Sustainability at the Strategic Level: 7 Trends to Be Aware of
A client of ours recently asked us to help them think about scenario building in the context of sustainability. Scenario building walks an organization through possible future scenarios that could impact their business. It is designed to help them think through future market and economic trends and provide a framework to enable them to test assumptions and strategic directions so that they can remain flexible and adapt to their future market environment.
Scenario building takes into account projected trends, data, and information that point to the way that the business may be impacted 5, 10, 15 years down the line. Incorporating sustainability into this exercise is vital to the success and longevity of an organization, as it is no longer a fad but a way of doing business.
Below are some sustainability trends that organizations operating in the US will be faced with, and some related questions that you may want to ask yourself when developing your organization’s long-term strategy:
1. Rise in climate-related events. The cost of doing business as a result of the rise in climate-related incidents is increasing, as some companies are already noting. While the insurance industry is picking up some of the tab, it is also passing on the cost to businesses in the form of increased rates.
- How will climate-related events impact your future cost of doing business?
- What can your organization do to plan for potential interruptions in its operations?
2. Resource constraints. A National Intelligence Council report predicts an increase in demand for food by 35%, water by 40%, and energy by 50% by 2030. As the global population grows, resources - especially nonrenewable ones - will become increasingly scarce.
- How canyou alter existing products and services to reduce use of nonrenewable resources?
- What solutions could your organization provide that would address future constraints and
potentially create new revenue streams?
3. Increased product transparency and accountability. As consumers become more and more savvy about the impacts of their purchases, they are increasingly asking questions about the supply chain. Manufacturer take-back programs are becoming a requirement in countries such as the EU, with the extended producer responsibility (EPR) policy. While it is largely voluntary in the US, some states are also beginning to enforce it, and many manufacturers have voluntary take-back programs.
- What can you do to lessen the upstream and downstream impact of your products?
- Which of your product components or processes are currently not environmentally sustainable?
4. Quantification of environmental externalities by the private sector. Companies are being held accountable for the environmental damages that their products and processes cause. One simple example is the 2010 BP oil spill, where BP is responsible for close to $40 billion in fines, settlements and cleanup fees. Public companies are also being ranked based on their sustainability practices. The Dow Jones Sustainability Index, established in 1999, is one of the best-known sustainability rankings of public companies. To address this, companies are increasingly reporting on their sustainability actions, and are looking at the life cycle impact of their products.
- Has your organization determined and quantified the environmental impacts of your products
and services?
- Are you reporting on your sustainability initiative?
5. Green ICT (information and communications technologies). Energy use related to ICT is set to double by 2022 and triple by 2030. This concept encompasses computers and cell phones as well as smart grids, smart cities and smart houses.
- How can your organization link to this so that it is easier for consumers to reach you and make
purchases using technology that is being developed?
- Are you in a space where you can develop products and services to aid this trend?
6. Increase in walkable and bikable cities. As cities continue to grow and expand, there is an increase in the use of bikes as means of transportation, as well as desire for walkable communities. Bike commuting in the US has grown 47% from 2000 to 2011. Cities in the US are also noting the increased interest in walkable communities and beginning to plan accordingly.
- Is your business located in a place that is easily accessible via public transportation?
- How can you make it easier for those who live in the city and do not have a car to interact with
your organization?
7. Expansion of renewable energy and alternative fuels. According to a recent International Energy Agency (IEA) report, renewables are currently “the fastest-growing power generation sector and will make up almost a quarter of the global power mix by 2018”. An Ernst and Young study points to a fivefold increase in global annual clean energy investment from 2004 to 2012. In the US, renewable electricity generation has grown 62 percent since 2001, and in 2011 represented 12.7 percent of total U.S. electricity generation. Costs have been decreasing, and renewable energy is increasingly being used by individuals.
- What is the optimal mix of energy sources for your organization?
- What is the cost/benefit of switching to renewable energy today for increased stability in the
future?
The above is a brief introduction to each of these topics. I would encourage you to take a look at the trends that could affect your organization and delve deeper into the potential impacts so that they do not take you and your organization by surprise.