Over the past three decades, global warming and carbon emissions have become major concerns worldwide. Various industries have been accused of contributing to these issues. The construction sector, in particular, has become a focal point due to its significant contribution to annual carbon emissions. The built environment is responsible for a staggering 39% of global carbon emissions, including both operational and embodied emissions. The former are from day-to-day operations, while the latter are related to the creation, transportation, and disposal of construction materials. The industry has adopted a sustainability-based approach to its projects, starting from the design phase up to demolition. Potential solutions include modified business models, sustainable construction methods, and the use of more sustainable materials. Eco-Conscious Construction: Understanding the Essence of Prioritizing Sustainable Materials The use of conventional building materials, such as steel, concrete, cement, bricks, and glass, among others, presents multiple challenges. Firstly, according to the United Nations Environment Programme and the Global Alliance for Buildings and Construction, building/construction materials contributed approximately 10% of the world’s greenhouse gas (GHG) emissions in 2019. The industry is not only a significant emitter but also a major consumer of raw materials. The production of construction materials involves extensive extraction of finite natural resources, leading to resource depletion. Additionally, the production of such materials is energy-intensive and often results in the generation of tons of waste. These challenges highlight the urgency of transitioning towards more sustainable material alternatives to address environmental impact, conserve resources, and align with contemporary standards of responsible construction. Sustainable building materials have unique characteristics based on their life cycle. They can be eco-friendly, low-maintenance, energy-efficient, locally sourced, biodegradable, and contribute to water conservation. They can also have unique characteristics such as recycled content, optimal performance, and minimal energy consumption. A few examples of sustainable materials that have gained momentum within the industry include advanced concrete, organic admixtures, recycled and smart glass, treated wood, and plastic waste. From Landfills to the Deep Blue: The Urgent Concerns Surrounding Plastics’ Production and Disposal The United Nations Environment Programme report reveals a staggering annual production of 400 million tons of single-use plastic waste worldwide, representing 47% of the total plastic waste generated. However, only 9% of this substantial plastic volume undergoes recycling on a global scale. The environmental challenges posed by plastics are multifaceted, primarily arising from their mass production and improper disposal practices. One facet of this challenge is the indiscriminate dumping of tons of plastic waste in landfills. This is because plastic waste degrades slowly, leading to the accumulation of piles of plastic waste over extended periods. Moreover, plastics contribute to the direct pollution of streams and groundwater, infiltrating vital water resources and posing a long-term threat to aquatic ecosystems. The detrimental impact of plastics extends to marine ecosystems, with an alarming 8 million tons of plastic waste finding its way into the oceans annually. Moreover, the incineration process of plastic waste releases harmful gases, further exacerbating environmental concerns. This contributes to air pollution and poses a direct threat to human health. Addressing these challenges requires a holistic and concerted effort to mitigate the impact of plastics on our ecosystems and promote sustainable waste management practices. Recycling plastic is crucial to achieving this goal, both in general and specifically as a sustainable construction material. From Waste to Wealth: Embracing the Benefits of Plastic Features for Sustainable Building Practices Currently, less than 1% of construction materials worldwide contain plastic waste. However, modifying construction materials with plastic waste is gaining attention. This would serve a twofold purpose: reducing waste and decreasing reliance on non-renewable resources. Plastics have gained popularity in construction because they are strong, durable, resistant to corrosion and weather, require little maintenance, are easy to transport, cost-effective, lightweight, and flexible in design. Plastics are increasingly used in construction due to their abundance and accessibility. They are a convenient resource for the industry and are cost-effective to process. Recycling procedures also ensure durability, meeting multiple structural integrity and performance requirements. In addition, structures made from waste plastics have a longer shelf life. This ensures that the structures incorporating these materials remain resilient over time. Furthermore, plastic waste has diverse properties that make it suitable for various applications in construction. For example, high-density polyethylene (HDPE) is hard and rigid, while light-density polyethylene (LDPE) is flexible. Polypropylene (PP) has both hard and flexible characteristics, providing an advantage for its use in construction. These attributes position plastic waste as a versatile and practical choice in numerous applications, contributing to sustainable practices by repurposing materials that might otherwise end up as environmental pollutants. Other benefits of recycling and sustainable building practices include boosting the economy by creating jobs in the recycling and manufacturing sectors, fostering innovation, and developing technologically advanced building practices. From Disposal to Structure: Examining the Diverse Applications of Waste Plastic in Construction As the construction industry undergoes a paradigm shift towards eco-friendly and sustainable practices, the utilization of plastic waste in building materials has emerged as a compelling avenue for positive change. The following paragraphs delve into the different applications of plastic waste within construction, unveiling its potential to revolutionize the way the industry approaches building projects. Plastic Waste as a Complete Green Substitute in Construction Plastic has the potential to replace traditional construction materials such as bricks, wood, plywood, and timber. This can be achieved by using recycled or mixed scrap plastic waste. The use of plastic is relevant in various areas, including non-load-bearing walls, building bricks, facing bricks, and thin veneer bricks. Examples of repurposed plastic waste include using plastic bottles instead of traditional bricks for constructing walls, plastic-based pavement blocks for non-traffic and light traffic roads, reinforced polymer sleepers on network rail tracks, plastic-based tiles for flooring and decking, and wood-plastic composites for decking, fencing, outdoor furniture, and structural components. Replacement of Aggregates (Sand/Gravel) in Concrete Plastic waste serves as aggregates, additives, or sand and cement alternatives or substitutes in concrete production, cement-asphalt mixtures, or insulating materials. This is often done by processing it into small particles and mixing it with cement, resulting in newer or more sustainable products such as polymer concrete. Also, plastic waste could act as a modifier in concrete/road construction when mixed with crumb rubber. Plastic waste could also serve as binders, as they act as components of cementitious composites in road construction materials such as fillers and modified bitumen. Applications of such include producing sustainable flexible pavements and sub-base and base construction of pavements. Reinforcements to Concrete Plastic waste could also be used as a synthetic alternative to steel fibers and wire nets to augment material properties and mechanical strength. Thus, it could enhance concrete durability by enhancing bending, abrasion, and impact resistance while minimizing cracks and altering appearance. Recent research integrates synthetic fibers in small amounts to fortify traditional concrete, thereby complementing traditional steel reinforcements. Plastic waste can be used to reinforce concrete in various applications, such as pedestrian paths, prefabricated tiles, borders, and sidewalks. Conclusion The construction industry is embracing sustainable practices to reduce environmental impact. One such practice is the use of waste materials, including plastic waste. Thus, plastic waste can be transformed into building materials in a wide range of applications due to their favorable properties. Such efforts would directly address resource scarcity and environmental concerns. This approach not only diverts materials from landfills but also fosters innovation, job creation, and economic growth, all of which align with the main sustainability goals, thereby promoting a greener, more resilient built environment. References https://www2.deloitte.com/us/en/pages/energy-and-resources/articles/delivering-sustainable-construction.html https://www.pwc.nl/en/industries/engineering-and-construction/sustainability.html https://www.researchgate.net/publication/372549011_Recycling_Plastic_Waste_into_Construction_Materials_for_Sustainability https://www.strategyand.pwc.com/m1/en/strategic-foresight/sector-strategies/energy-utilities/using-recycled-plastics-to-build-a-more-sustainable-future/usingrecycledplastics.pdf https://jusst.org/wp-content/uploads/2021/12/The-Influence-Of-Construction-Materials-On-Sustainable-Constructions-A-Study-In-Wolaita-Zone-Southern-Ethiopia.pdf https://www.researchgate.net/publication/355356295_Recyclingreuse_of_plastic_waste_as_construction_material_for_sustainable_development_a_review https://www.sciencedirect.com/science/article/pii/S0950061823010243 https://www.sciencedirect.com/science/article/pii/S2214785322023707 https://www.sciencedirect.com/science/article/pii/S0950061820335248 https://www-sciencedirect-com.libproxy.aucegypt.edu/science/article/pii/S0195925522000804?via%3Dihub
Nature has always been a primary source of inspiration for our ideas and innovations. From a poem contemplating the beauty of autumn to a 16th-century visionary who drew the first plans for human flight from birdwatching, we have always looked to nature for guidance. The deliberate use of nature for technological advice on many of the challenges we face is gaining increasing attention. From mimicking bee communication for better building energy management to emulating whale fins for robust wind turbine efficiency, more and more companies and researchers are turning to nature not as a reserve of potential resources to be exploited but as the oldest R&D lab, harnessing the power of 3.8 billion years of nature's proven designs and solutions. Bioinspired Innovation Principles Bioinspired innovation is a technological approach that draws inspiration from nature to solve human design challenges. This approach preserves nature as an experienced engineer and a genius problem solver. It involves learning from and emulating nature's forms, processes, and ecosystems. There are several techniques and methodologies for embracing the bioinspired design approach. One of the key bioinspired design approaches is biomimicry, which emphasizes replicating living systems' solutions for specific functional challenges. Other approaches include bio-morphism, involving designs visually resembling natural elements, and bio-utilization, involving the integration of biological materials or living organisms in design and technology. These are the key principles that are currently steering the transformative wave toward bioinspired innovation. A Global Shift Toward Bioinspired Innovation Governments as well as the private sector are at the forefront of the shift towards bioinspired innovation. They are actively directing considerable funding and establishing several R&D centers to foster the integration of solutions inspired by nature. For example, the Pentagon's research and funding arm, the Defense Advanced Research Projects Agency (DARPA), has provided significant financial support for biomimicry research in the United States. This includes a $4 million contribution to AeroVironment for the development of a hummingbird-like aircraft prototype. In addition, Germany has over 100 public research institutions conducting biomimicry-related R&D projects. These networks have received a cumulative investment exceeding 120 million euros since 2001. France has also considered biomimicry as a key innovation area in its announced national ecological transition strategy. In 2014, it established CEEBIOS, a leading research center in biomimicry that aims to catalyze bioinspired and sustainable innovation. Several other countries are adopting comparable strategies. For instance, South Korea has the world's second-largest number of biomimicry technology patents, after the United States. South Korea estimates that biomimicry development will generate an economic value of around USD 62 billion and 650,000 jobs by 2035. This is projected to grow to $382 billion and create 2 million new jobs by 2050. Accordingly, biomimicry patents, scholarly articles, and research grants have expanded by more than 5 times since 2000. The number of scientific publications addressing bioinspired topics has steadily increased, with over 22,000 articles published between 2017 and 2019. Corporate Embrace of Biomimicry The private sector is also tapping into the power of nature, as many major corporations are actively exploring biomimetic solutions to address their business challenges. For example, in 2015, Ford collaborated with P&G and The Biomimicry Institute to improve adhesives and increase the recyclability of auto parts by studying the gecko’s sticky toe pads. Also, Unilever took inspiration from the Ice Structuring Protein (ISP), which allows fish to survive in freezing water, to create a healthier ice cream that doesn’t melt easily. As numerous biomimicry concepts have already demonstrated their market viability, more businesses are working to embed bioinspired concepts and approaches into their design processes. Real-World Business Applications Bioinspired solutions have led to many breakthroughs in various fields, from architecture to automotive. Nature-inspired concepts, designs, and models have proven to be a vital approach to solving our most challenging problems. Below are some of the real-world business applications for bioinspired solutions: Bullet Train - Beak of the kingfisher Japan is famous for its high-speed trains, which can reach speeds of up to 320 km per hour. However, traveling through tunnels at this speed can cause air pressure to build up, resulting in a sonic boom every time the train exits a tunnel. This can affect people living up to 25 km away. To address this, engineers took inspiration from the kingfisher bird's beak and its ability to smoothly transition between air and water. They designed a quieter train model that reduces noise, increases speed by 10%, and decreases electricity consumption by 15%. Swarm Logic technology - Honey bee communication Encycle, a technology company, has developed a building management system that mimics the communication system of bee colonies. This allows equipment and systems, such as HVAC, to integrate and operate more efficiently in response to changing conditions, such as outdoor temperature and building occupancy. As of November 2023, the swarm logic system has reported 135 million KWh in consumption savings and more than $19 million in energy cost savings at US sites alone. Kalundborg Eco-Industrial Park, Denmark - symbiosis The Kalundborg symbiosis is a pioneering example of industrial symbiosis. It mimics the beneficial interactions between various species within an ecosystem. Neighboring industrial facilities exchange resources and energy by-products, transforming one plant's waste into feedstock for others. The symbiosis has been operating for almost six decades and has proven to be a great success. It saves 3.6 million m³ of groundwater, 586,000 tonnes of CO₂, and recycles 62,000 tonnes of residual materials annually. Additionally, it contributes to annual bottom-line savings of 24 million euros. Eastgate Centre Building, Zimbabwe - mound-building termites The Eastgate Center uses techniques inspired by termite architecture to create a self-cooling system. This system requires 90% less energy for heating and cooling compared to similar-sized buildings. Additionally, the ventilation system used by the Eastgate Center costs only a fraction of traditional air conditioning systems. These are just a few examples of the many available applications for bioinspired solutions that are currently being tested and implemented. These applications are actively shaping our economy and driving innovation across various industries. Outlook A 2013 study by the Fermanian Business & Economic Institute (FBEI) estimated that bioinspiration could generate a total global output of $1.6 trillion by 2030. An additional $0.5 trillion could be generated from resources and pollution reduction. The study also estimated that bioinspiration would contribute $425 billion to the US GDP by 2030. Moreover, a recent study by BCG predicts that nature co-design will impact over $30 trillion in economic activity in the next 30 years, which is about 40% of the current global GDP. These figures highlight the significant potential for bioinspired innovation. As more businesses integrate these approaches and technologies into their internal processes, innovations and concepts will continue to emerge. Conclusion In conclusion, the intersection between biology and technology plays a crucial role in shaping the future of industries. Biomimicry and other nature-inspired concepts have demonstrated their capacity to provide diverse solutions and innovations. Moreover, given the unprecedented challenges facing our world today, it has been essential to redefine our relationship with nature. This will foster change and accelerate the shift towards bioinspired solutions. Nature has always ignited our imagination and creativity, and we have only begun to scratch the surface of its wisdom. 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The global debt pile is mounting at an alarming pace, with a stock of $305 trillion in 2023, recording a staggering surge of $100 trillion over the past decade, as the Institute of International Finance highlighted. The World Bank identifies the emerging risk of entering 'a fifth wave' of a debt crisis. This implies a threat to low-income countries, endangering their ability to fulfill the pledge of “Leaving no one Behind” in the journey towards sustainable development. The United Nations shaped this ambitious promise in 2015, aiming to fulfill it by 2030 and eradicate poverty and curb all forms of inequality. It is already halfway to 2030, and with the cascading crises that the world witnessed, from the outbreak of COVID-19 and the war in Ukraine to climate disasters worldwide, the financing needs of developing countries to counter the shocks are rising, as is their cost of debt service. “Countries are facing the impossible choice of servicing their debt or serving their people”. The United Nations Secretary,General António Guterres,July 2023 The Debt Trap: Soaring Poverty and Hunger Public debt is deemed “sustainable” when the government can fulfill its present and future payment commitments without requiring exceptional financial aid or facing the risk of default. The primary instrument creditors use to evaluate the risk of default in Lower-Income Countries (LICs) is the Debt Sustainability Framework (DSF) developed by the World Bank. This framework categorizes countries according to their capacity to repay their debt obligations, establishes threshold levels for specific debt burden indicators, and stress-tests scenarios in comparison to these thresholds. According to this framework, over 40% of low-income countries are already approaching debt distress (unsustainable) levels. There is a vicious circle between debt and achieving the Sustainable Development Goals (SDGs), where mounting debt puts a heavy strain on mobilizing public resources dedicated to investments in the economy and people’s well-being. In fact, around 3.3 billion people live today in countries that spend more on interest payments than on education, health, climate adaptation, and social protection, according to the United Nations. Source: UNCTAD 2022 Meanwhile, global hunger (Sustainable Development Goals 2) is soaring amid the dire economic effects of political conflicts and climate change, whereby the number of undernourished people has grown by as many as 150 million in the last 10 years. Ethiopia, for instance, where 4% of the global population is extremely poor, was already at high risk for debt distress, even before the pandemic crisis. Source: Sustainable Development Goals in the Debt Trap, June 2022, extracted from the World Bank Debt Sustainability Analysis, https://www.worldbank.org/en/programs/debt-toolkit/dsa. Unprecedented Record: Don’t solely blame the pandemic. Even before the cascading crises, the pandemic and the Russian War posed a major threat to advancing the Sustainable Development Goals. Moreover, the cost of debt servicing for countries eligible for international development assistance more than doubled between 2000 and 2019. (UNDESA, 2020). In 2022, 69 low- and middle-income countries made payments of $62bn on public debt, which means a 35% increase from 2021. On this front, the UN issued an alarming warning as global public debt reached a record of $92 trillion in 2022. According to the IMF, public debt as a ratio to GDP has soared across the world during COVID-19; the global average of this ratio in 2020 approached 100 percent, and it is expected to remain above pre-pandemic levels for about half of the world. Source: EIU Debt and Climate Change: Bidirectional Causality The vicious circle of debt is even more intertwined with the threat of climate change (Sustainable development goal 13), whereby countries that are most vulnerable to the climate crisis are also the ones on the frontlines of sovereign default. In fact, UNCTAD outlines that over 70% of current public climate finance takes the form of debt. Meanwhile, the UN Environment Programme estimates that the annual climate adaptation needed for developing countries could amount to $340 billion by 2030 and $565 billion by 2050. Today, around 60% of the poorest countries are already in debt distress or on the brink of it; among these are Sri Lanka, Ghana, Lebanon, and Zambia. The causality between debt distress and climate change is bidirectional. In developing nations, constrained governmental budgets pose a challenge: they hinder the ability to make investments needed for a climate-resilient recovery. Simultaneously, studies provide empirical evidence that the exposure of sovereigns to climate risks can impact credit ratings and debt servicing costs. Addressing this issue, the IMF empirically demonstrates that countries with higher resiliency to climate change shocks enjoy elevated credit ratings. The IMF also argues that the impact of climate change is disproportionately greater in developing countries, due largely to a weaker capacity to mitigate the consequences of climate change. African countries, the Middle East, and Latin America are the regions least resilient to climate change shocks. A possible way out Amid substantial financing requirements spanning over a wide range of countries, reminiscent of the levels witnessed during the 1980s debt crisis, a rising demand for debt restructuring is emerging. Structural fiscal reform The World Bank suggests long-term remedies such as ramping up economic growth, whereby the best way to escape a debt trap is “to grow out of it”. Growing out of debt can be done through improving business conditions, better allocation of resources, and healthy market competition to boost productivity. On the structural reform front, the WB stresses the importance of accelerating fiscal policy reforms through improving tax administration efficiency and broadening the tax bases in ways that support rather than impede long-term growth. That can be accomplished by improving tax compliance, debt management procedures, and public spending while strengthening the legal environment for debt contracting. DEBT RESTRUCTURING While fiscal consolidation and growth-oriented structural reforms have the potential to diminish debt ratios, they might not suffice for nations grappling with severe debt issues or the heightened risks associated with debt rollovers. In such instances, it may become imperative to undertake debt restructuring, which involves renegotiating the terms of a loan. For vulnerable middle-income countries, the United Nations proposes several urgent solutions to alleviate the ballooning debt; these encompass payment suspensions, longer lending terms, and lower interest rates. The G20 had several contributions on this front; they assisted low-income nations through the suspension of loan and interest repayments until mid-2021, known as the Debt Service Suspension Initiative (DSSI), and then through the Debt Service Suspension Initiative (DSSI). Typically, debt restructuring is employed as a measure of last resort due to its potential for considerable economic costs, reputational risks, and challenges in terms of coordination. Despite these challenges, when coupled with fiscal consolidation, debt restructuring can significantly decrease debt ratios by up to 8% or more over a five-year period, as noted by the IMF Debt Swaps Unlike debt relief, debt swaps come with conditions for external debt alleviation, necessitating the allocation of domestic funds to activities tied to the Sustainable Development Goals. These activities encompass health, education, child development, and environmental preservation. Debt swaps can take the form of equity investments (equity swaps), environmental activities (environmental swaps), or development activities (development swaps). Egypt is a salient example of a development debt swap; in 2001, the country signed an agreement with Germany to swap 50% of its debt amounting to 204.5 million euros to finance projects in the areas of poverty reduction, improving water and sanitation infrastructure, improving basic education, and environmental protection. A more recent example of development debt swaps is in 2017, when the Global Fund to fight Aids, Tuberculosis, and Malaria (GFATM) declared that Spain had signed agreements to withdraw 36 million euros of debt to the Democratic Republic of Congo, Cameroon, and Ethiopia. In return, the countries would invest a total of 15.5 million euros in health-related projects. Conclusion Amid ballooning inflation, the surge of interest rates, and sluggish growth, governments in developing countries are now burdened with alarming levels of public debt, forcing them to choose between paying debt service or investing in their nations. To mitigate the trade-off between “investments in debt and investments in people”, focusing on the reforms of global debt architecture (debt relief, restructuring, swaps, etc.) as well as finding innovative financing schemes is of utmost importance to prevent exacerbating poverty and “a lost decade of inaction”. Sources https://www.bloomberg.com/news/articles/2023-09-19/world-debt-surges-to-record-307-trillion-rises-as-share-of-gdp https://www.barrons.com/news/world-facing-5th-wave-of-debt-crisis-world-bank-chief-01665154807 https://unsdg.un.org/2030-agenda/universal-values/leave-no-one-behind https://www.actionagainsthunger.org/the-hunger-crisis/world-hunger-facts/ https://www.imf.org/en/About/Factsheets/Sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023 https://www.imf.org/en/Publications/fandd/issues/2020/09/debt-pandemic-reinhart-rogoff-bulow-trebesch https://www.imf.org/en/Publications/WP/Issues/2020/12/18/Feeling-the-Heat-Climate-Shocks-and-Credit-Ratings-49945 https://unctad.org/news/un-warns-soaring-global-public-debt-record-92-trillion-2022 https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023 https://link.springer.com/article/10.1007/s10584-022-03373-4 https://blogs.worldbank.org/voices/when-debt-crises-hit-dont-simply-blame-pandemic https://onlinelibrary.wiley.com/doi/pdf/10.1002/sd.2198 https://www.unescwa.org/sites/default/files/event/materials/ESCWA_Paper_Debt_Swap_for_Climate_and_SDGs_Finance.pdf
An increasing number of investors, consumers, and other stakeholders are demanding access to a comprehensive view of companies’ environmental impacts, along with climate-related risks. Companies that choose to report on their emissions usually only include information on their scope 1 and 2 inventories, thus excluding scope 3 emissions from their disclosures. However, given the mounting pressure from stakeholders and regulators, organizations may soon find themselves required to report on the full picture. Let’s take a look at a brief history of how the concept of emission scopes came to be and what they include, as well as regulatory trends related to scope 3 emissions. The GHG Protocol and emission scopes In the second half of the 1990s, both the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) had come to the same conclusion: there was a clear need for an international standard for corporate greenhouse gas (GHG) accounting and reporting. WRI senior managers thus met with WBCSD officials in late 1997 and agreed to launch a new initiative, the GHG Protocol. With a core steering group combining members of environmental groups (e.g., WWF and the Pew Center on Global Climate Change) and industry (e.g., Norsk Hydro and Tokyo Electric), the multi-stakeholder standard development process took place. In 2001, the first edition of the Corporate Standard was published. It has since been updated with additional guidance. The Corporate Accounting and Reporting Standard introduced the concept of “scopes” to help delineate direct and indirect emission sources. Scope 1 emissions refer to all direct GHG emissions, meaning emissions occurring from sources that are owned or controlled by the company. Scope 2 emissions refer to indirect GHG emissions from the consumption of purchased energy. Scope 3 emissions include all other indirect emissions. Scope 3 emissions aim to capture all indirect emissions up and down a company’s value chain. While all scopes were introduced at the same time, the Corporate Accounting and Reporting Standard focused on the first two. In order to help companies that wanted to account for GHG emissions across their entire value chain, the Corporate Value Chain (Scope 3) Accounting and Reporting Standard was published. The standard divides scope 3 emissions into 15 different categories: The figure below summarizes the concept of emission scopes by illustrating the entire value chain of an example company. [caption id="attachment_11228" align="aligncenter" width="613"] GHG Protocol, Corporate Value Chain (Scope 3) Accounting and Reporting Standard, p. 7[/caption] Companies are still lagging on emission disclosures While companies are increasingly choosing to measure and disclose their scope 1 and 2 emissions, most are still very much lagging when it comes to scope 3. In its 2022 edition of the Global Supply Chain Report, CDP (formerly known as the Carbon Disclosure Project, one of the most popular voluntary reporting frameworks) revealed that while 72% of CDP-responding companies reported operational emissions (Scope 1 and/or 2), only 41% reported emissions for at least one Scope 3 category. This is problematic, as scope 3 emissions usually account for the majority of a company’s total emissions. In a Technical Note published in 2022 (revised in 2023), CDP provides an analysis that highlights the crucial importance of scope 3 reporting: across all sectors, Scope 3 emissions account on average for 75% of total Scope 1+2+3 emissions in the sample. The organization also provides the breakdown by sector, as shown in the figure below. [caption id="attachment_11231" align="aligncenter" width="693"] CDP, Technical Note: Relevance of Scope 3 Categories by Sector, p. 6[/caption] Regulatory pressure The regulatory landscape is shifting towards more comprehensive disclosures. The International Sustainability Standards Board (ISSB), announced during COP26 in Glasgow, is one of the standard-setting boards of the IFRS Foundation. The ISSB’s standards provide a comprehensive global baseline for sustainability disclosure. In March 2022, it launched a consultation on two proposed standards for general sustainability-related disclosure requirements (IFRS S1) and climate-related disclosure requirements (IFRS S2). In October 2022, the ISSB unanimously voted to require company disclosures on the three GHG emission scopes, applying the current version of the GHG Protocol Corporate Standard as part of IFRS S2. In June 2023, the ISSB finalized and issued the standards. While not mandatory on their own, the ISSB is backed by groups such as the G7 and G20, and it works with jurisdictions on the regulatory adoption of these standards as well as to facilitate compatibility and interoperability. For example, the UK government announced in August 2022 that the ISSB standards would form a core part of the Sustainability Disclosure Requirements (SDR) regime it is working on developing. In July 2023, the International Organization of Securities Commissions (IOSCO) announced its endorsement of IFRS S1 and IFRS S2, calling on its 130 member jurisdictions (which regulate more than 95% of the world’s financial markets) to consider ways in which they might incorporate these standards into their jurisdictional arrangements. In the European Union, Directive (EU) 2022/2464, also known as the Corporate Sustainability Reporting Directive (CSRD), entered into force in January 2023. The CSRD aims to ensure that stakeholders have access to the needed information to assess the impact of companies on environmental, social, and governance matters and that investors are able to assess financial risks and opportunities related to climate change and other sustainability issues. It also broadens the set of companies that will now be required to report on sustainability, relative to previous regulations. The CSRD requires Scope 3 reporting (although smaller companies are exempt from this), and the first companies will have to apply the new rules for the first time in the 2024 financial year for reports published in 2025. In the United States, the Securities and Exchange Commission (SEC) unveiled in March 2022 a proposal that would require publicly listed companies to disclose their GHG emissions and any climate-related risks to their operations. Scope 3 reporting would be required if deemed material or if the company has set an emission target or goal that includes scope 3 emissions. The SEC was initially expected to issue its final climate risk disclosure rule in December 2022, but it pushed it back to the end of April 2023. In the same month, a former SEC commissioner revealed the rule would be delayed until the fall. Current efforts in the country also include bills introduced by the states of California and New York, which propose to further strengthen companies’ obligations to disclose their GHG emissions, including scope 3 categories. These are only a few examples, and given the global, interconnected nature of supply chains today, it is becoming increasingly urgent for companies that do not already report on their GHG emissions to prepare for the upcoming changes and take the necessary steps to ensure compliance. Organizations need to identify regulations relevant to their operations and familiarize themselves with the expected requirements. Finally, while one of the most frequent complaints relates to the complexity of scope 3 measurements and control, guidance from trusted organizations is available. We already mentioned above the Corporate Value Chain (Scope 3) Accounting and Reporting Standard, published by the GHG Protocol, along with a Technical Guidance for Calculating Scope 3 Emissions. Other helpful documents include, for example, the “Value Change in the Value Chain” guidance report, published by the Science Based Targets initiative (SBTi), Navigant and the Gold Standard, which provides best practices in scope 3 GHG management. SBTi also offers other helpful resources, such as sector-specific guidance for a growing list of industries. Sources: https://ghgprotocol.org/about-us https://ghgprotocol.org/sites/default/files/standards/ghg-protocol-revised.pdf https://ghgprotocol.org/calculation-tools-faq https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf https://ghgprotocol.org/sites/default/files/standards/Scope3_Calculation_Guidance_0.pdf https://cdn.cdp.net/cdp-production/cms/reports/documents/000/006/918/original/CDP-Supply-Chain-Report-2022.pdf?1678870769 https://cdn.cdp.net/cdp-production/cms/guidance_docs/pdfs/000/003/504/original/CDP-technical-note-scope-3-relevance-by-sector.pdf?1649687608 https://www.ifrs.org/groups/international-sustainability-standards-board/issb-frequently-asked-questions/ https://www.ifrs.org/news-and-events/news/2022/10/issb-unanimously-confirms-scope-3-ghg-emissions-disclosure-requirements-with-strong-application-support-among-key-decisions/ https://www.ifrs.org/news-and-events/news/2023/06/issb-issues-ifrs-s1-ifrs-s2/ https://sustainablefutures.linklaters.com/post/102ii0r/issb-publishes-final-versions-of-first-two-global-sustainability-disclosure-stand https://www.iosco.org/news/pdf/IOSCONEWS703.pdf https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en https://www.sec.gov/news/press-release/2022-46 https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/sec-climate-disclosure-rule-delayed-until-fall-former-commissioner-says-75479173?mkt_tok=NDkxLVZORy03OTAAAAGLgVcl3Tj3ONQ0yV5KNWsUb9y_Yyi8lDws_bmuDIz2YTafFx7BWBcN-hTG6X3Go4Tqt_p5bnykfLxlcDoCCw https://www.complianceandrisks.com/blog/esg-reporting-developments-in-the-united-states/ https://www.persefoni.com/learn/scope-3-reporting-challenges https://sciencebasedtargets.org/resources/files/SBT_Value_Chain_Report-1.pdf https://sciencebasedtargets.org/sectors
In today's fashion landscape, sustainability has become a powerful force, compelling brands to reassess their operations and present an eco-conscious image. As consumer demand for ethically sourced products grows, fashion companies are recognizing the need to adopt concrete measures for responsible practices. From sourcing materials to manufacturing processes, a comprehensive approach to sustainability is emerging, aiming to address the industry's environmental impact. The fashion industry's impact on global carbon dioxide emissions is substantial, accounting for 932 million metric tons, which is up to 10% of the total output. Additionally, it plays a significant role in generating one-fifth of the world's annual plastic production, amounting to 300 million tons. These figures highlight the pressing and immediate requirement to adopt sustainable practices within the industry. To ensure a prosperous and accountable future for fashion, a fundamental transformation towards sustainability becomes imperative. In our exploration of sustainable practices in the fashion industry, we touch upon the challenges it faces. To delve deeper into how innovative solutions, such as regulatory sandboxes, are shaping various industries, including fashion. This transformation should encompass environmentally and socially responsible approaches to sourcing materials, manufacturing processes, and ensuring fair working conditions and wages throughout the supply chain. Embracing Sustainability: The Global Surge of Ethical Fashion Amidst the thriving landscape of ethical fashion, the global fashion market is experiencing a notable transformation. As of 2022, sustainable clothing items have claimed a modest share of 4.3% in the market, increasing from 2.83% in 2017. This upward trend indicates a growing awareness and demand for eco-friendly fashion choices. Furthermore, the ethical fashion market has witnessed remarkable growth, achieving a substantial value of nearly USD 7.5 Bn in 2022, driven by a steady compounded annual growth rate (CAGR) of 6.5% since 2017. Looking ahead, projections suggest that the ethical fashion market will continue to expand, with a projected value of USD 11.2 Bn by 2027, growing at a notable rate of 8.1%. Beyond 2027, the journey is expected to maintain its momentum with an estimated CAGR of 8.6%, ultimately reaching an impressive value of USD 16.8 Bn by 2032. [caption id="attachment_10440" align="aligncenter" width="626"] Estimated value of the ethical fashion market worldwide from 2022 to 2027 (in million U.S dollars)[/caption] The market growth is driven by a surge in synthetic and regenerated materials, such as Tencel, a fabric made from sustainably sourced wood pulp, and innovative options like Pinatex, which is derived from pineapple fibers. These materials collectively contribute to this expansion with an impressive 50.9% share. Additionally, the organic segment is projected to exhibit high growth at a rate of 16.4% CAGR. Animal cruelty-free brands currently dominate the market, holding a 43.3% share, while eco-friendly brands are expected to grow rapidly at a rate of 10.6% between 2022 and 2027. In terms of regional dynamics, the Asia Pacific region takes the lead in the ethical fashion market, holding a significant 33.0% market share in 2022. Eastern Europe and South America are poised to emerge as the fastest-growing regions, with projected CAGRs of 12.5% and 10.3%, respectively. Driving Forces and Challenges: The Ethical Fashion Market's Journey Towards a Responsible Future The significant growth of the ethical fashion market is driven by several key factors. The rise of emerging markets, increased foreign direct investments, and a growing focus on sustainable fashion by consumers have all played a pivotal role in this expansion. Despite challenges, such as the high costs and the impact of reduced free trade, the global apparel market is increasingly aligning with ethical fashion, converging towards a shared vision of a responsible and eco-conscious future. One of the primary drivers behind this growth is the increasing global population. As the world's population continues to grow, the demand for innovative and sustainable fabrics used in apparel, automobiles, and home furnishings products is on the rise. This presents significant opportunities for companies in the ethical fashion market to capitalize on the growing demand for efficient and durable fabrics. However, the path to sustainability in the fashion industry comes with challenges. Integrating sustainable practices requires substantial investments, posing financial hurdles for businesses. Additionally, the complexities of reduced free trade need to be carefully managed to balance sustainability with global commerce. The war in Ukraine is also significantly influencing the industry, resulting in inflation and disruptions that have compelled companies to suspend or halt operations in the affected regions. Consequently, Consequently, well-known clothing brands such as H&M and Zara have been compelled to close stores and suspend their activities in Russia, leading to adverse effects on the market's growth. [caption id="attachment_10441" align="aligncenter" width="656"] Challenges faced by fashion executives to improve consumer perceptions of their company's sustainability credentials worldwide in 2022.[/caption] Emerging Trends: Recycling, Upcycling, and Storytelling for a Greener Future Amidst these challenges, there are several noteworthy trends that are shaping the ethical fashion industry. Recycling and upcycling have emerged as crucial practices to reduce waste. By recycling materials and upcycling discarded items, companies can significantly reduce their carbon footprint and minimize waste in the manufacturing process. For example, Rubymoon, a UK-based swimwear and activewear company, creates its products using fishing nets and plastic bottles from the ocean. Similarly, India-based social enterprise EcoKaari upcycles waste plastic into handcrafted fabrics, which are then used to make fashion accessories and utility items. Another trend gaining traction in the market is storytelling and customer education. Brands are increasingly transparent about their production and design processes, highlighting their commitment to ethics and sustainability. By highlighting good practices in sourcing and production, companies can build credibility and trust with consumers who prioritize eco-friendly choices. For example, RSPR, a Doha-based clothing manufacturer, educates consumers on eco-friendly and ethical fashion, emphasizing their use of recycled plastic bottles to create soft, antimicrobial garments. Leading Brands Driving Global Awareness In response to the growing demand for sustainability in the fashion industry, brands worldwide have embraced eco-friendly practices, highlighting the power of global awareness in promoting sustainable development. Companies that prioritize true sustainability are reaping positive results in their communities. Innovations in Sustainable Fashion Levi's excels as a prime example in this area with its impactful 'Buy Better, Wear Longer' campaign." This global initiative raised awareness among consumers, urging them to make conscious apparel choices while emphasizing Levi's commitment to producing durable clothing that lasts for generations. By collaborating with influencers like Emma Chamberlain, Furthermore, Levi's successfully engaged with the younger generation and amplified their sustainability message through media reach. Patagonia: A Model of Sustainability Another exemplar of sustainable practices in the industry is Patagonia. Moreover, Patagonia not only employs sustainable materials in its clothing but also empowers customers to repair their clothes instead of buying new ones. The company allows customers to return clothes in good condition for new merchandise credits. The pieces are then cleaned, repaired, and sold on the company’s Worn Wear platform. By encouraging customers to value and maintain their clothing, Patagonia fosters a culture of sustainability and responsible consumption. Overcoming Barriers to Sustainability Conversely, lack of access to data, metrics, and transparency around sustainability initiatives has been the primary barrier hindering change, often leaving retailers uncertain about the cost versus benefits. To embed sustainable practices seamlessly into their value chains, retailers require appropriate tools and measures, making sustainability a standard part of their business operations. Sustainable Materials and Packaging As companies prioritize reducing their carbon footprint, they are employing various approaches. Many are opting for recycled/sustainable raw materials and packaging, demonstrating their commitment to environmental responsibility in both upstream and downstream aspects. However, while 56% of companies are using more recycled/sustainable raw materials and 46% are using sustainable packaging, there remains a significant distance to cover before the industry fully embraces these vital elements as an integral part of their operations. The Future of Ethical Fashion The fashion industry is experiencing a profound shift towards sustainability, driven by increasing consumer demand for eco-conscious choices. With the industry's significant environmental impact, urgent and concrete measures are essential for a responsible future. Fortunately, the rise of ethical fashion has been remarkable, displaying a steady growth trend and a promising market value. Additionally, Recycling, upcycling, and storytelling are emerging as key trends, fostering a greener future. Leading brands, like Levi's and Patagonia, are setting a positive example by prioritizing sustainability and promoting responsible consumption. As we move forward, it is crucial for the fashion industry to embrace sustainable practices wholeheartedly, making them an integral part of their operations and ensuring a thriving, eco-friendly future for all. 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