Sustainability vs. Inflation: 4 Game-Changing Trends

• Published date: 25 November 2022
• Subject Matter: Environment, Consumer Protection, Strategy, Energy and Natural Resources, Technology, Industry Updates & Analysis, Energy Law, Environmental Law, Consumer Law, Economic Analysis, Security
• Law Firm: Innovation Park
• Author: Ms Julia Vorontsova

As industries across the board grapple with rising costs, supply-chain issues, and economic uncertainty, sustainability goals have taken a back seat.

Or have they?

In today's post-pandemic reality, companies are realizing that innovative solutions are the only way to weather ever-increasing inflation.

It's not business as usual.

Companies must strike a balance between passing costs onto consumers and preserving operating margins. But how?

Efficiency efforts are changing the game.

Check out the following trends demonstrating the importance of sustainability amid inflation. Before we get into it, though, let's take a quick look at inflation.

INFLATION IN NUMBERS

US inflation rose from 1.4% in January 2021 to a record high of 9.1% in 2022. The European Union's rate reached 7.8% in March 2022, while the UK hit a 30-year high of 7% in the same month.

While CEOs deal with supply chain bottlenecks, shortages of raw materials, and ballooning input costs, consumers remain wary.

The average cost of living worldwide has increased more in the previous 18 months (since 2021's first quarter) than it did in the preceding five years combined. According to the International Monetary Fund, food and energy are the primary drivers behind this inflation.

Since 2021, average inflationary contributions from food alone surpassed overall median inflation from 2016 to 2020. This means food inflation has affected global living standards at the same detrimental rate as inflation for all consumption in the five-year period before the pandemic.

Energy costs paint a similar picture both directly and indirectly through rising transportation costs. Prices are rising in other categories too, but the average rate varies across countries.

Nonetheless, global inflation continued to climb in July 2022, with energy-related numbers easing only slightly. Food rates only increased-consistent with the estimation that worldwide energy prices have been passed onto consumers quicker than increased wholesale food prices.

The IMF's latest World Economic Outlook projects inflation in emerging markets and developing economies to reach 9.5% and 6.6% in advanced economies. Central banks have already hiked up interest rates, a trend likely to stick in 2023.

Today's economic climate is the result of certain trends, including:

• Robust demand growth post-pandemic, as global industrial activity rebounded
• Supply chain bottlenecks resulting in limited availability of products and materials, in turn driving cost...