When it comes to the environment, business must adapt or die

A golden age of sustainability lies in waiting.

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 per cent 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 per cent 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 per cent. 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.

Photograph: Getty Images

Tom Delay is Chief Executive of the Carbon Trust.

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.