By Harsheenee Aujayeb, General Manager, ESG Intellis Solutions Ltd
How is progress on ESG shaping up as 2024 draws to a close? As ESG consultants, we are working in a privileged space as we interact with clients and other actors on a daily basis, and we have an in-depth understanding of what is happening.
- Evolution of ESG Regulations and Standardization
When it comes to global convergence on standards, we note that the launch of the International Sustainability Standards Board (ISSB) standards in 2023 created momentum for standardized ESG reporting. As an independent, private-sector body, the ISSB is committed to addressing the challenges faced by investors and other stakeholders historically of not having access to good quality and globally comparable information on sustainability.
In 2024, we saw increased interest in adoption of the IFRS Sustainability Standards, where the first two standards relate to General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and climate-related disclosures (IFRS S2). The latter seeks to capture climate-specific requirements such as strategy disclosures that distinguish between physical and transitional risks, and disclosure of their plans to respond to climate-related risks and opportunities, among others.
A move to stronger regulatory frameworks at global level has also been witnessed, with Governments and financial regulators mandating transparency and accountability in ESG practices. Jurisdictions across the world have or are currently adopting ESG frameworks. The EU continues to take one of the strongest stances globally, having started the year with a parliamentary vote on the introduction of the proposed Green Claims Directive, and ending it with a commitment from the newly appointed Commissioner for Financial Services and the Savings and Investment Union, Maria Luís Albuquerque, to look into the possibility of a proper labelling system for green investments but also for transition investments. She stated in her nomination hearing in November that the current framework under the Sustainable Finance Disclosure Regulation (SFDR) is being misused “as a pseudo-labelling regime”, creating greenwashing risks.
- The Rise of Corporate Climate Accountability
In 2024, there has been an increased corporate focus on Scope 3 emissions, defined by the US Environmental Protection Agency (EPA) as the emissions arising from “activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain”. The EPA has noted that these ‘value chain emissions’ often represent the majority of an organization’s total greenhouse gas (GHG) emissions.
With an eye on Scope 3 Emissions Accountability, we have seen major brands enforcing stricter environmental requirements across their supply chains. This had ripple effects on small suppliers, including those in Mauritius.
Litigation as a climate tool has also been a growing phenomenon in 2024. This year, India was one of the latest countries to propose legislation to outlaw greenwashing, or the act of engaging in false or misleading advertising of the environmental merits of certain products or services. It therefore joins the growing ranks of countries, states and regional blocs, from the EU to the US, UK to Australia, to send a legislative warning signal to those companies exaggerating their environmental credentials.
Despite this, some of the world’s biggest brands have still been under the spotlight for greenwashing in 2024, with accusations brought against McDonalds (for sourcing practices and waste management), Royal Dutch Shell (for its carbon footprint) and Coca-Cola (where critics allege that its ‘World Without Waste’ campaign is not in line with its actual practices). In the Indian Ocean region, various companies are currently undertaking footprint assessments with Cap Business Océan Indien to ensure that they are prepared for the future.
- Biodiversity and Nature-Based Solutions (NbS)
Last but not least, we see that biodiversity has become a Core Metric. The post-COP15 biodiversity goals moved beyond policy into implementation, with businesses setting measurable targets for biodiversity conservation.
When it comes to investment in Nature-Based Solutions, industries have embraced nature-based solutions to tackle interconnected biodiversity and climate challenges. For island nations like Mauritius, projects protecting marine biodiversity and coral reefs were prioritized. The Varuna program, implemented by Expertise France and financed by AFD – Agence Française de Développement, is one such example, which aims to halt biodiversity loss in the southwestern Indian Ocean, considered as a “world class hot spot subject to increasing pressures”.
Conclusion
This year, global trends have highlighted that the ESG agenda is becoming more and more entrenched, and difficult for companies to ignore, with increasing convergence of approaches across the globe. We consider that 2024 ends on a positive note although we wish to see more legislation to truly make a lasting difference.
