbying by trade associations for their own interests leads to the process of standardization becoming more complex, taking longer, and the resulting rules becoming too complex to adopt for anyone. 

 

Change is hard

From our work with customers, we estimate that up to 90% of the data needed to understand the sustainability performance of products isn’t available in a company – it sits in the value chain, proprietary 3^rd party databases, and other external data repositories. Impacting this massive component is even harder – it means influencing product design, suppliers, and sometimes changing supply chains entirely. It requires the right data for action, incentive, and governance structures to make change happen and, most of all, long-term investments. It’s one of the main reasons we see lofty climate goals with much less to show for it.

For Scope 1 and 2 impacts, so all emissions that are company-owned, the information needed to make necessary evaluations are often siloed and hidden away. We’ve spoken to sustainability teams sitting in product development that do not have access to product definitions (or Bills of Materials) for security reasons. It takes time and expertise to pull all the needed information together and get the results verified externally, which is not possible to do within the tight timeframes of a product launch without the right systems and processes in place. 

Another problem is that sustainability information is not trivial. There are nuances that require expertise to understand, and sometimes, in the process of simplifying the messaging for customers, the message itself changes. According to a TerraChoice^[10] report, the three most common forms of greenwashing are hidden trade-offs, no proof, and vagueness. Outright lying only accounts for less than 1% of greenwashing cases. Ensuring that messaging is developed in collaboration with sustainability experts can help minimize the chance of costly mistakes here.  

 

 

What if you get caught greenwashing? 

Until recently, there were mostly no consequences for greenwashing. However, in the past few years, companies have encountered mounting legal repercussions over false or exaggerated sustainability claims. Consumer protection laws, which mandate companies to validate their marketing claims, have been established for three decades. Nonetheless, the issue of greenwashing had largely been disregarded. Now this has changed.

 

It now costs money

Companies are facing tightening consumer protection regulations across the world as well as an increasing level of enforcement and penalties. Although these regulations were initially designed to ensure customer safety, they are now being used to hold companies accountable for their environmental and social impact claims. Several companies have or are currently facing lawsuits for greenwashing. E.g., at the beginning of 2022, Italian oil major Eni made history by being the first in the country to be prosecuted for greenwashing. The company was fined €5 million (US$5.94 million) for claiming that its palm oil-based diesel was ‘green’ in an advertising campaign. Keurig was sued for falsely claiming their coffee pods were recyclable and biodegradable. The fine for Keurig’s misleading advertisement came out to be $3 million. Additionally, Keurig must make an $800,000 donation to an environmental charity and pay $85,000 in Competition Bureau expenses for the case. They were also ordered to update the packaging and notify consumers of the changes to its recyclability claims on the website, social channels, and through media outlets. Tina.org provides an extensive list of lawsuits against companies for greenwashing and associated penalties.

These lawsuits and the overall rise of climate-change-related lawsuits demonstrate the importance of companies being transparent and honest about their environmental claims. While the fines for greenwashing can already take up a significant amount of a company’s turnover, specific greenwashing laws are preparing to fine companies even more. 

Figure 2: Climate change lawsuits. Source: LSE

The French climate and resilience law, for example, requires companies to prove their carbon neutrality claims through annual GHG emissions reports, including the entire life cycle of a product from production to disposal. Environmental labeling is also mandatory for several product categories, and companies must include information on environmental impact in their advertisements^[11]. The European Union is also already working on a law forbidding greenwashing. The so-called green claims proposal aims to ensure that green claims are trustworthy, commensurable, and confirmable throughout the EU. It seeks to safeguard consumers against greenwashing and empower them to make informed purchasing decisions, thereby contributing to the creation of a circular and environmentally friendly economy in the EU^[12]. The Australian Competition and Consumer Commission (ACCC) has recently unveiled its latest initiative—an updated draft guidance on environmental and sustainability claims. The guideline aims to enhance the credibility of companies’ green assertions while safeguarding consumers against deceptive marketing practices known as greenwashing.

 

Damage to brand and business

Social media has changed the way we access information, express our views, and drive mass action. This means that instances of greenwashing are easier to identify and publicize, and there is a very low threshold for infringement on public trust. Multiple studies^[13][14] show that greenwashing negatively impacts the brand image and can seriously damage brands, with the possibility of ending in ”brand hate.” 

This scrutiny also extends to the supply chain – there are now numerous software service providers that track reputational risk to a brand from its supply chain. In the B2B world, we’ve seen companies that are caught greenwashing being blacklisted from procurement lists and losing business. 

 

 

How to avoid greenwashing?

As countries commit to emission targets, sustainability regulations are becoming more stringent worldwide. As discussed above, companies need to make green claims to remain relevant to consumers and back them up with data to stay in business. So, what steps can companies take to avoid greenwashing? 

 

Focus on product data

A company is its product, and a product is its supply chain. Most green claims are based on product properties, not brands, and therefore it’s crucial to have a product-level focus on data.

Detailed product definitions: Standards, regulations, and enforcement are evolving differently and at different rates around the world. If we are to learn from the past with substance regulations like REACH/RoHS/Prop65 etc., focusing on better master data about your products and their supply chains is the best way to stay agile to changing requirements. It provides the flexibility to apply the knowledge about the product to new situations and evaluate the product for conformance. 

Life cycle perspective: It’s also crucial to maintain this information for the entire value chain – cradle-to-grave, as it’s called. This is a principle that ensures that you understand the implications of sustainability impacts across the entire lifecycle of the product. Nearly all anti-greenwashing regulations require a life-cycle-based approach to evaluating the performance of products. 

Multi-criteria views: Looking at just carbon or water is insufficient. Understanding the performance across all key environmental and risk categories is crucial to avoiding overlooking critical side-effects of your products. 

 

Decentralization with proper internal governance

The two engines for change in a company are product development and procurement – what you make and where you buy. It’s crucial to enable reliable decision-making within these teams to drive sustainable innovation and ensure these are prioritized through the right incentives. However, this process needs support from sustainability experts – whether in-house or external to ensure the right guardrails. These need to extend all the way to marketing teams. There are two main approaches we’ve found to work well – (1) stage gate-based approach – where sustainability or compliance is one of the quality gates that a product needs to go through, and (2) embedded approach – where these experts are part of the development, procurement, and marketing teams providing support when required. Having the right tools for data sharing and analysis is crucial to ensuring the preservation of context across the product development lifecycle.

 

External verification

If you think experts are expensive, wait until you find out how much amateurs cost. This adage holds truer than ever in this context. It can get expensive to involve external verifiers for claims for each product and claim you make, but overheads can be reduced if the proper systems are in place (and verified) that document the analysis and provide an audit trail of the process. It is often hard to have experts certify bold comparative claims but having them provides a level of scrutiny and credibility that protects you from costly mistakes. 

 

To prepare for the future, companies should consider using external tools to access necessary data, save time, enhance credibility with auditors, and effectively utilize the collected data. Exploring suitable tools early on will facilitate reporting on current and future products on a larger scale.

 

Conclusion

The issue of greenwashing is a complex one, and it requires companies to carefully examine their claims and assess where their risk exposure and opportunities lie. For companies that have already made claims, it is essential to figure out where they may be exposed and take corrective action. Companies that have not yet made claims, but have the opportunity to do so, must ensure they do it right by accurately quantifying their environmental impact and making transparent and verifiable claims. In some cases, both risk and opportunity may lie in the same place, and it is up to companies to strike the right balance between promoting their sustainability efforts while avoiding misleading claims. By taking these steps, companies can avoid the pitfalls of greenwashing and build a credible reputation in the market as responsible and sustainable businesses.

 

What does sustainability mean for you?

Janek Kose: “Sustainability, to me, means more than just adhering to “green” practices or corporate social responsibility initiatives. It’s about reimagining our approach to technology, fundamentally rethinking how we design, develop, and deploy tech solutions for sustainable transformation.

In the tech world, we fancy ourselves as innovators, relentlessly pursuing the next breakthrough, the next “big thing”. But in our relentless pursuit, we often overlook the profound impacts our creations have on the world. From electronic waste to energy consumption, our innovations come at a high environmental cost.

When I consider the role of sustainability in technology, I envision a shift in perspective. It’s about exploring critical questions like “How can we extend the lifecycle of our products? How can we reduce our tech carbon footprint? How can we create tech products that add value not only to our customers but also to our planet?”

It’s about moving from a mindset of exploitation to regeneration, from short-term profitability to long-term responsibility. It’s about realizing that the true measure of innovation isn’t just the number of products we ship out but the positive impact they have on the world.

In a nutshell, sustainability isn’t a buzzword; it’s a mindset. It’s a commitment to ensuring our technological advancements leave the world better, not worse, for future generations. It’s about making sure our legacy isn’t just one of innovation but also one of preservation.”

 

What motivates you to work in sustainability?

JK: “What motivates me to work in sustainability is a profound belief in our collective responsibility toward the future of our planet and the generations to come. It’s driven by the understanding that the choices we make today, especially in the realm of business and technology, have far-reaching consequences.

Having spent my career in this field, I have witnessed the tangible impact that innovations with sustainability at heart can have. In my roles, I had the opportunity to help businesses in leveraging that influence to not only succeed in the market but also to make a significant contribution to doing their bit to mitigate the worst impacts of the climate crisis.

Ultimately, I am fueled by the challenge. Sustainability is complex, it’s multifaceted, and it requires us to rethink traditional business models, question the status quo, and innovate with both urgency and care. This complexity is not a deterrent but a call to action that motivates me daily.”

 

What would you rate your most successful measure for more sustainability in the last years, and why?

JK: “When I reflect on my roles and my work in driving more sustainability, several key measures emerge. However, the ones I am particularly proud of share a common theme: they intimately link positive climate impact with the core operations of the tech business.

Firstly, we designed a feature at the checkout process that allowed customers to contribute directly to a vetted, high-quality carbon credit portfolio. This measure was successful not only in its tangible climate action but also in the way it empowered our customers. It made sustainability not just a corporate endeavor but a collective one, giving our customers an active role in climate action. It turned an everyday transaction into an opportunity for change.

Secondly, we introduced an internal carbon price. This was more than just a financial mechanism; it was a cultural shift. By attaching a tangible cost to our Scope 1-3 emissions, we created a powerful incentive for reducing emissions and the externalities of our business throughout the company. Every year the funds from this internal pricing were used to support external climate projects, effectively turning our carbon footprint into a stepping stone for building capacity for climate action.

In my mind, both of these measures present a powerful approach to voluntary climate action funding, a particularly relevant strategy for tech companies, where direct emission reduction opportunities might be limited. In essence, tech can turn their technological prowess into a catalyst for climate action.”

 

How did you become a sustainability manager?

JK: “My journey to becoming a Sustainability Manager began as an environmental engineer specializing in renewable energies. In my early career within environmental consultancies, I quickly realized the engineering toolbox was insufficient to drive the large-scale sustainability transformation we aspire to achieve.

The decisions that required making were strategic in nature, demanding an expanded skill set to engage stakeholders and navigate organizational complexities effectively. Consequently, I pursued an MBA in sustainability management to broaden my understanding and approach.

Simultaneously, the rise of tech-driven companies presented an intriguing opportunity. I saw the vast potential these emerging sectors had for driving good, and I wanted to be at the forefront, influencing their path toward sustainable operations.

This led me to pivot my career towards sustainability management within the tech industry, blending my technical knowledge, newfound strategic skills, and passion for positive impact.”

 

What do you do to make your own life more sustainable?

JK: “I try to make sustainable choices every day, but there are two that I’d recommend to anybody:

Switch to a Sustainable Bank: Your choice of bank can have a significant environmental impact. Consider moving to a sustainable bank that invests in projects promoting ecological and social progress.

Adopt 100% Renewable Electricity: Every kilowatt-hour counts! By switching to a renewable energy provider that creates new renewable energy plants, you can directly support clean energy projects and reduce your carbon footprint.

And then, talk about your actions and experiences with as many people as possible. Your conversation may inspire others to make similar changes.”

 

What’s something new you learned in the past year?

JK: “In the past year, my learning journey has taken me to the heart of circularity and its potential to drive decarbonization in digital infrastructure. By engaging closely with suppliers and exploring data-driven solutions, I’ve gained valuable insights into what is achievable today. I’ve learned that circularity isn’t just a theoretical concept but a practical, implementable strategy that can significantly reduce the carbon footprint of digital activities.”

 

What do you think companies lack to become better at sustainability?

JK: “To me, one concept comes to mind: embracing complexity. Too frequently, companies hold on tightly to existing processes and try to oversimplify problems in sustainability. This approach can often lead to stagnation and a loss of momentum in projects.

Sustainability challenges us to tackle complex issues, ones that cannot be neatly simplified or confined within traditional business processes. Therefore, I believe companies need to become better at welcoming this complexity rather than shying away from it.

Further, leveraging technology can be a significant part of the solution because it helps to navigate this complexity, offering innovative solutions and providing the tools necessary to approach sustainability in a holistic, comprehensive manner.”

 

What do you think the world needs most to fight global warming and pollution?

JK: “As someone deeply immersed in the world of sustainability, I find myself genuinely encouraged by the advancements we’ve witnessed in many areas in the last 12 months. The innovation happening in the realm of carbon removal and storage solutions and the escalating investments in clean energy and green infrastructure are just some examples that bring hope.

However, there’s one element that we must underscore: the necessity for more urgent corporate climate action. It’s not just about acknowledging the climate crisis; it’s about actively and urgently allocating resources toward decarbonization efforts and the funding of external climate projects.

The approach is quite straightforward. If your company has a significant Scope 1 and 2 footprint, your resources should be focused on accelerating decarbonization initiatives. If, on the other hand, you’re a tech company with limited direct impact, the way forward should be finding effective ways to fund external climate projects.”

 

If you had one wish from a legislative point of view to make your job easier – what would you wish for?

JK: “Given the urgency of the climate crisis, the pace of legislation is frustratingly inadequate. But one of the most straightforward yet impactful actions we can take in our fight against climate change is eliminating all existing fossil fuel subsidies. These subsidies not only perpetuate our reliance on non-renewable resources but also artificially lower the cost of fossil fuels, hindering the competitiveness of renewable alternatives. By removing these subsidies, we can create a level playing field, allowing clean energy solutions to flourish and thereby accelerating our transition to a sustainable energy future.”

Note: Further CSDDD developments – where the directive failed to receive final approval – were announced on 28th February 2024. You can read about what happened here.

The Corporate Sustainability Due Diligence Directive (CSDDD) is an upcoming European Union (EU) directive designed to enhance responsible business practices and ensure compliance with human rights, social, and environmental standards. In this article, we will delve into what the CSDDD entails, its current status and timeline, and how companies can prepare for its implementation. 

 

What is the CSDDD?  

The CSDDD is a proposed EU directive inspired by the French “loi de vigilance” and the German Supply Chain Sourcing Obligations Act (LkSG). Its primary objective is to address environmental impacts, including obligations relating to the protection of biodiversity, endangered species and the ozone layer, and human rights obligations along supply chains by requiring companies to identify, assess, and mitigate such risks. Large companies will be required to define a plan to ensure that the company’s business model and strategy are compatible with the transition to a sustainable economy and the limitation of global warming to 1.5 degrees celsius in accordance with the Paris Agreement. If climate change is identified as a major risk or impact of the company’s operations, the company should also include emissions reduction targets in its plan. 

The CSDDD proposal includes the provision for penalties of up to 5 percent of global sales for violations. 

 

What companies have to comply with CSDDD? 

Under the proposed directive, companies with more than 250 employees and a global turnover of over 40 million euros would be subject to the requirements. This contrasts with the previous draft, which set the limits at 500 employees and 150 million euros. To accommodate different company sizes, staggered transition periods of up to five years are suggested.  

 

CSDDD Status and Timeline 

As of 2023, the CSDDD has made significant progress in its legislative journey. On June 1st, the majority of Members of the European Parliament (MEPs) voted in favor of strengthening the original legislative proposal put forth by the EU Commission. This move signals a significant step toward shaping the directive’s final form. 

Right now, the CSDDD is in the trilogue stage, where representatives from the European Parliament, the European Commission, and the European Council negotiate to reach a consensus on the final version of the directive. While an exact CSDDD timeline cannot be determined, a decision in the EU trilogue is expected in the near future. Once agreed upon, the directive will proceed towards implementation, and companies will be required to comply with its provisions. 

 

How to Prepare for the CSDDD 

Given the significance of the CSDDD for companies operating within the EU, proactive preparation is crucial. Here are a few steps businesses can take to ready themselves for compliance: 

• Assess Supply Chain Sustainability: Conduct a thorough analysis of your supply chain to identify potential risks related to child labor, slavery, labor exploitation, pollution, environmental degradation, and loss of biodiversity. Implement measures to mitigate these risks and ensure responsible sourcing practices. 
• Enhance Transparency and Reporting: Establish transparent reporting mechanisms throughout your supply chain that cover procurement practices, working conditions, environmental impacts, and efforts to prevent human rights abuses. Regularly communicate and disclose this information to stakeholders such as investors, customers, and society. 
• Align with Climate Goals: Develop a comprehensive plan that aligns your business model and corporate strategy with the transition to a sustainable economy and the goal of limiting global warming to 1.5 degrees Celsius, as outlined in the Paris Agreement. Consider setting emission reduction targets if climate change is identified as a material risk or impact of your corporate activities. 

 

Summary of the CSDDD directive 

The Corporate Sustainability Due Diligence Directive represents a significant step toward ensuring responsible and sustainable business practices within the EU and the EUs supply chains. With the CSDDD’s status progressing and its timeline advancing, companies must proactively prepare for compliance. By assessing supply chain sustainability, enhancing transparency and reporting, and aligning with climate goals, businesses can position themselves to meet the requirements of the CSDDD and contribute to a more sustainable future. 

If you want to learn more about European Sustainability reporting obligations, click here. 

The Global plastics production forecast 2025-2050 (Statista) says that by 2030 the world will produce 483 million tons of thermoplastics (the biggest group of plastic materials), and by 2040 it will be even more, with 564 million tons of plastic. While plastic has technical properties that cannot be reached with other materials such as textiles, paper, or metals, plastic is made from non-renewable resources, and its manufacturing, as well as its disposal, can cause serious harm to the environment. In this article, we give an overview of the plastics industry, how plastic harms the environment, and how the plastics industry could reduce carbon emissions from plastic production and disposal.

 

What are the advantages of plastic

Plastic is lightweight and has – depending on the granulate – high flexibility and durability, which makes it a very efficient material to use in many everyday appliances.

Plastic is important for several reasons. First, it is a durable and versatile material that can be molded into various shapes and sizes, making it suitable for various applications. Its flexibility allows for innovative designs and functionalities in industries such as packaging, construction, automotive, electronics, healthcare, and more.

Second, plastic is cost-effective to produce. Its manufacturing process is generally efficient and less expensive than other materials like metal or glass. This cost advantage makes plastic accessible to many consumers and businesses, contributing to economic growth and development.

Third, plastic packaging plays a crucial role in preserving and protecting products. Plastic packaging helps extend the shelf life of food, beverages, and other perishable goods by providing a barrier against moisture, air, and contaminants. This is especially important for the pharmaceutical industry.  It also reduces transportation costs due to its lightweight nature, resulting in fuel efficiency and lower carbon emissions.

 

What are the disadvantages of plastic

How plastic is made

With so many advantages, even environmentally, why is plastic bad for the environment? Nearly every piece of plastic begins as a fossil fuel. Plastic is made through a process called polymerization, where monomers (building blocks) are chemically bonded together to form long chains called polymers. Monomers are typically derived from petrochemicals like crude oil or natural gas. The plastic manufacturing process releases greenhouse gases directly into the atmosphere.

The plastic industry is a huge, fast-growing industry. New plants for making granulates are built in several countries in the world. The US uses gas derived from fracking, which comes with even higher environmental costs than standard gas exploitation methods.

The Center for International Environmental Law about CO2 emissions from plastic production and use:

“If plastic production and use grow as currently planned, by 2030, these emissions could reach 1.34 gigatons per year—equivalent to the emissions released by more than 295 new 500-megawatt coal-fired power plants. By 2050, the cumulation of these greenhouse gas emissions from plastic could reach over 56 gigatons—10–13 percent of the entire remaining carbon budget.”

 

Plastic recycling and disposal

If plastic waste is discarded non-properly, plastic waste is a huge environmental problem This is not just a problem for the biodiversity of systems due to animals confusing plastics with food; there are also concerns about microplastics being potentially toxic to the environment. Meanwhile, microplastics can be found anywhere in our environment, also in the human body.

The International Union for Preservation of Nature states:

“The most visible impacts of plastic debris are the ingestion, suffocation and entanglement of hundreds of marine species. Marine wildlife such as seabirds, whales, fish and turtles mistake plastic waste for prey; most then die of starvation as their stomachs become filled with plastic. They also suffer from lacerations, infections, reduced ability to swim, and internal injuries. Floating plastics also help transport invasive marine species, thereby threatening marine biodiversity and the food web.”

Once plastic products are discarded non-properly, they contribute to carbon emissions through the process of decomposition, which releases CO2 and other harmful chemicals into soil, water, and the atmosphere. A lot of times, plastic is burned in a non-controlled environment, which causes more harm to the environment than controlled incineration plants

Plastics vary in their life span – if used in packaging, it can be a few weeks and up to several years; if used in cars or machines. This means that carbon captured in the plastic will be released after a short period of time.

 

What are plastic alternatives?

One alternative the chemical industry is going for is using renewable raw materials as alternatives to their non-renewable counterparts. Another trend is to replace harmful chemicals so that the end product cannot release harmful chemicals. Still – considering that this is a growing market – using renewable alternatives is not an overall solution to the problem. Given that precursors – to make them renewable – have to be extracted from renewable materials – even if it is biological waste – they will be missed somewhere else as a base for food, topsoil, or pasture. Also, the plastic industry will compete with other industries for renewable raw materials, which will make it much more expensive for the industry to keep prices low.

 

What measures is the industry applying to reduce the impact of plastic on the environment?

There is a growing number of legal requirements for plastic products (especially packaging) for products going into the market. Many companies try to meet these requirements by taking a circular economy approach by enhancing the reusability or recyclability of their products. This can be done by reusable plastic products, enhancing mechanical recyclability, or investing in chemical recycling technologies. While this can extend its lifespan and time of use, it is not long enough to actually help keep the carbon dioxide in the plastic stored for longer than some years. It only shifts the point of time in which the emissions will be released into our environment.

Thus, the plastic industry has a significant responsibility to care for and take action to reduce waste and environmental impact. Although plastic plays an important, sometimes even a key role in our society, on the other hand, it is also misused or used too much. A real reduction will only come by transforming businesses and slowing down plastic usage. One start could be identifying which areas of the business are key to society and which products can be outdated to slow down plastic use. It is clear that expected growth numbers will eat up any enhancements in the products itself, so a real transformation is necessary to meet the set environmental goals.

What does sustainability mean for you?

Prof. Dr. Laura Marie Edinger-Schons: Currently, our way of living is not sustainable, and it is imperative that we take action to protect our ecological and social resources for future generations. But sustainability is not just about the intergenerational aspect. It also involves the intragenerational aspect, as the way we use resources is not fairly distributed around the globe.

Therefore, I think it is essential to consider both dimensions of sustainability – intergenerational and intragenerational – in any sustainable development initiatives. By doing so, we can ensure that we are protecting our resources for future generations, as well as promoting a fair and equitable distribution of resources among all people, regardless of where they live or what their socioeconomic status is.

 

What motivates you to work in sustainability?

LES: During my twenties, I had the opportunity to travel to South-East Asia. Witnessing the conditions and problems that many people face in that part of the world made me realize that I wanted to contribute to finding solutions to these issues.

As I already studied business management and economics, my experiences during my travels inspired me to take a scientific approach to these problems. That’s why I decided to pursue a PhD and later became a lecturer at the University of Hamburg, where I teach on the topic of how we can make impacts and our use of resources measurable.

Through my research and teaching, I am hoping to make a positive difference in the world by finding ways to promote sustainable development and equitable resource use. I believe that measuring impacts and resource use is a critical step in achieving these goals, as it allows us to better understand the challenges we face and develop effective solutions to address them.

What do you think companies lack to become better at sustainability?

LES: Transparency is crucial for stakeholders to make better decisions – not only for investors but also for employees, suppliers, etc. For non-financial performance measurement, there are no uniform reporting criteria, ratings are based on mostly publicly available data, which is often not granular, and the landscape of rating formats is extensive and, therefore, confusing.

At the moment, the development in ESG is very divergent, which poses a problem. One example is the monetarization of impacts, meaning that a good social impact, e.g. providing jobs, could balance out ecological impacts in this model.

What are the biggest challenges in the sustainability space?

LES: In my opinion, one of the biggest challenges we face in the sustainability space is bridging the gap between impact calculation, technology, and scientific expertise, and finding ways to connect academia with practical solutions.

To address this challenge, we need to combine our knowledge of scientific methods with the new data availability provided by digital technology. Historically, academia and practice have not been connected enough, which has hindered our ability to develop effective solutions to sustainability issues. I believe it would be helpful to have support schemes from governments that promote collaboration between academia and practice.

How do you feel about legislation?

LES: I believe that legislation is needed in the sustainability space because we have seen that companies do not take sufficient voluntary action. One example of this is the Lieferkettensorgfaltspflichtengesetz in Germany. Initially, companies were given the choice to take action on their own, but they did not, which prompted the German government to put the law into place.

When Europe first introduced reporting duties for companies, there was a big discussion on whether we need reporting or not. However, now we see that the GRI standards have evolved to become an internationally accepted standard. What I appreciate about the GRI is that it was developed in a multi-stakeholder process, allowing many different stakeholders to contribute to setting up the reporting. This is very different from when politicians put something into place without consulting opinions from the space.

What concerns me is that currently sustainability could become a power game for companies, which is evident from the lobbying happening. Ten years ago, sustainability was not taken seriously. However, now big businesses realize that it is relevant to their core businesses, and many of them are taking ownership of the process. This can be dangerous to our overarching goal. We need to find a way to orchestrate sustainability processes so that not only the most powerful voices are heard.

While the legislation we have right now needs to evolve, we need to also ensure that the process of iterative improvement is democratic and participative.

In your opinion, what should companies nowadays do to become more sustainable?

LES: This relates to company size. Small startups have it easier to set up sustainable processes than big corporations, which already have a running system and established structures. A crucial thing for this is to have a sustainability culture in a company. One sustainability manager trying to steer a whole company in one direction is mostly not enough. Everyone in the company needs to be enabled to be their own sustainability manager. Only very few companies have succeeded in doing that. You need a strong purpose, like with Patagonia for example, paired with a bottom-up empowerment of everyone and the right incentive systems enabling also middle management to integrate sustainability into all activities.

A couple of big companies are now trying to put this into place by applying social intrapreneurship programs, creating platforms in the company for employees to drive sustainability innovation. I think that is a very good development. On the other hand, I get the feeling that the same companies tend to be a bit scared of their own programs. They are afraid of touching the core business. And you must be brave to do that, especially in times of crisis. But in the end, companies must find a way to do this, because the old business models are simply not going to be able to survive in the future. And that ranges from fossil fuel cars to IT manufacturers based on unsustainable production methods. In a lot of industries, fundamental change needs to happen to make them fit for the future, and that requires turning the company upside down. For that you have to be willing to take bold steps.

By Sophie Kieselbach

 

Sustainability has the goal of allowing humanity to exist on Earth for a long time. Thus sustainable development is a concept that aims to balance economic growth with environmental protection and social well-being. It was officially formalized in the 1980s by the Brundtland report, and since then, the definition of sustainable development has evolved to encompass a broader range of issues and concerns. This article will explore the meaning of sustainable development – economic, social, and environmental sustainability – and how it has changed over time. 

 

The three pillars model

Economic sustainability 

Economic sustainability is about creating and maintaining a strong economy that can provide jobs and income for people while also being sustainable in the long term. In the past, economic sustainability was primarily focused on traditional economic indicators such as GDP. However, over time, the definition of economic sustainability has expanded to include more than just financial growth. 

Today, economic sustainability includes factors such as resource efficiency, circular economy models, and the promotion of sustainable business practices. Resource efficiency refers to the efficient use of natural resources, while circular economy models aim to reduce waste and create a closed-loop system where resources are reused and recycled. Sustainable business practices include reducing energy consumption, using renewable energy, and reducing waste. 

 

Social sustainability 

Social sustainability focuses on creating a society that is fair, just, and inclusive for everyone. This includes ensuring that people have access to basic needs such as food, shelter, healthcare, education, and social services. In the past, social sustainability was primarily focused on meeting basic needs. However, over time, the definition of social sustainability has expanded to include more complex issues. 

Today, social sustainability includes issues such as human rights, child labor, gender equality, diversity, and inclusion. Gender equality refers to equal rights and opportunities for women and men. Diversity and inclusion refer to creating a workplace or society where everyone feels valued and included, regardless of their race, gender, or background. Human rights refer to the fundamental rights and freedoms that every person is entitled to, such as the right to life, liberty, and security. 

 

Environmental sustainability 

Environmental sustainability is about protecting our planet’s natural resources and ecosystems. This includes minimizing pollution, conserving biodiversity, and reducing carbon emissions. In the past, environmental sustainability was primarily focused on reducing pollution and protecting wildlife. 

However, over time, the definition of environmental sustainability has expanded to include the need to address climate change and other important issues, such as biodiversity loss. Today, it is widely recognized that economic and social sustainability cannot be achieved without also protecting the natural systems upon which we all depend. 

 

Evolution of the sustainable development-model 

The connection between the three pillars of sustainable development – economic, social, and environmental sustainability – has evolved over time as our understanding of sustainable development has grown. 

Initially, sustainable development was seen as a trade-off between economic growth and environmental protection. This meant that policies focused on protecting the environment often came at the expense of economic growth, and vice versa. However, over time, it became clear that social sustainability was also a critical component of sustainable development. 

As a result, the connection between the three pillars of sustainable development shifted from a trade-off between economic growth and environmental protection to a more integrated approach that recognizes the interconnectedness of economic, social, and environmental sustainability. This approach recognizes that economic growth and environmental protection are not mutually exclusive, and that social sustainability is also essential for achieving sustainable development. 

In 2012 an Oxfam report published the concept of the doughnut economy which consists of two concentric rings: the social foundation, which should guarantee that basic human rights and needs are covered and an ecological ceiling, which states that planetary boundaries exist. Between these two rings humanity can thrive economically on a long term basis. (About Doughnut Economics | DEAL)  

This way of thinking is also reflected in todays concept of sustainability. The environment is the foundation of sustainable development. It is the basis of all life, and without a healthy environment, economic and social sustainability cannot be achieved. Therefore, the environment determines the limit in which our society can grow socially and economically, as it provides the natural resources and ecological services that support all economic and social activity. 

 

What does this mean for businesses? 

Since the concept of sustainable development emerged in the 1980s as a response to growing concerns about the negative impacts of economic growth and development on the environment and society, the understanding of sustainable development has expanded to include not only environmental and economic concerns but also social and cultural dimensions. Today’s view is based on the knowledge that a healthy ecosystem is crucial for society and the economy to thrive. Achieving sustainable development requires balancing all three dimensions, as they are all interconnected. 

To achieve sustainable development, it is necessary to address the root causes of environmental degradation, social inequality, and economic instability. This requires a holistic and long-term approach that considers the interactions and trade-offs between different aspects of sustainability, and involves collaboration between governments, businesses, civil society, and individuals. It requires innovation and creativity to develop new technologies and practices that can promote sustainable growth and development.  

Integrating this mindset into the business and basing all decision making on hard facts will enable businesses to contribute to a sustainable society.