2020 Sustainability Trends: Our Experts’ Top Ten

January 13, 2022

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As we welcome the new decade, it’s time again for our experts’ New Year's Sustainability trend outlooks. We are now entering a decade that threatens great uncertainty as the window of opportunity to create a sustainable world, one in which people everywhere can lead fulfilling lives on a healthy planet, seems narrower than ever before. But there are also positive trends and breakthroughs in sight, as evidenced by the UN Secretary-General’s declaration that the time between now and 2030 shall be known as the Decade of Action. The opportunities and technological advances at our fingertips promise that multiple futures are open to us and a transformation of economies has already begun.

Here, our Schneider Electric’s global energy and sustainability experts have listed their 10 Top Trends for industry professionals to have a close look at in 2020 to help their organization be a leader in sustainability.

TREND #1: Companies lead the way with bold new climate commitments

Companies across sectors are heeding the call to act on climate change by limiting average global temperature rise to no more than 1.5 degrees Celsius and reaching net-zero emissions by 2050. As part of the “Business Ambition for 1.5°C — Our Only Future” campaign, 177 signatories so far have pledged to set climate targets that align with limiting global temperature rise to 1.5°C, including Schneider Electric moving up its own target by 5 years. Many more are setting and meeting ambitious goals to invest in clean energy or transportation and drive sustainable solutions within their own business operations and global supply chains. Importantly, companies are not just taking action to tackle their own emissions, they are also driving policy change in their countries and regions and create ambition loops to accelerate climate action.

Contributed by Ekaterina TSVETKOVA, Head of Sustainability Consultancy; Budapest (HUN)

TREND #2: Global investors adopting green investments

Today's investment community is riding a wave of growing interest in sustainable companies—ones that show progress toward a 1.5C world. As companies’ sustainability journeys continue to evolve, so too do investor interactions. BlackRock’s C.E.O. Larry Fink’s influential annual letter where he said his firm would avoid investments in companies that “present a high sustainability-related risk” is just the most recent indicator of this trend. In December 2019, 631 investors from around the world, representing some $37 trillion in assets, signed a letter calling on governments to step up their efforts against climate change. And on top of that, the EU recently laid out the “Action Plan: Financing Sustainable Growth” to move toward mandatory climate risk disclosure as part of a new set of regulations to finance sustainable growth and support a low-carbon economy. In addition to investor and consumer pressure to operate sustainably and disclose climate risk, companies now face legislative pressure as well.

Contributed by Maureen BRAY, International Energy & Sustainability Consultancy Director; Dunfermline (UK)

TREND #3: Corporates buying renewable energy always and everywhere

In 2019, we saw many interesting developments in the renewable energy space: in addition to a steady growth of renewable opportunities in the U.S., Europe continued to advance as an attractive market for corporate PPAs—a trend that will only speed up in 2020. With this, we’re also seeing increased innovation in deal structures coming out from the European market. For example, in 2019 Signify signed the first publicly announced virtual power purchase agreement (VPPA) in Poland and various contract types designed to reduce risk were on offer from developers in multiple markets.

Beyond Europe, 2019 showed a growing interest, but also challenges, in some newer geographies for renewables: India and Brazil have seen an upswing in I-REC purchasing and both countries show greater potential for renewable purchasing in 2020. Australian companies, meanwhile, continue to explore a variety of deal structures from long-term PPAs to short-term renewable retail contracts. New and increasingly attractive markets for renewable energy to keep an eye on this year include Vietnam, Taiwan, China, Italy and Germany. One of the key drivers for renewables heading into 2020 is companies’ urgency to meet their sustainability goals. With rapidly growing global initiatives such as the RE100 and Science-Based Targets, more companies than ever are now positioning themselves among the league of climate leaders making bold commitments to renewable energy and greenhouse gas reduction.

Contributed by James LEWIS, Director of International Cleantech; Boulder, CO (U.S.)

TREND #4 Water Action Takes Precedent

In the World Economic Forum's 2020 Global Risk Report, water crises were identified as one of the top 5 greatest risks to society over the next decade. Time is running out for companies to be unaware of their water footprint. Companies must understand what goes into their upstream and downstream operations – whether that means water used to create products or if water used is in areas susceptible to drought, pollution, etc.

Already in 2020, the United States Administration has removed pollution controls on streams and wetlands. While that might initially sound like a win for businesses in terms of seeing lower prices or less stringent water standards, in the end, there could be long-term or irreversible damage to the water sources they depend on to operate.

As we enter the final decade before 2030, the year by which the UN predicts the world will see a 40% shortfall of the available global water supply, we expect to see a greater interest from companies in water efficiency. Companies should gather information about their water footprint by aligning water definitions across their business and becoming more educated on where water is coming from and how it is used in operations.

Contributed by Louis CHRISTOPHER, Sustainability Specialist; Louisville, KY (U.S.)

TREND #5 Big tech disrupts sustainability and transforms economies

We live in an age of rapid technology innovation. Technology that is giving rise to new opportunities and business models that possesses the potential to change the energy and sustainability industry in unique and dramatic ways. For the sake of discussion, we could characterize technology in two broad buckets: physical and virtual.

Physical technologies refer to assets such as wind turbines, photovoltaics, electric vehicles, battery storage, microgrids, and other distributed energy resources (DERs). These technologies continue to improve in terms of capabilities while costs decline at a corresponding, yet inverse rate. Coupled with these technologies are a host of other low-cost, “internet of things” connected devices and sensors further enabled by cheap onboard computing power and communications chips. This proliferation of distributed assets means more end users are likely to seek to add renewables and other grid edge resources to their energy portfolios to achieve greater control and cost certainty, fulfill sustainability goals and commitments and improve resiliency. This shift has the potential to cause grid defection and disintermediation of end user asset owners and central grid operators who currently provide service under traditional business models.

Similarly, virtual technologies ranging from artificial intelligence to distributed ledgers to big data are also helping organizations become more sustainable by enabling faster access to better quality information for informed decision making. As an example, artificial intelligence can be used to predict failing equipment before failure, thereby saving time, money and resources (such as higher energy or water consumption). Distributed ledgers, commonly referred to as blockchain, have a great deal of potential to change the way end users interface with the grid and with each other. Blockchain-enabled platforms are being piloted around the globe in a variety of concepts ranging from localized energy markets that enable peer-to-peer energy trading, to crowdsourcing the funding and deployment of new renewable energy assets, to the minting and trading of energy attribute credits virtually, among others.

While it remains to be seen exactly how these physical and virtual technologies change the complexion of the energy industry, it seems likely any change will be dramatic. Transformation is inevitable as organizations leverage physical and virtual technologies to create more sustainable businesses while minimizing their impact on the environment.

Contributed by Dominic BARBATO, Director of Strategy; Louisville, KY (U.S.)

TREND #6 Climate risk gets real

2019 wrapped with some of the most extreme cases of natural disasters. According to the World Economic Forum’s top 20 risks facing the world in 2020, these risks are only growing. Over 70% of respondents think risks to businesses will increase in the next 10 years across all areas of short-term risk outlook, including climate-related disasters such as extreme heat waves and uncontrolled fires.

Source: World Economic Forum

Because of the reality of these risks, companies should expect to see more of a push from the investment community to address risks related to climate change. BlackRock’s recent announcement that it will exit investments that generate more than 25% of revenues from coal is a case in point. In 2020, companies should prepare themselves to respond to these investor pressures to act on climate change by undergoing scenario analysis planning, adopting key recommendations from the TCFD and taking tangible steps to mitigate carbon emissions.

Contributed by Erik Mohn, Director of Sustainability, Americas; Louisville, KY (U.S.)

TREND #7 Carbon zero is the economies’ new imperative

The upswing in carbon neutrality goals was already a big trend in 2019, with almost daily announcements of net zero initiatives from countries, organizations, event organizers or even on a personal, family level. While many companies have joined this movement, there are still a lot of discussions on what exactly is net zero (and what is not). Net zero, carbon neutral or climate neutral claims lack clear, widely accepted definitions and boundaries (e.g. on the question of carbon offsetting). Initiatives differ based on what a company sells, owns or influences. The emissions reduction rate associated to neutrality claims is not always clear and neither is the way that the remaining emissions may be offset.

Additionally, companies like Microsoft now enter the carbon negative space by committing to remove more carbon dioxide from the atmosphere than it emits by 2030; but how exactly? 2020 will bring more granularity on these questions. In the meantime, it is safe to say that experts are aligned that the litmus test of carbon credibility are science-based targets (SBT) and any net zero initiative shall start with emission reductions in line with 1.5°C or well below 2°C scenarios

Contributed by Gabriel DE MALLERAY, International Consultancy Manager; Paris (France)

TREND #8 Supply chain action goes mainstream

Many companies have turned their focus to carbon reduction on Scope 3, or indirect emissions in a company’s supply chain. Mainstreaming supply chain carbon reduction will bring a real breakthrough, as impacts could be exponential compared to focusing only on emissions from a company’s own operations. We see many activities in the Scope 3 field, such as fostering science-based target setting for suppliers, engaging supply chain partners on renewable energy procurement or joined R&D initiatives to step away from carbon-intensive technologies. The electrification in glass industry is one example how these activities can force innovation. We strongly recommend our clients to work in tandem with key supply chain partners to reap the benefits of early adopters.

Contributed by Gary Cafe, Consultancy Manager – Sustainability; Hoofddorp (Netherlands)

TREND #9 Circular economy - moving from buzz to business

A growing number of businesses have begun identifying viable opportunities in adopting circular business models. Unlike the mainstream linear model, circular models adopt strategies in recycling and product life extension. In the past, such initiatives mainly focused on plastics and packaging reduction and recycling, as the public interest in the ocean plastics crisis had driven both consumers and regulators to seek action.

Nowadays, circular economy programs extend to decouple many economic activities from consumption of finite resources and help to cut GHG emissions. For example, a European manufacturer of household cleaning products was able to cut CO₂ emission in the value chain by 45% using dematerialization and eco-design techniques, such as reducing chemicals, packaging materials, inbound and outbound freight and improving end of life treatment of wastes. Removing poorly designed and environmentally harmful products from the market is one of the most efficient ways to achieve climate protection. Consequently, the European Green Deal, the EU’s new carbon reduction and growth program, outlines the priority of circularity and is expected to announce measures in a Circular Economy Action Plan in March 2020.

Contributed by Valérie Limauge, Sustainability Consultant; Lasne (Belgium)

TREND #10 Green microgrids are on the rise

Microgrids are trending due to various reasons. Regionally, Asia Pacific has emerged as a leader in installed and planned capacity, as microgrids provide access to a secure and reliable power supply for a growing population—even in regions with power scarcity. Growth in microgrid business is also fueled by the need of organizations to ensure grid reliability and resilience of their physical supply infrastructure. Electrical interruptions caused by extreme weather are increasing, and microgrids are available as a solution to build a resilient infrastructure. We also see more microgrids getting their power from renewable energy sources and/or having backup battery storage. Declining costs of photovoltaic (PV) and battery storage solutions, along with improving functionality in microgrid technologies, have brought these projects to cost parity with traditional grid supply. The launch of dozens of successful microgrid projects globally, such as Lidl’s carbon-neutral distribution center in Finland, has proven the possibility to gain savings while minimizing carbon footprint. Microgrids are not a niche solution anymore, and are gaining popularity in many sectors such as infrastructure, commercial, military and industrial applications – and moreover, many of these microgrids are green.