Sustainability

Addressing natural resource challenges: The business case for hope

November 17, 2016

Global

November 17, 2016

Global
Josselyn Simpson

Contributor

Josselyn has worked in the thought leadership and quantitative research team of the Economist Intelligence Unit for more than 15 years. She is an expert in creating engaging content for C-level and other senior executives. Among her areas of interest are organisation, governance, and the effects of technology on the workplace. She was also a Senior Campaign Manager at Booz & Company and a Senior Editor at McKinsey & Company. Through those roles she developed significant expertise in global thought leadership development and programme management. She began her career at The New Yorker. She is based in New York and holds an undergraduate degree with honors from Harvard College.

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Resource challenges are revenue challenges

Climate change mitigation, the sources of energy used in the US, and related natural-resource issues are among the policy areas thrown into upheaval after the recent US election. The Economist Intelligence Unit recently published a report that examines executives’ perceptions of resource challenges and how and why companies are addressing them. (The report, sponsored by Sealed Air, can be found .) The research shows that businesses around the world are most often addressing challenges related to natural resources, as well as physical and labour resources, because they get hard business benefits—or avoid hard costs—by doing so. More than a quarter of executives say their companies are addressing natural-resource challenges because it’s a high priority among their leaders to do so. Furthermore, the majority don’t seek to collaborate with government to address these challenges. All this suggests hope that, however US policies change in the next administration, businesses may well go on increasing the efficiency and effectiveness with which they use natural resources.

A key finding is that resource challenges are revenue challenges. Three-quarters of respondents to the survey said that natural-resource challenges caused their corporate revenue to decline last year, by 9% on average. In that context, it’s no wonder that 28% of executives at companies facing only natural-resource challenges [1] say that addressing them is a priority for corporate leaders. That priority may be sharpened  because companies appear to see a direct link between addressing these challenges and improved profitability. Twenty-six percent of executives, for example, say their companies are addressing natural-resource challenges because there’s a strong case they’ll incur hard business costs, such as increased input costs or reduced brand value, if they don’t. Just under a quarter say they’re seeking hard business benefits such as increased efficiency or lowered costs from addressing challenges, or the ability to attract new investors with a focus on sustainability.

Heineken’s Brewing for a Better World programme is one example of a company seeking to—and succeeding at—reaping financial benefits from addressing potential shortages of a crucial natural resource, water. “Water makes up 95% of every glass of Heineken, so the availability of water is very important to our business,” says Michael Dickstein, global sustainability director for Heineken International. The company’s metrics-driven water sustainability programme looks at water use at all of its plants 5, 10, and 15 years out to understand and proactively address water risks and to set measurable water-savings goals. “Every gallon we save can be expressed in terms of dollars saved,” he says. The company’s goal is to reduce water consumption in its breweries by 25% through efficiency initiatives by upgrading equipment and installing in-house wastewater treatment systems.

The survey data too show that executives are mostly getting what they want when they address resource challenges. The benefits executives cite most often are an improved reputation with customers (which affects brand value) and increased revenue because their products are more sustainable or more innovative than competitors’, each chosen by 22% of survey respondents. The Brazilian cosmetics company Natura is one that has made sustainability core to its brand identity from its beginning, in 1969. Initially the company focused on developing products from natural ingredients; over time it expanded its commitment to sustainable sourcing and reduced waste throughout its value chain. Among other initiatives, Natura has developed partnerships with 36 Amazonian villages to encourage sustainable agriculture practices that ensure it has steady supplies of ingredients. Over nearly half a century, this approach has built a committed customer base for the company and is a key reason that Natura is consistently among the highest valued South American brands.

Finally, it’s notable that companies don’t seem to feel  the need for government help in addressing natural-resource challenges: only 18% of survey respondents say they collaborated with government to address their challenges. That’s heartening today, with the increased uncertainty about the position the future US government will take on these matters.

Taken together, all this offers a case why even the hardest-nosed executive is likely to continue to focus on addressing natural-resource challenges regardless of government policy. And among other executives there’s another sign of hope: 22% of respondents say their companies are addressing natural-resource challenges to contribute to the global good. That’s a goal that can’t be changed by any government policy.

 

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.


[1] The survey examined natural, physical and labour resource challenges at companies facing each type of challenge individually and at companies facing combinations of challenges.

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