By Ira Srivastava
1. Board Sustainability Competencies Report. Competent Boards and the Copenhagen Business School have released an analysis of sustainability competencies in boardrooms across the European Union and United States. Of the 390 European Fortune 500 and 447 U.S. Fortune 500 boards that were analysed in this report, only 2% of companies showed “high levels of sustainability competency”. The U.S. companies were found to have a higher sustainability competence score than EU companies despite more lax regulations. Nearly 5% of boards did not have any sustainability competence at all, despite the fact that sustainability is becoming an increasingly important topic on board agendas. For more detailed findings and recommendations for companies to address this gap, please refer to the full report here.
2. World Economic Forum’s 2024 Global Risks Report. The 2024 Global Risks report shows that the respondents — risk experts, government officials and private sector leaders — are concerned about our long term outlook. 17% believed we have a stormy outlook on the next ten years with “global catastrophic risks looming”. 46% believed the next decade will be turbulent with “upheavals and elevated risk of global catastrophes”. The report identifies four structural forces that will shape the next decade of risk: climate change, demographic changes, technology acceleration, and geopolitical power shifts. The top 4 risks for the next ten years are all environmental including extreme weather, changes in Earth’s systems, biodiversity loss, and resource shortages. Younger respondents ranked biodiversity loss, ecosystem collapse, and planetary system changes as a higher short term risk than older respondents. Low to middle income countries face increasing economic hardships, polarisation and misinformation will worsen, and rifts will open between governments of the global North and South impacting global governance.
3. EY 2024 Geostrategic Outlook. Here are a few of the top geopolitical developments for the new year:
- Geopolitics are expected to get more complex in 2024. 2023 witnessed an expansion of BRICS, new agreements between Japan and South Korea, war in the Middle East, and the continuation of the war in Ukraine. As more countries gain influence on the world stage, navigating geopolitics will become more difficult.
- Governments are racing to implement AI throughout local economies, but there is a balancing act with new regulations for this technology. This will split countries around the world into groups in regards to AI regulation as countries will take different approaches to the issue.
- 2024 will see the highest number of elections around the world in history. India, Taiwan, South Korea, the United States, 27 EU countries, Mexico, 7 African countries, and more will have elections this year.
4. European Council to regulate ESG ratings. In order to gain investor confidence, ratings agencies must be supervised and licensed by the European Securities and Market Authority. New transparency guidelines are being implemented to ensure that the methodologies used for calculating ratings are publicly available. These specific rules only apply to European Union based companies. However, those who are headquartered outside of the bloc but have operations within it still need some form of endorsement or equivalent standard to continue operating in the EU. Smaller ESG ratings companies have more relaxed regulations and a three-year grace period to comply.
5. 2023 was the hottest year on record. 2023 was almost 1.5 degrees Celsius warmer than the average temperatures in the times before mass fossil fuel combustion. According to the BBC, “almost every day since July has seen a new global air temperature high for the time of year”. Surface ocean temperatures have “been on an unbroken streak of record-breaking days since 4 May”. While part of this can be explained by a strong El Niño year, it is undeniable that our greenhouse gas emissions play a huge role. This extreme heat was felt around the world, intensifying Canadian wildfires, worsening droughts in east Africa, and causing flooding across Africa and Europe. Arctic and Antarctic ocean ice cover is extremely low, with glaciers continuing to recede at record pace in North America and Europe. The target of the 2015 Paris Agreement was to limit warming to 1.5 degrees Celsius, but without meaningful climate action the world will blow past that goal in the coming decades.
Ira Srivastava is Competent Boards’ Program Coordinator. Follow Competent Boards on LinkedIn.