Tom Delay, Chief Executive of the Carbon Trust, explores why putting sustainability at the heart of business is the only option for businesses to succeed in a world where consumers expect more and where resources are scarce and expensive.
Five years ago the world’s economy went into shock as Lehman Brothers filed for bankruptcy. The resulting global economic crisis was driven by the greed of loosely regulated financial institutions, governments seeking short term popularity and the unhealthy relationship between the two. It has resulted in unsustainable levels of debt in some major economies with a period of austerity prescribed to restore balance within a decade, although the scars may last far longer.
But a more fundamental risk to our long term economic development lies in the rapidly expanding use of our scarce natural resources, combined with the planet’s ability to cope with the multiple impacts of their use. We know that we are living well beyond our means, drawing on natural resources at a rate that we cannot sustain. Just as we have accumulated debt priced too cheaply, so we have built economies with resources priced too cheaply.
Whichever basic need we consider, from warmth to mobility to food, today’s solutions are hugely inefficient – in the same year the Lehman Brothers went under, the world was using resources at a rate 50% faster than it can renew. And as our growing population, expected to reach nine billion by 2050, consumes more, these strains on our natural capital will become even more acute.
The inevitable conclusion of this is a resource crunch. It means we urgently need to find new methods of production, address wasteful consumption and develop innovative business models that put sustainability at the heart of business operations. But a recent survey of global business leaders shows that while awareness of a pending resource crunch is high, most businesses see this as a risk to be managed rather than as a new commercial opportunity. Few see it changing the nature of the business they do today.Tellingly we also found that only 13% of board directors are remunerated for achieving sustainability targets.
The resource war will bring winners and losers. Take water. Already we are seeing parts of Texas in drought with reports that 30 communities could be dry by the end of the year. By 2050 the OECD predicts that the world's demand for water will grow by 55%. Competition between water users and nations demanding water resources will escalate. And yet our research has shown that only one in seven businesses have a target to reduce water use.
In our work with businesses all around the world we have found two distinct behaviours when it comes to sustainability. Think of the 19th century science experiment with frogs and boiling water. Most businesses are treading water on the issue of sustainability as the temperature rises. They won’t move until the issue bites them hard. Our research suggests that they are discounting the impacts of sustainability on their business well into the future, beyond the time horizon of most shareholders or the CEO’s likely tenure.
A few, the jumpers in the frog analogy, are moving now. They anticipate the danger and see a way out.The first step they take is to look inside their business and map out the resources used in the products and services that they provide. The insight gained usually highlights simple cost saving measures to improve efficiency and resource use. But incremental improvements that once seemed ground breaking can now look like greenwash, damaging reputations and doing little to ensure competitiveness and survival.
True leaders go further and take a deeper look at resource use to drive a far more fundamental business change. These companies are at the cutting edge, redesigning products and services and their business models to minimise the use of resources that were once plentiful and cheap but are increasingly scarce and costly. Interface, the world’s largest maker of carpet tiles, is an example of a company putting sustainability at the heart of business strategy. It’s not being done as an add-on but is core to the future success of the business. Dyson, through its focus on designing out inefficiency from the start, is another.
While I understand it’s hard to challenge the status quo before the platform is burning, the alternative can be harder still. Just think how many of the high street names that have recently failed could have survived had they anticipated, not just reacted, to the onslaught of the internet. A new tsunami of change will result from the resource crunch with less reliable access to cheap land, energy, water and materials as regions of the world and business supply chains become resource stressed.
A golden age of sustainability lies in waiting. For as we slowly recover from the debt crisis, businesses that have been hoarding capital are now looking to invest once again in their future. But that future can’t just be more of the same. Business face a world where consumers will expect more but resources will be scarce and expensive. This is a huge opportunity to innovate. Successful businesses will be sustainable investments, resilient to the resource crunch, but they will also be good businesses that appeal to environmentally conscious consumers. They will have sustainability inside.