The way we do business impacts upon the world around us. It is becoming increasingly clear that the converse is also true: the state of the world around us affects the way we do business.
In the Expect the Unexpected study, KPMG analyses 10 sustainability ‘mega forces’, which will impact upon every business in the coming two decades.
The report examines how these global forces may impact upon business and industry, and calls on business and policymakers to work more closely, in order to mitigate future business risks and act on opportunities.
These mega forces are all interconnected, and are all related to sustainability issues.
Ten global mega forces that will affect how you do business:
- Climate change: impacts directly on all nine other mega forces.
- Energy and fuel: fossil fuel markets will become unpredictable and volatile because of higher global energy demand, uncertainty in supply chains and changes in the pattern of consumption.
- Material resource scarcity: as developing countries rapidly industrialise, global demand for material resources will increase.
- Water scarcity: it is predicted that by 2030, the global demand for fresh water will exceed supply by 40%. Businesses will become vulnerable to water shortages, declines in water quality and water price volatility.
- Population growth: the global population is predicted to be 8.4 billion by 2032, placing pressure on ecosystems and the supply of natural resources, including food, water, energy and materials.
- Wealth: the global middle class is predicted to grow by 172% by 2030.
- Urbanisation: by 2030, most of the global population will live in urban areas.
- Food security: the global food production system will come under increasing pressure from mega forces including population growth, water scarcity and deforestation.
- Ecosystem decline: this will make resources scarcer, more expensive and less diverse.
- Deforestation: forested areas will decline by 13% by 2030.
With the cost of environmental impacts on businesses doubling every 14 years, KPMG reports that business should expect increases in external environmental costs as well. The Expect the Unexpected study found that these external costs are not reflected on a balance sheet, because they are often non-monetary, such as the cost of pollution, and are borne by individuals or society at large.
Michael Andrew, Chairman of KPMG International, said: “We are living in a resource-constrained world. The rapid growth of developing markets, climate change, and issues of energy and water security are among the forces that will exert tremendous pressure on both business and society”.
“We know that governments alone cannot address these challenges. Business must take a leadership role in the development of solutions that will help to create a more sustainable future. By leveraging its ability to enhance processes, create efficiencies, manage risk, and drive innovation, business will contribute to society and long-term economic growth,” he says.
The study states that the resources that business relies upon are becoming more difficult to access and more costly. As patterns of economic growth and wealth change, strain on infrastructure and natural systems will increase. Physical assets and supply chains will be affected by the unpredictable results of a changing climate, and business can expect an ever more complex web of sustainability legislation and instruments.
It all sounds pretty grim, but the report goes on to insist that to manage risks, businesses must use a systems thinking approach to address the ways these mega forces relate to each other.
Some opportunities arise from these challenges: for example, cities will require extensive improvements in infrastructure including construction, water and sanitation, electricity, waste, transport, health, public safety, internet and mobile phone connectivity. There is scope for business innovation here.
To address the needs of a global growing population, there is also the opportunity to innovate and create jobs and new businesses. The study recommends that:
- Businesses should turn strategic plans into ambitious targets and actions for sustainable supply chain management
- Businesses should seek collaboration with other business partners on sustainability issues
- Governments should increase collaboration with the private sector.
Are you interested in finding out more about systems thinking? SBN is launching The Big Shift, a system innovation framework developed by our partner Forum for the Future at Project NZ, our 2014 Conference.
The Big Shift is already used by global brands like Nike, Unilever and Marks & Spencer. The model uses simple, practical steps to map problems, identify solutions and embed change. At SBN we will be using this approach in our four work streams: Smart Transport, the Circular Economy, Social Value and Food Systems. Contact us to find out more or get involved.