Reimagining Sustainability: A Systems Approach for a Resilient Future
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Rachel A. Meidl, “Reimagining Sustainability: A Systems Approach for a Resilient Future” (Houston: Rice University’s Baker Institute for Public Policy, August 22, 2024), https://doi.org/10.25613/VZZG-QA38.
This article is also featured in Energy Insights, which reflects a sample of ongoing research across the Center for Energy Studies’ diverse programmatic areas, all addressing the ever-evolving energy challenges across Texas, the U.S., and the globe. Read more from the inaugural edition.
Sustainability in Focus
In an era where the imperatives of sustainability are often confined to the narrow corridors of climate action and carbon metrics at a specific site or use rather than the entire supply chain, there is a pressing need to expand our horizons. We stand at a pivotal juncture where the traditional paradigms of industry and governance must be reimagined. This vision calls for a holistic approach that interweaves the intricate tapestry of environmental integrity, social equity, and economic vitality across the entire supply chain and life cycle of an energy system. We are beckoned to pioneer a transformative path that not only mitigates emissions more broadly than those that are just carbon-related but also fosters resilience, cultivates innovation, and propels us toward a truly sustainable future.
Even though there has recently been increasing discussion about corporations backing away from environment, social, and governance (ESG) investing, this does not speak to broader trends and efforts on sustainability.[1] To begin, ESG and sustainability are not the same, despite many groups using them interchangeably.[2] Rather, sustainability is complex and must be approached from a systems-level that incorporates environmental, socioeconomic, and commercial perspectives to foster lasting Pareto-improving gains. This is a reality that many firms are beginning to internalize, which will drive them to manage their sustainability efforts differently going forward.
Trends suggest that sustainability will remain a dynamic and critical area of focus in 2024 and beyond, presenting both challenges and opportunities for businesses, investors, and policymakers. The current milieu — characterized by persistent supply chain constraints, escalating geopolitical discord, heightened concerns about energy security, growing focus on nearshoring and protectionism, ongoing shifts in the global economic order, multidimensional energy and material transitions, and acute waste issues — has catalyzed a greater emphasis on resilience measures, sector-specific reporting frameworks, and enhanced product stewardship across life cycles. These developments, among others, are propelled by a combination of regulatory mandates and consumer advocacy, signaling a pivotal shift in the operational and governance paradigms of modern enterprise. While climate change and carbon emissions remain urgent issues that demand action, a narrow focus that fails to acknowledge the interdependency or importance of other factors across supply chains can create dangerous blind spots. Carbon tunnel vision fails to adequately address energy access, reliability, and security, and it can lead to neglecting other critical issues, such as loss of biodiversity, resource depletion, affordability of goods and services, and social inequalities.
Global Governance for Climate and Economy
The Group of Twenty (G20), an intergovernmental forum, addresses key issues such as international financial stability, climate change mitigation, and sustainable development, and the group plays a crucial role in shaping global policies. The Think20 (T20) operates as the G20’s ideas bank, gathering and disseminating analyses by think tanks with a goal to inform the G20 negotiations and final declarations. It is generally recognized that G20 policy declarations can pose challenges for developing countries and should strike a balance between global economic interests and the specific needs of developing countries. As such, one of the three core priorities for the G20 in 2024, hosted by Brazil, is “energy transition and sustainable development in its social, economic and environmental aspects.”[3] Against this backdrop, the T20 has established six task forces to examine the core priorities.[4] Policy recommendations cover a range of issues, including:
- Enabling the bioeconomy, circular economy, and role of critical minerals.
- Promoting skill development for communities and workforces of the future.
- Fostering access to information, public participation, and justice in energy transitions.
- Integrating biodiversity and sustainable food systems.
- Furthering trade and finance through nature-based investments.
- Developing solutions in the Global South.
Similar priorities have emerged in the Conference of the Parties (COP) proceeding, where the alignment of views between developed and developing nations regarding energy transitions and sustainability remains a critical point of discussion. The path toward sustainable energy and material transitions overlooks the unique pace and trajectory that will be faced by different regions of the world given varying stages of economic development, distinctive natural resource endowments, socioeconomic conditions, geopolitical circumstances, and other factors. The vision of COP is to achieve a sustainable future, yet there is minimal application of systems-level sustainability because climate action and emissions reduction are the primary points of emphasis. Sustainability, if not managed in an equitable and realistic way, can produce unintended consequences that exacerbate inequalities, trigger rebound effects, and shift burdens across global systems.
Plastics: Demand Increases Along With Interventions To Address Pollution
The plastics industry will remain an important player in global manufacturing, with 2024 and 2025 providing opportunities for growth. A key element of this growth in the plastics industry is projected to come from the increasing demand for high-performance polymers in various sectors, such as automotive, aerospace, energy, and electronics. Despite the continued demand for plastics, the industry is an ever-evolving space that is increasingly facing public pressure to reduce carbon emissions and adopt more sustainable practices in the production, use, and disposal of plastic items. In 2024, dozens of policies at the state, federal, and international levels have been filed on stewardship, extension of producer responsibility, recycling content mandates, regulation of plastic products, right-to-repair, or the role of ACM recycling as a circular strategy.[5]
A legally binding instrument on plastic pollution is in the final stretch in 2024. Ongoing efforts in the negotiation of the U.N. Global Plastics Treaty aims to be international in scope and address the full life cycle of plastics, including design, production, and disposal.[6] Intergovernmental Negotiating Committee (INC) meetings will continue throughout 2024 with the treaty finalized and adopted by participating countries in 2025 during the conference of the plenipotentiaries.
The market for recycled plastic has become progressively significant in recent years as more states, brands, and private industries have adopted initiatives to reduce waste by encouraging recycling and by manufacturing products from recycled materials. As these initiatives continue to expand, so will demand for recycled plastic. ACM has the potential to play a role in the shift to a circular economy by diverting hard-to-recycle plastics from landfills and incinerators, and by filling an unmet demand for high-quality plastics that can be processed in predictable, controlled, and regulated processes with precise operating parameters (Figure 1).[7] However, ACM raises a number of concerns, including life cycle impacts, social equity, environmental justice, and potential competition with traditional mechanical recycling. The merits of ACM will continue to be debated while multisectoral groups throughout the INC negotiation cycle work to develop verifiable, measurable, and auditable guidelines for the responsible production of ACM to inform the outcome of the treaty.[8]
The National Academies of Sciences, Engineering, and Medicine recently established the Roundtable on Plastics Committee.[9] The committee’s aim is to examine systemic solutions across each stage of the plastic life cycle and examine interventions in plastic production, product and material design, waste management, environmental and health impacts, and data collection, management, and modeling to understand the complexity of issues in reducing plastic waste. Throughout 2024–25, roundtable committee members will deliberate these issues and develop workshops and consensus studies that offer an opportunity for separate, ad hoc study committees to provide in-depth analysis and advice for the policy and research communities and the broader public.
Figure 1 — Common Plastics Without Commercial Recovery Solutions, Typically Sent to Landfill
![CES Energy Insights - Meidl - Figure 1.jpg](https://www.bakerinstitute.org/sites/default/files/2024-08/Meidl-Figure01.png)
Life Cycle Management Will Become Foundational to Decision-Making
Industries and investors face enormous uncertainty in the year ahead. Throughout 2024 and beyond, the demand from customers, investors, and regulators requiring traceability and transparency in supply chains and product sustainability information across life cycles will gain momentum. In the EU alone, the Corporate Sustainability Due Diligence Directive will require certain businesses to collect and analyze supply chain data across a range of ESG factors. Additional supply chain sustainability regulations are also coming in 2024, such as the EU Green Claims Directive.
Life cycle assessments (LCA) are becoming essential in decision-making while the expansion and appropriate scoping will grow in importance as it is integrated into mainstream business strategy and financing decisions, and as it continues to reinforce and justify major policy decisions at the national and global levels. For instance, LCAs underpin the implementation of the U.S. Department of Treasury’s eligibility for receiving certain energy tax credits under the Inflation Reduction Act, is under consideration in the U.N. Global Plastics Treaty, and ESG investments continue to be rationalized with narrow LCA interpretations. Altogether, these underscore the significance of life cycle solutions to manage the growing complexity and scope of sustainability disclosures. Failure to contextualize, properly scope, and communicate LCAs have led to gross misinterpretation by decision-makers and the public, resulting in misguided policies that continue to create blind spots and shift risks.[10] Throughout 2024 and into 2025, LCAs will face scrutiny over narrowly applied focus on climate and emissions with boundaries not representative of the full life cycle, inconsistent scope, data quality, and temporal and regional data sets that yield unrepresentative results. More attention will be given to expanding LCAs to a wider range of environmental impacts as well as understanding the interplay of social and economic dimensions.
ESG and Sustainability Reporting Frameworks
Throughout 2024 and 2025, companies will grapple with persistent challenges related to interpreting and adhering to divergent climate and sustainability disclosure and reporting mandates while balancing legal obligations, investor expectations, and shifting global standards. Legal challenges have prompted the U.S. Securities Exchange Commission (SEC) to pause implementation of climate-related disclosure rules.[11] California enacted two significant climate-related disclosure laws that go beyond SEC’s proposal, mandating disclosure of direct (Scope 1), indirect (Scope 2), and value chain (Scope 3) greenhouse gas emissions as well as disclosure of climate-related financial risk.[12]
In Europe, from 2024 the Corporate Sustainability Reporting Directive (CSRD) will require certain businesses to disclose and assure their sustainability information. CSRD considers all ESG disclosures to be material unless explicitly stated otherwise, constituting an enormous inflow of sustainability data requiring limited assurance within a compressed timeframe. Meeting the growing demand for ESG assurance is complicated by a lack of skilled experts available to meet the increasing needs.
The objective of both the European Sustainability Reporting Standards and the International Sustainability Standards Board (ISSB) is to develop sector-specific standards that recognize the distinct ESG challenges encountered by various sectors. The European Commission has postponed the deadline for sector-specific standards from June 2024 to June 2026, while the ISSB is persisting in its efforts to establish these standards. Meanwhile, firms will continue using sector-specific reporting frameworks, such as Global Real Estate Sustainability Benchmark (GRESB), the Sustainability Accounting Standards Board standards, and the U.N. Principles for Responsible Investment, alongside the CSRD and ISSB. As ESG reporting and sustainability regulations gain complexity and jurisdictional reach, navigating the intricacies of compliance is becoming an exercise in adaptability. Entities are required to implement extensive changes to operations, aligning with edicts that emphasize accountability and transparency. These adjustments extend beyond mere reporting; they are reshaping business models, supply chains, and internal governance structures.
What Is Next?
Sustainability as a framework is not directly connected to financial markets. It is bound by the principles of managing resources that aim to provide ecological, social, and economic equilibrium while recognizing there are trade-offs across the three domains. Choosing whether to focus attention and resources on ESG issues more narrowly, or on sustainability more broadly is not just a question of perspective; it is also a question of intention. Deeper analysis of the shortcomings and uncertainties associated with conflicting reporting requirements will be needed in 2024 and beyond, including how they align with a systems-level perspective of sustainability across the commercial, financial, socioeconomic, and environmental vectors. Moreover, market design, policy, and innovation will each play a pivotal role in connecting and strengthening each of these vectors in ways that deliver systems-level sustainability.
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Notes
[1] See, for example, Nicole Goodkind, “ESG Investing Is Dying on Wall Street. Here’s Why,” CNN, October 23, 2023, https://www.cnn.com/2023/10/23/investing/premarket-stocks-trading/index.html.
[2] Rachel A. Meidl and Kenneth B. Medlock III, “The Pride and Prejudice of Sustainability: Rethinking Sustainability from a Systems Perspective” (Houston: Rice University’s Baker Institute for Public Policy, November 8, 2023), https://doi.org/10.25613/20CH-3Z48.
[3] Foundation 20, “Political Year: G7 and G20,” https://foundations-20.org/political-year/.
[4] Meidl is a member of T20 Brasil’s Task Force 02: “Sustainable Climate Action and Inclusive Just Energy Transitions,” on the subtopic, “2.1: Fostering Sustainable, Inclusive, and Just Energy Transitions” (https://t20brasil.org/en/tf/2/tf02-sustainable-climate-action-and-inclusive-just-energy-transitions).
[5] Marissa Heffernan, “Ten EPR Bills Introduced in 2024 So Far,” Resource Recycling, last modified March 13, 2024, https://resource-recycling.com/recycling/2024/03/01/ten-epr-bills-introduced-in-2024-so-far/; Megan Quinn, “Tracking the Future of US Recycling Policy in Congress,” Waste Dive, last modified March 13, 2024, https://www.wastedive.com/news/tracking-the-future-of-us-recycling-policy-in-congress/570778/; Maria Rachal and Quinn, “Massachusetts Advances Plastic Bag Ban, Lawmakers Consider Packaging EPR,” Packaging Dive, June 24, 2024, https://www.packagingdive.com/news/massachusetts-plastic-bag-ban-packaging-epr/719617/; Rachal, “Packaging EPR Compromises Met with Apprehension and Hope,” Packaging Dive, May 29, 2024, https://www.packagingdive.com/news/extended-producer-responsibility-circularity-caa-american-beverage-recycling-partnership-upstream/717177/; and Matt Crawley, “Plastics and Advanced Recycling: Legislation to Watch in 2024,” MultiState, February 20, 2024, https://www.multistate.us/insider/2024/2/20/plastics-and-advanced-recycling-legislation-to-watch-in-2024.
[6] “Global Plastics Treaty,” Plastic Oceans International, https://plasticoceans.org/global-plastics-treaty-intergovernmental-negotiating-committee/.
[7] Figure 1 appears in Paula Luu et al., “Assessing Molecular Recycling Technologies in the United States and Canada,” Closed Loop Foundation, 2021, https://www.closedlooppartners.com/foundation-articles/assessing-molecular-recycling-technologies-in-the-united-states-and-canada/.
[8] Meidl is a science and policy expert for the Ocean Plastic Leadership Network, providing strategic input and guidance in the cross-value chain development of “Responsible Production Guidelines for Progressive Advanced/Chemical/Molecular Recycling of Plastics” to help inform the ongoing negotiations for the global plastics treaty.
[9] Meidl is a member of The National Academies of Sciences, Engineering, and Medicine Roundtable on Plastics Committee whose multi-sectoral forum examines issues associated with national efforts to reduce plastic pollution across all aspects of the life cycle. The goal is to pave the way for a sustainable circular economy for plastics.
[10] Life cycle assessments (LCAs) underpin Section 45V of the IRA but is limited to lifecycle carbon intensity from well-to-gate. Basing the credit solely on lifecycle carbon intensity and disregarding other relevant verifiable life cycle insights across the actual cradle-to-grave or cradle-to-cradle (e.g., water use and waste management) encourages preselecting presumed clean hydrogen winners. For instance, the availability of water (which is used as a feedstock for electrolyzers), along with water quality, water treatment, and desalinization in some locales. Understanding the administrative regimes that govern water use, rights, jurisdiction, etc. could all be factors that impede the success and sustainability of green hydrogen over time. This is especially true in areas of water scarcity where competition over resources for food production would be exacerbated. Aligning with the principles of sustainability, a true lifecycle approach from an emissions perspective should capture upstream and downstream supply chain activities, including the mining, processing, and transportation of minerals used in solar panels, wind energy, and electrolyzers. LCAs should also take into account the supply chains of natural gas and coal for other hydrogen production methods, including transportation-related emissions and any capture and storage of emissions of hydrogen production. While an emissions profile is important, it does not by itself translate to sustainability unless a broader set of environmental, social, and economic metrics are captured, assessed, and verified.
[11] Securities and Exchange Commission, “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” April 12, 2024, https://www.sec.gov/files/rules/other/2024/33-11280.pdf.
[12] S.B. 253, Reg. Sess. (Ca. 2023), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB253; S.B. 261 Reg. Sess. (Ca. 2023), https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB261.
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