Fragile earth

Share:

The concept of scarcity is fundamental. It is rooted in the environmental realities of the planet, ruled and limited by entropy and ecology.
 
Adaptive businesses can do more with less and enable their customers to do more with less as well. This does not just add a real and immediate commercial advantage, it can also position the company as a leader which helps to builds its brand among environmentally and socially-conscious consumers.

Focus on...

  • Rising consumption of natural resources

  • Resource scarcity, increased costs and volatility

  • Environmental constraints

For more on Fragile Earth, including climate change and biodiversity loss, see Forces for Change

Share:

Rising consumption of natural resources

Globally, we take 20% more resources than the earth can naturally replenish. If we continue on this ‘business-as-usual’ path, by 2050 we would need 2.5 times the natural resources of earth to support a population of 9 billion people. [i]

Number of planets required to support global consumption levels under business as usual (1970 – 2050)

Source: Footprint Network: Humanity's ecological footprint and biocapacity through time (global hectares per capita), 2010

The OECD estimates that by 2030, 3 billion more people will join the middle classes. The positive trend towards increased economic-wealth for large populations globally creates expectations for a corresponding increase in living standards and quality of life. This in turn creates a rise in demand for food, energy, goods and services, and underlying resources, and puts pressure on the environment and social structures.

These global trends are also reflected in the UK. In the 1980s, 24% of the UK population described themselves as middle class, but this figure has risen to 71% in 2011. Changing lifestyle expectations of UK consumers have created increased demand for goods and services, resulting in greater resource use. [ii] For example, electricity consumption per capita has risen by 19% since 1985. [iii]

Key implication:

  • By rapidly improving resource efficiency, business can continue to fulfil the demands of society.

Resource scarcity

Supplies of natural resources are not infinite. Despite a slight decoupling of global growth from resource extraction, net extraction of resources continues to grow at a rate of 2% per year on average. [iv]

Trends in global resource extraction, population and GDP since 1980

Source: SERI, 2010, The material basis of the global economy

Diminishing supply increases the relative cost of extraction, as resources become more difficult to access. This can negatively affect the quality of resources, particularly for materials such as iron ore and copper, but also for other natural resources such as freshwater.

Supply pressures (coupled with rising demand) have caused higher and more volatile prices for key commodities, as well as unpredictable availability of supply. Global oil production has risen by 36% over the past 3 decades, with an accompanying 6-fold price increase that has been subject to significant fluctuation [v]. Other commodities such as cotton have been subject to volatility – the price in July 2011 being the highest in 300 years, tripling over a 2 year period. [vi] Price pressure is also set to increase as emerging markets continue to grow their share of global consumption of commodities – for example today China’s demand for steel is now 46% of global production. [vii]

Volatility is also complicated by the fact that the UK and the EU are dependent on certain resources specifically from emerging markets. For example, China supplies over 95% of the world’s rare earth metals vital to a wide range of consumer goods, and prices for these have escalated over the past decade. [viii]

Supply constraints are also increasing the costs of key basic goods, such as food and energy, for UK consumers. The long-term decline in proportion of spending on food, fuel and power relative to other costs has been reversed. Fuel and power combined made up 18% of household spending in 2003, but this has increased to 21% in 2011. Furthermore, an estimated 17% of households in the UK are in fuel poverty, a 280% rise over 10 years. [ix]

Percentage of household spending on different categories


 
Source: Office of National Statistics, 2013

Key implication:

  • Tightening supply may create rising and more volatile input costs, squeezing margins and profitability and driving efficiency and substitution programmes.

Environmental constraints

The UK is facing significant environmental challenges, notably water pressures, air pollution, and declining biodiversity and ecosystem services.

Examples of impacts from these challenges include:

  • DEFRA estimate that by the 2050s, between 27 and 59 million people in the UK may be living in areas affected by water supply-demand deficits. [x]

  • Air pollution in urban centres in the UK is of particular concern, with parts of central London exceeding EU air quality regulation limits every day of the year. [xi]

  • Intensive agriculture together with certain chemical pesticides is considered to be a leading cause for the decline in the honeybee population, which plays a vital role in pollination and thus agricultural production. [xii]

Companies may also be susceptible to the effects of global losses in natural capital, which are compromising global supply chains. An estimated two thirds of the world’s water and land ecosystems are now degraded significantly, with a collective cost to the global economy of US$ 6.6. trillion (11% of GDP) from mis-management of this natural capital. [xiii]

The environment also influences our health in many ways – due to exposures to physical, chemical and biological risk factors, or through related changes in our behaviour in response to those factors. Each year, 13 million deaths are due to preventable environmental causes. Preventing environmental risk can save as many as four million lives a year, mainly in developing countries, among children under 15. [xiv]

Key implication:

  • Increasing environmental externalities may put more pressure on supply chains and operations, leading to potential business disruption, but also creating markets for new technologies and solutions.

 


References

See all references