REASON #2: RESOURCE CONSTRAINT
The other week, we talked about the number one reason for business to start thinking about sustainability. That is growing population. Today’s world population is approximately at 6.8 billion people (and counting) with 2 billion people in the emerging middle class.
So we have rising population, increasing living standard and higher resources demand to deal with.
As more people climbing up the middle class ladder consumer consumption also goes up. Higher consumer consumption puts more stress on the existing social and economical infrastructure threatening the supplies of food, natural resources such as fresh water, energy, wood and fish.
image: World Business Council for Sustainable Development – Vision 2050 [Click on image for larger view]
RESOURCES AT RISK
Forget about the demand for fossil-fuel based for awhile. Let’s just see where we get our resources from. Then you understand why we have a big problem.
OIL and GAS
Via McKinsey Quarterly:
Just four countries – Iran, Iraq, Saudi Arabia, and Venezuela hold some 50 percent of known oil and gas reserves. Nationally-owned companies now control 85 percent of them. Many of the key providers are highly exposed to broader political instability, which makes security of supply a major risk.
– emphasis added
Security of supply affects market pricing.
Source of materials include whatever nature provide to people and business. Fresh water, fish, food, energy and wood.
Demand vs. supply
According to Global Footprint Network:
In 2006, humanity’s Ecological Footprint worldwide was 17.1 billion hectares (gha); with world’s population at 6.6 billion people the average person’s Footprint was 2.6 global hectares. But there were only 11.9 billion gha of biocapacity available that year, or 1.8 gha per person. This overshoot of approximately 40% means that in 2006 humanity used the equivalent of 1.4 Earths to support its consumption. It took Earth approximately a year and four months to regenerate resources used by humanity (that’s us) in that year.
To put it in a plain language: We’re screwed! We’ve overdrawn our natural resources. Basically, we are in the red. In monetary language, we spend more than we can afford. We are in deficit.
In graphic, here’s what we’re looking at.
If we continue do business-as-usual, we could lose the Earth. We might have to relocate to Mars 🙂
graphic: Global Footprint Network
WATER: THE 40% GAP
One day, water will be trading like gold. Let’s face it, we can live without electricity. But we can’t live without water. The chart below shows the business-as-usual scenario that could end up with 40% gap in water resources if we do nothing.
India becomes the first country facing with water shortage. A US based company will start shipment of water in bulk within 6 to 8 months from Alaska to India. Circle of Blue reports that Sitka, a small town located on Baranoff island off Alaska’s southeast coast will sell the water to Alaska Resource Management for one penny per gallon.
What these risks mean for business is all business that have operations around the world either directly or indirectly will be affected.
At the same time, risks give the opening for a transformational change that can affect the upstream (supply chain) and downstream (consumers). The benefits include branding, market niche, risk reduction, cost savings, new source of revenues, new customers, etc.
The world is officially open for business that can offer the following:
– design of products that reduces energy use
– technologies that can improve resource productivity
– design of products that use less water use
– clean technologies
The potential is unlimited.
For business, sustainability is also about dealing with its own survival. Business need to find new business models and new ways to capture the world’s emerging middle class that scale at China-clock-speed and reduces the environmental impact at the same time.
This is it. We’re entering the time where business have the opportunities to reshape the market at a scale we have never seen before…