Net zero and greenwashing
Sustainability trends will continue in 2023, and businesses and consumers will increasingly prioritize transactions with vendors who share their values. Focus areas include decarbonization, aggressive net zero targets, and a shift toward clean technology.
However, as more companies make green pledges, they can expect increased scrutiny from investors and regulators on the lookout for “greenwashing.” “Greenwashing” is the term used to describe when companies make misleading, unsubstantiated, or outright false claims about the sustainability of their products and environmental efforts.
Companies will need to be able to provide tangible evidence they understand the risks from greenhouse gas emissions and are making real steps in their clean energy or pollution reduction efforts.
Exploring a circular economy
With our current economy, there is concern about how material is extracted from the Earth, made into products, and eventually thrown away as waste. A circular economy aims to minimize or prevent waste from occurring in the first place by trying to keep materials and goods in circulation for as long as possible.
As inflation and supply chain issues continue to limit access to raw materials, companies will look to a circular economy as a way to ensure access to materials. In fact, the selling of second-life products (products reclaimed from first-time customers) is already generating new revenue streams for some companies. According to the World Economic Forum and Ellen MacArthur Foundation, recycling, reusing, and remanufacturing could unlock $1 trillion in wasted resources by 2025.
A circular supply chain provides companies with many other benefits, including being able to maintain reliable supplies during inflation, reducing waste and emissions, and keeping new competitors at bay. By reducing waste and emissions from primary material production, circular business practices can also assist industries in reaching net zero.
Metaverse to enrich the customer experience
In its top strategic trends for 2023, Gartner predicts that two in five large companies will invest in the “metaverse” — a virtual space created by the “convergence of virtually enhanced physical and digital reality.”
The metaverse draws on a collection of technologies, including Web3 (a decentralized, next-generation internet based on blockchain), virtual and augmented reality, and digital twins to enrich the customer experience, enable a virtual product marketplace, and collect customer data.
B2B businesses can benefit from the trend too. Consider a manufacturer that buys new equipment parts. The current process involves browsing a physical brochure or electronic PDF. By using the metaverse, users could test their products virtually at a lower cost. For instance, plant owners could create a digital twin of a factory and test how new systems interact with the existing environment.
The metaverse can also reimagine the workspace. Gartner predicts these environments will account for 30% of investment growth by enterprises through 2027.
In preparation, companies are appointing chief experience officers (CXOs) to incorporate the metaverse into their business strategy.
Changing statutory and regulatory landscape in 2023
Enterprise companies should also be aware of amendments and changes to state and federal statutes and regulations in 2023, some of which are known. Others being enacted in 2023 will require companies to be nimble in order to deal with consequences for the business.
- Transactions involving cryptocurrency or other digital assets. States are expected to begin amending their state commercial laws to adopt the amendments to the Uniform Commercial Code dealing with emerging digital technologies.
- Personal data laws. Companies that collect personal data should be prepared to comply with new consumer privacy laws that will go into effect in 2023 in Connecticut, Colorado, Utah, and Virginia. Extensive amendments to California’s data privacy law will go into effect as well. A federal consumer privacy law has been introduced in Congress which also bears watching.
- Investing and ESG. States that have passed or proposed bills prohibiting state pension funds from investing in socially responsible companies. Other states, in contrast, are encouraging investments in companies with ESG commitments.
- Board diversity. Several states have already passed or proposed laws requiring certain public companies to report on the diversity of their boards, to have a diverse board, or to report on the reasons for not having a diverse board.
- Inflation Reduction Act. Beginning in 2023, a provision of the Inflation Reduction Act imposing a 1% excise tax on the repurchases of corporate stock by public companies will go into effect.
- Beneficial ownership reporting. Companies should start preparing for the beneficial ownership reporting requirement imposed by the federal Corporate Transparency Act. Although reporting does not begin until 2024 — and many large corporations will qualify for an exemption — businesses still should familiarize themselves with the CTA and the regulations implementing the Act to ensure they are exempt and to determine whether any subsidiaries may be required to file a report.
- Delaware General Corporation Law amendments. Companies incorporated in Delaware should monitor the annual amendments to the Delaware General Corporation Law. Each year these amendments give corporate management the opportunity to take actions they consider beneficial. For example, the 2022 amendments provided an option to limit the personal liability of executive officers under certain conditions and to purchase and maintain D&O insurance by or through a captive insurance company. In 2023, the Delaware legislature may provide further beneficial opportunities.
A rapidly shifting society has challenged predictive norms, and organizations are increasingly relying on data, artificial intelligence, and predictive analytics to understand what’s coming next and inform decision-making.
Using these insights and determining what works for your company today and what will be required to ensure it thrives tomorrow, is an unprecedented challenge. But for businesses that understand the latest trends, developments, and services, there is ample opportunity and room for growth.
As you navigate 2023, CT Corporation is dedicated to helping your business stay compliant so you can focus on the year ahead. If you want to learn more, contact a CT Corporation representative or call us at 855-316-8948 (toll-free US).