The UN’s global stocktake synthesis report underscores the need for significant efforts to meet the ambitious goals of the Paris Agreement to keep the global warming limit to 1.5ºC, compared to pre-industrial levels. Achieving this requires collective action from governments, organisations, and individuals.
While regulators focus on mandates, organisations today are being influenced more by individual responsibility for positive impact. Customers and employees are leading ESG actions – another fast-emerging voice driving ESG initiatives are value chain partners looking to build sustainable supply chains.
Ecosystm research reveals that only 27% of organisations worldwide currently view ESG as a strategic imperative, yet we anticipate rapid change in the landscape.
Click below to find out what Ecosystm analysts Gerald Mackenzie, Kaushik Ghatak, Peter Carr and Sash Mukherjee consider the top 5 ESG trends that will shape organisations’ sustainability roadmaps in 2024.
Click here to download ‘Ecosystm Predicts: Top 5 ESG Trends in 2024’ as a PDF.
#1 Organisations Will Evolve ESG Strategies from Compliance to Customer & Brand Value
Many of the organisations that we talk to have framed their ESG strategy and roadmaps primarily in relation to compliance and regulatory standards that they need to meet, e.g. in relation to emissions reporting and reduction, or in verifying that their supply chains are free from Modern Slavery.
However, organisations that are more mature in their journeys have realised that ESG is quickly becoming a strategic differentiator and compliance is only the start of their sustainability journey.
Customers, employees, and investors are increasingly selective about the brands they want to associate with and expect them to have a purpose and values that are aligned with their own.
#2 Sustainability Will Remain a Stepping-Stone to Full ESG
Heading into 2024, the corporate continues to navigate the nuances between Sustainability and Environmental, Social, and Governance (ESG) initiatives. Sustainability, focused on environmental stewardship, is a common starting point for corporate responsibility, offering measurable goals for a solid foundation.
Yet, the transition to comprehensive ESG, which includes broader social and governance issues alongside environmental concerns, demands broader scope and deeper capabilities, shifting from quantitative to qualitative measures. The trend of merging sustainability with ESG risks is blurring distinct objectives, potentially complicating reporting and compliance, and causing confusion in the market. Nevertheless, this conflation ultimately paves the way for more integrated, holistic corporate strategies.
By aligning sustainability efforts with wider ESG goals, companies will develop more comprehensive solutions that address the entire spectrum of corporate responsibility.
#3 ESG Consulting Will Grow – Till Industry Templates Take Over
At the end of 2022, LinkedIn buzzed with announcements of Chief Sustainability Officer appointments. However, the Global Sustainability Barometer Study reveals that only around one-third of global organisations have a dedicated sustainability lead. What changed?
Organisations have recognised that ESG is intricate, requiring a comprehensive focus and a capable team, not just a sustainability leader.
Each organisation’s path to sustainability is unique, shaped by factors like size, industry, location, stakeholders, culture, and values. Successfully integrating ESG requires a nuanced understanding of an organisation’s barriers, opportunities, and risks, making it challenging to navigate the sustainability journey alone. This is complicated by the absence of clear government/industry mandates and guidelines that frame best practices.
#4 Sustainability Tech Will Finally Gain Traction
Many organisations initiate sustainability journeys with promises and general strategies. While the role of technology in accelerating goals is recognised, alignment has been lacking. In 2024 sustainability tech will gain traction.
Environmental Tech. Improved sensors and analytics will enhance monitoring of air and water quality, carbon footprint, biodiversity, and climate patterns.
Carbon-Neutral Transportation. Advancements in electric and hydrogen vehicles, batteries, and clean mobility infrastructure will persist.
Circular Economy. Innovations like reverse logistics and product lifecycle tracking will help reduce waste and extend product/material life.
Smart Grids and Renewable Energy. Smart grid tech and new solutions for renewable energy integration will improve energy distribution.
#5 Cleantech Innovation Will See Increased Funding
Cleantech is the innovation that is driving our adaptation to climate change. We expect that investments into, and the pace of innovation and adoption of Cleantech will accelerate into 2024.
As companies commit to their net-zero targets, the need to operationalise the technologies required to fuel this transition becomes all the more urgent. BloombergNEF reported that for Europe alone, nearly USD 220 billion was invested in Cleantech in 2022.
But to meet net-zero ambitions, annual investments in Cleantech will need to triple over the rest of this decade and quadruple in the next.
2023 has been an eventful year. In May, the WHO announced that the pandemic was no longer a global public health emergency. However, other influencers in 2023 will continue to impact the market, well into 2024 and beyond.
Global Conflicts. The Russian invasion of Ukraine persisted; the Israeli-Palestinian conflict escalated into war; African nations continued to see armed conflicts and political crises; there has been significant population displacement.
Banking Crisis. American regional banks collapsed – Silicon Valley Bank and First Republic Bank collapses ranking as the third and second-largest banking collapses in US history; Credit Suisse was acquired by UBS in Switzerland.
Climate Emergency. The UN’s synthesis report found that there’s still a chance to limit global temperature increases by 1.5°C; Loss and Damage conversations continued without a significant impact.
Power of AI. The interest in generative AI models heated up; tech vendors incorporated foundational models in their enterprise offerings – Microsoft Copilot was launched; awareness of AI risks strengthened calls for Ethical/Responsible AI.
Click below to find out what Ecosystm analysts Achim Granzen, Darian Bird, Peter Carr, Sash Mukherjee and Tim Sheedy consider the top 5 tech market forces that will impact organisations in 2024.
Click here to download ‘Ecosystm Predicts: Tech Market Dynamics 2024’ as a PDF
#1 State-sponsored Attacks Will Alter the Nature Of Security Threats
It is becoming clearer that the post-Cold-War era is over, and we are transitioning to a multi-polar world. In this new age, malevolent governments will become increasingly emboldened to carry out cyber and physical attacks without the concern of sanction.
Unlike most malicious actors driven by profit today, state adversaries will be motivated to maximise disruption.
Rather than encrypting valuable data with ransomware, wiper malware will be deployed. State-sponsored attacks against critical infrastructure, such as transportation, energy, and undersea cables will be designed to inflict irreversible damage. The recent 23andme breach is an example of how ethnically directed attacks could be designed to sow fear and distrust. Additionally, even the threat of spyware and phishing will cause some activists, journalists, and politicians to self-censor.
#2 AI Legislation Breaches Will Occur, But Will Go Unpunished
With US President Biden’s recently published “Executive order on Safe, Secure and Trustworthy AI” and the European Union’s “AI Act” set for adoption by the European Parliament in mid-2024, codified and enforceable AI legislation is on the verge of becoming reality. However, oversight structures with powers to enforce the rules are currently not in place for either initiative and will take time to build out.
In 2024, the first instances of AI legislation violations will surface – potentially revealed by whistleblowers or significant public AI failures – but no legal action will be taken yet.
#3 AI Will Increase Net-New Carbon Emissions
In an age focused on reducing carbon and greenhouse gas emissions, AI is contributing to the opposite. Organisations often fail to track these emissions under the broader “Scope 3” category. Researchers at the University of Massachusetts, Amherst, found that training a single AI model can emit over 283T of carbon dioxide, equal to emissions from 62.6 gasoline-powered vehicles in a year.
Organisations rely on cloud providers for carbon emission reduction (Amazon targets net-zero by 2040, and Microsoft and Google aim for 2030, with the trajectory influencing global climate change); yet transparency on AI greenhouse gas emissions is limited. Diverse routes to net-zero will determine the level of greenhouse gas emissions.
Some argue that AI can help in better mapping a path to net-zero, but there is concern about whether the damage caused in the process will outweigh the benefits.
#4 ESG Will Transform into GSE to Become the Future of GRC
Previously viewed as a standalone concept, ESG will be increasingly recognised as integral to Governance, Risk, and Compliance (GRC) practices. The ‘E’ in ESG, representing environmental concerns, is becoming synonymous with compliance due to growing environmental regulations. The ‘S’, or social aspect, is merging with risk management, addressing contemporary issues such as ethical supply chains, workplace equity, and modern slavery, which traditional GRC models often overlook. Governance continues to be a crucial component.
The key to organisational adoption and transformation will be understanding that ESG is not an isolated function but is intricately linked with existing GRC capabilities.
This will present opportunities for GRC and Risk Management providers to adapt their current solutions, already deployed within organisations, to enhance ESG effectiveness. This strategy promises mutual benefits, improving compliance and risk management while simultaneously advancing ESG initiatives.
#5 Productivity Will Dominate Workforce Conversations
The skills discussions have shifted significantly over 2023. At the start of the year, HR leaders were still dealing with the ‘productivity conundrum’ – balancing employee flexibility and productivity in a hybrid work setting. There were also concerns about skills shortage, particularly in IT, as organisations prioritised tech-driven transformation and innovation.
Now, the focus is on assessing the pros and cons (mainly ROI) of providing employees with advanced productivity tools. For example, early studies on Microsoft Copilot showed that 70% of users experienced increased productivity. Discussions, including Narayana Murthy’s remarks on 70-hour work weeks, have re-ignited conversations about employee well-being and the impact of technology in enabling employees to achieve more in less time.
Against the backdrop of skills shortages and the need for better employee experience to retain talent, organisations are increasingly adopting/upgrading their productivity tools – starting with their Sales & Marketing functions.
In our previous Ecosystm Insights, Ecosystm Principal Advisor, Gerald Mackenzie, highlighted the key drivers for boosting ESG maturity and the need to transition from standalone ESG projects to integrating ESG goals into organisational strategy and operations.
This shift can be difficult, requiring an alignment of ESG objectives with broader strategic aims and using organisational capabilities effectively. The solution involves prioritising essential goals, knitting them into overall business strategy, quantifying success metrics, and establishing incentives and governance for effective execution.
The benefits are proven and significant. Stronger Customer and Employee Value Propositions, better bottom line, improved risk profile, and more attractive enterprise valuations for investors and lenders.
According to Gerald, here are 5 things to keep in mind when starting on an ESG journey.
Download ‘Embedding Sustainability in Corporate Strategy and Operations’ as a PDF
In an era marked by heightened global awareness of environmental, social, and governance (ESG) issues, organisations find themselves at a crossroad where profitability converges with responsibility. The imperative to take resolute action on ESG fronts is underscored by a compelling array of statistics and evidence that highlight the profound impact of these considerations on long-term success.
A 2020 McKinsey report revealed that executives and investors value companies with robust ESG performance around 10% higher in valuations than laggards. Equally pivotal, workplace diversity is now recognised as a strategic advantage; a study in the Harvard Business Review finds that companies with above-average total diversity had both 19% higher innovation revenues and 9% higher EBIT margins, on average. Against this backdrop, organisations must recognise that embracing ESG principles is not merely an ethical gesture but a strategic imperative that safeguards resilience, reputation, and enduring financial prosperity.
The data from the ongoing Ecosystm State of ESG Adoption study was used to evaluate the status and maturity of organisations’ ESG strategy and implementation progress. A diverse representation across industries such as Financial Services, Manufacturing, and Retail & eCommerce, as well as from roles across the organisation has helped us with insights and an understanding of where organisations stand in terms of the maturity of their ESG strategy and implementation efforts.
A Tailored Approach to Improve ESG Maturity
Ecosystm assists clients in driving greater impact through their ESG adoption. Our tools evaluate an organisation’s aspirations and roadmaps using a maturity model, along with a series of practical drivers that enhance ESG response maturity. The maturity of an organisation’s approach on ESG tends to progress from a reactive, or risk/compliance-based focus, to a customer, or opportunity driven approach, to a purpose led approach that is focused on embedding ESG into the core culture of the organisation. Our advisory, research and consulting offerings are customised to the transitions organisations are seeking to make in their maturity levels over time.
Within the maturity framework outlined above, Ecosystm has identified the key organisational drivers to improve maturity and adoption. The Ecosystm ESG Consulting offerings are configured to both support the development of ESG strategy and the delivery and ‘story telling’ around ESG programs based on the goals of the customer (maturity aspiration) and the gaps they need to close to deliver the aspiration.
Key Findings of the Ecosystm State of ESG Study
89% of respondents self-reported that their organisation had an ESG strategy; however, a notable 60% also identified that a lack of alignment of sustainability goals to enterprise strategy was a key issue in implementation. This reflects many of the client discussions we’ve had, where customers share that ESG goals that have not been fully tested against other organisational priorities can create tensions and make it difficult to solve trade-offs across the organisation during implementation.
People & Leadership/Execution & Governance
Capabilities are still emerging. 40% of respondents mentioned that a lack of a governance framework for ESG was a barrier to adoption, and 56% mentioned that immature metrics and reporting maturity slowed adoption. 64% of respondents also mentioned that a lack of specialised resources as a key barrier to ESG adoption.
In our discussions with customers, we understand that there is good support for ESG across organisations, but there needs to be a simple narrative compelling them to action on a few clearly articulated priorities, a clear mandate from senior leadership and credible resourcing and governance to ensure follow through.
Data and Technology Enablement
There is a strong opportunity for improvement. “We can’t manage what we cannot measure” has been the common refrain from the clients we have spoken to and the survey reflected this. Only 47% of respondents say that preparing data, analytics, reporting, and metrics for internal consumption is a priority for their tech teams.
ESG is rapidly emerging as a key priority for customers, investors, talent, and other stakeholders who seek a comprehensive and genuine commitment from the organisations they interact with. Successfully determining the right priorities and effectively mobilising your organisation and external collaborators for implementation are pivotal. It’s crucial to acknowledge the intricacy and extent of effort needed for this endeavour.
With our timely research findings complementing our ESG maturity and implementation frameworks, analyst insights and consulting support, Ecosystm is well-positioned to help you to navigate your journey to ESG maturity.
As an industry, the tech sector tends to jump on keywords and terms – and sometimes reshapes their meaning and intention. “Sustainable” is one of those terms. Technology vendors are selling (allegedly!) “sustainable software/hardware/services/solutions” – in fact, the focus on “green” or “zero carbon” or “recycled” or “circular economy” is increasing exponentially at the moment. And that is good news – as I mentioned in my previous post, we need to significantly reduce greenhouse gas emissions if we want a future for our kids. But there is a significant disconnect between the way tech vendors use the word “sustainable” and the way it is used in boardrooms and senior management teams of their clients.
Defining Sustainability
For organisations, Sustainability is a broad business goal – in fact for many, it is the over-arching goal. A sustainable organisation operates in a way that balances economic, social, and environmental (ESG) considerations. Rather than focusing solely on profits, a sustainable organisation aims to meet the needs of the present without compromising the ability of future generations to meet their own needs.
This is what building a “Sustainable Organisation” typically involves:
Economic Sustainability. The organisation must be financially stable and operate in a manner that ensures long-term economic viability. It doesn’t just focus on short-term profits but invests in long-term growth and resilience.
Social Sustainability. This involves the organisation’s responsibility to its employees, stakeholders, and the wider community. A sustainable organisation will promote fair labour practices, invest in employee well-being, foster diversity and inclusion, and engage in ethical decision-making. It often involves community engagement and initiatives that support societal growth and well-being.
Environmental Sustainability. This facet includes the responsible use of natural resources and minimising negative impacts on the environment. A sustainable organisation seeks to reduce its carbon footprint, minimise waste, enhance energy efficiency, and often supports or initiates activities that promote environmental conservation.
Governance and Ethical Considerations. Sustainable organisations tend to have transparent and responsible governance. They follow ethical business practices, comply with laws and regulations, and foster a culture of integrity and accountability.
Security and Resilience. Sustainable organisations have the ability to thwart bad actors – and in the situation that they are breached, to recover from these breaches quickly and safely. Sustainable organisations can survive cybersecurity incidents and continue to operate when breaches occur, with the least impact.
Long-Term Focus. Sustainability often requires a long-term perspective. By looking beyond immediate gains and considering the long-term impact of decisions, a sustainable organisation can better align its strategies with broader societal goals.
Stakeholder Engagement. Understanding and addressing the needs and concerns of different stakeholders (including employees, customers, suppliers, communities, and shareholders) is key to sustainability. This includes open communication and collaboration with these groups to foster relationships based on trust and mutual benefit.
Adaptation and Innovation. The organisation is not static and recognises the need for continual improvement and adaptation. This might include innovation in products, services, or processes to meet evolving sustainability standards and societal expectations.
Alignment with the United Nations’ Sustainable Development Goals (UNSDGs). Many sustainable organisations align their strategies and operations with the UNSDGs which provide a global framework for addressing sustainability challenges.
Organisations Appreciate Precise Messaging
A sustainable organisation is one that integrates economic, social, and environmental considerations into all aspects of its operations. It goes beyond mere compliance with laws to actively pursue positive impacts on people and the planet, maintaining a balance that ensures long-term success and resilience.
These factors are all top of mind when business leaders, boards and government agencies use the word “sustainable”. Helping organisations meet their emission reduction targets is a good starting point – but it is a long way from all businesses need to become sustainable organisations.
Tech providers need to reconsider their use of the term “sustainable” – unless their solution or service is helping organisations meet all of the features outlined above. Using specific language would be favoured by most customers – telling them how the solution will help them reduce greenhouse gas emissions, meet compliance requirements for CO2 and/or waste reduction, and save money on electricity and/or management costs – these are all likely to get the sale over the line faster than a broad “sustainability” messaging will.
As they continue to promote innovation in the Financial Services industry, the Monetary Authority of Singapore (MAS) introduced the Financial Sector Technology and Innovation Scheme 3.0 (FSTI 3.0) earlier this week, pledging up to SGD 150 million over three years. FSTI 3.0 aims to boost innovation by supporting projects that use cutting-edge technologies or have a regional scope, while strengthening the technology ecosystem in the industry. This initiative includes three tracks:
- Enhanced Centre of Excellence track to expand grant funding to corporate venture capital entities
- Innovation Acceleration track to support emerging tech based FinTech solutions, and
- Environmental, Social, and Governance (ESG) FinTech track to accelerate ESG adoption in fintech
Additionally, FSTI 3.0 will continue to support areas like AI, data analytics, and RegTech while emphasising talent development. We can expect to see transformative financial innovation through greater industry collaboration.
MAS’ Continued Focus on Innovation
Over the years, the MAS has consistently been a driving force behind innovation in the Financial Services industry. They have actively promoted and supported technological advancements to enhance the industry’s competitiveness and resilience.
The FinTech Regulatory Sandbox framework offers a controlled space for financial institutions and FinTech innovators to test new financial products and services in a real-world setting, with tailored regulatory support. By temporarily relaxing specific regulatory requirements, the sandbox encourages experimentation, while ensuring safeguards to manage risks and uphold the financial system’s stability. Upon successful experimentation, entities must seamlessly transition to full compliance with relevant regulations.
Innovation Labs serve as incubators for new ideas, fostering a culture of experimentation and collaboration. They collaborate with disruptors, startups, and entrepreneurs to develop groundbreaking solutions. Labs like Accenture Innovation Hub, Allianz Asia Lab, Aviva Digital Garage, ANZ Innovation Lab, and AXA Digital Hive drive create prototypes, and roll out market solutions.
Building an Ecosystem
Partnerships between financial institutions, technology companies, startups, and academia contribute to Singapore’s economic growth and global competitiveness while ensuring adaptive regulation in an evolving landscape. By creating a vibrant ecosystem, MAS has facilitated knowledge exchange, collaborative projects, and the development of innovative solutions. For instance, in 2022, MAS partnered with United Nations Capital Development Fund (UNCDF) to build digital financial ecosystems for MSMEs in emerging economies.
This includes supporting projects that address environmental, social, and governance (ESG) concerns within the financial sector. For instance, MAS worked with the People’s Bank of China to establish the China-Singapore Green Finance Taskforce (GFTF) to enhance collaboration in green and transition finance. The aim is to focus on taxonomies, products, and technology to support the transition to a low-carbon future in the region, co-chaired by representatives from both countries.
MAS has also promoted Open Banking and API Frameworks to encourage financial institutions to adopt open banking practices enabling easier integration of financial services and encouraging innovation by third-party developers. This also empowers customers to have greater control over their financial data while fostering the development of new financial products and services by FinTech companies.
Regulators in Asia Pacific Taking a Proactive Approach
While Singapore is at the forefront of financial innovations, other regulatory and government bodies in Asia Pacific are also taking on an increasingly proactive role in nurturing innovation. This stance is being driven by a twofold objective – to accelerate economic growth through technological advancements and to ensure that innovative solutions align with regulatory requirements and safeguard consumer interests.
Recognising the potential of fintech to enhance financial services and drive economic growth, the Hong Kong Monetary Authority (HKMA) established the Fintech Facilitation Office (FFO) to facilitate communication between the fintech industry and traditional financial institutions. The central bank’s Smart Banking Initiatives, including the Faster Payment System, Open API Framework, and the Banking Made Easy initiative that reduces regulatory frictions help to enhance the efficiency and interoperability of digital payments.
The Financial Services Agency of Japan (FSA) has been actively working on creating a regulatory framework to facilitate fintech innovation, including revisions to existing laws to accommodate new technologies like blockchain. In 2020, FSA launched the Blockchain Governance Initiative Network (BGIN) to facilitate collaboration between the government, financial institutions, and the private sector to explore the potential of blockchain technology in enhancing financial services.
The Central Bank of the Philippines (Bangko Sentral ng Pilipinas – BSP) has launched an e-payments project to overcome challenges hindering electronic retail purchases, such as limited interbank transfer facilities, high bank fees, and low levels of trust among merchants and consumers. The initiative included the establishment of the National Retail Payment System, a framework for retail payment, and the introduction of automated clearing houses like PESONet and InstaPay. These efforts have increased the percentage of retail purchases made electronically from 1% to over 10% within five years, demonstrating the positive impact of effective cooperation and innovative policies in driving a shift towards a cash-lite economy.
The promotion of fintech innovation highlights a collective belief in its potential to transform finance and boost economies. As regulations adapt for technologies like blockchain and open banking, the Asia Pacific region is promoting collaboration between traditional financial institutions and emerging fintech players. This approach underscores a commitment to balance innovation with responsible oversight, ensuring that advanced financial solutions comply with regulatory standards.
The ongoing Ecosystm State of ESG Study throws up some interesting data about organisations in Asia Pacific.
We see ESG more firmly entrenched in organisational strategies; organisations leading with Social and Governance initiatives that are easily integrated within their CSR policies; and supply chain partners driving change.
Download ‘Sustainable Asia Pacific: The ESG Growth Story’ as a PDF
Zurich will be the centre of attention for the Financial and Regulatory industries from June 26th to 28th as it hosts the second edition of the Point Zero Forum. Organised by Elevandi and the Swiss State Secretariat for International Finance, this event serves as a platform to encourage dialogue on policy and technology in Financial Services, with a particular emphasis on adopting transformative technologies and establishing the necessary governance and risk frameworks.
As a knowledge partner, Ecosystm is deeply involved in the Point Zero Forum. Throughout the event, we will actively engage in discussions and closely monitor three key areas: ESG, digital assets, and Responsible AI.
Read on to find out what our leaders — Amit Gupta (CEO, Ecosystm Group), Ullrich Loeffler (CEO and Co-Founder, Ecosystm), and Anubhav Nayyar (Chief Growth Advisor, Ecosystm) — say about why this will be core to building a sustainable and innovative future.
Download ‘Building Synergy Between Policy & Technology’ as a PDF
The global economy remains fragile due to multiple factors; and banking organisations will need to weather the storm. While large and well-capitalised banks are expected to fare better, there is a need for the industry to pursue new sources of value beyond traditional boundaries.
Banking industry leaders should be bold, proactive, and envision possibilities beyond current uncertainties. Technology has a key role to play in turning their innovation and resiliency goals into reality.
Read on to find out how the National Australia Bank, the Scottish National Investment Bank, the ANZ Bank, the Swiss National Bank, Mastercard, and the French banking group Crédit Agricole are leading the charge in driving innovation within the banking industry by investing in new technologies and exploring business models to better serve their customers.
Download ‘The Future of Banking’ as a PDF