Eight dynamic areas for business to watch

Sensemaking / Eight dynamic areas for business to watch

Expectations of global business are changing. Read this to find out what eight transformative areas mean for you, and how to stay ahead

By David Bent / 22 Mar 2016

This article was first published in The Long View 2016. Please share your thoughts here and join the conversation on social media with #longview2016.

The coming decade will see growing expectations of businesses and other large organisations to create a sustainable future. Organisations will have to act outside of their operational boundaries. They will be transforming markets to make success possible in a more sustainable world.

The next two years are going to be vital. If we are going to craft a sustainable future we need to be bold and act urgently. We need to take every opening that presents itself. Here are eight areas of dynamism for sustainable business: the ones where we see transformative potential. If your business can treat them as opportunities, we will be in for an exciting period.

1. Sustainable Development Goals (SDGs) reframe business plans

The SDGs were announced late in 2015, but the difference was noticeable almost immediately. Unlike the Millennium Development Goals, the SDGs are universal, and every country is required to say how they will meet these goals. We expect the SDGs to be the new framing device. At first, leaders will be expected to say how their sustainability plans align with the SDGs. Then more mainstream organisations will follow suit, realising that business-as-usual is no longer enough.

Unilever’s CEO Paul Polman is already taking a leading position: “‘Unilever is involved in the SDG agenda, as we fundamentally believe these are challenges that need to be addressed for economies, businesses and society to function.”

What this means for you

> Get behind the SDGs. If we are to reach a sustainable future, then we need a good-enough shared understanding of what we want for that future and how to reach it. The SDGs cover the breadth of issues, have global reach and are backed by important institutions. Ensure your e orts align with particular goals.

> Play your part in transforming markets. We won’t reach these goals through incrementalism. Over the next two years there will be growing expectations that businesses will be proactively transforming their sectors. Ask yourself: What transformation does your sector need, and what role can you play?

2. Extreme climate change drives action and adaptation

The projections of climate scientists are becoming more severe, and the impacts are already being felt, with
extreme rainfall from Yemen to Chennai, following extreme drought in California. With new global commitments to
limit warming to less than 2°C, we can see the transition towards renewables taking on a new urgency. A clean energy revolution is underway, with an 80% drop in the price of solar photovoltaic panels in the last five years.

Elon Musk is making energy storage sexy. Community energy projects are making disturbed renewables a reality in pockets. Even so, it is likely that people will start concluding it’s too little, too late. We can expect talk of geoengineering and carbon capture and storage to rise, along with positioning gas as a bridging technology (something we fear might slow diffusion of the renewable technologies we need).

What this means for you

> Do nothing, and your business will falter. Some climate change is already locked in, and the impacts will affect us all. If you are not now assessing your risks and investing in the assets and capabilities you need to be successful in a climate-stressed world, you will likely fail.

> Start to adapt now. You must understand how profoundly you will be affected. In this very different future, how will people meet the needs that your industry currently serves? What are the risks to your supply and production? What must you invest in, and divest from?

> Join the energy revolution. Mitigation remains vital. Prices of energy from renewables are falling; energy storage is progressing. There is a revolution happening in energy, and you should be part of it.

3. Europe’s turmoil puts the spotlight on values

Over recent years, many Europeans have developed feelings of being le behind by globalisation and technological change. This, coupled with a lag in the responsiveness of European institutions – which were designed for a time in which the pace of change was much slower – has meant that any extreme event could turn into a crisis. We can see this evolving now with the current refugee situation, which in many ways symbolises the failure of European and global governance. This has generated a polarised mood. On one side is ‘solidarity’, those offering rooms to refugees and cheering them into train stations. On the other is ‘protect your own’, with people fearing refugees might take state handouts and jobs. Populist politicians on both the Le

and Right and from across the continent have been able to capitalise of these moods (we can see some of this in the US, with Sanders and Trump) – which we can expect to intensify going forward.

What this means for you

> Be ready for the politics of national identity and values. Globalisation and technological change are driving many people to feel le behind. Their anxiety about how ‘my country’ is changing – which is as much about identity and values as it is about economics –
will colour politics for the coming years, including the referendum in the UK regarding its membership in the EU.

> Appeal to people’s immediate concerns. Engagement around future generations, people living far away, or protecting the natural world will fall on deaf ears.

4. Empowerment recognised as a crucial force for change

The push for equality and diversity is not new. What we believe we’re seeing, though, is the start of a new phase. In industrialised countries the call is for women to ‘lean in’, but also for change in the nature of male-dominated corporate hierarchies. The London School of Economics Commission on Gender, Inequality and Power recently concluded that “the burden of the argument should now shift from the under-representation of women to the unjustifiable over- representation of men”. (Currently, women hold only 27%
of seats in national parliaments and governments; 18% of board seats; and 3% of CEO positions.) In addition, there is rising visibility of greater gender diversity beyond traditional binaries of men/women and hetero/homo, with potential implications for all traditional binary outlooks.

In emerging nations, the empowerment of women and other gender minorities is crucial in achieving progress
in health, birth rates, education attainment, skills and more. We can already see the push for greater gender empowerment in this context growing, with organisations such as Oxfam looking to invest in female empowerment labs across Africa.

What this means for you

> Globally, remove barriers to minorities in your workplace. The evidence is: your business will do better, and the surrounding community will flourish. According to a study conducted by Credit Suisse, large companies with at least one woman on the board do better than those with all-male boards. You’ll also head o reputational risks from campaigners, governments and others.

> Support the education and empowerment of women.

Identify opportunities to educate girls and employ women in secure and empowering jobs, particularly in any operations in the developing world, in line with the fi h SDG.

5. Manufacturing reconfigures, transforming supply chains

We can see several factors combining to transform the economics of global manufacturing. The labour cost differential between developed and developing countries is reducing. In the UK, wages are about 6.5 times higher than those in China today, but are forecast to shrink to only 2 times larger by 2030, according to Price Waterhouse Cooper’s 2013 study. There’s a growth in automation, big data and other digital technologies. Digitised methods of fabrication are decentralising manufacture, with implications for the materials needed and where they come from. This means that supply chains generate less waste, with new opportunities for local economies. How these factors will combine is complex and uncertain. But the next two years will see much experimentation in distributed manufacturing, with changes in what is made where by whom. That will affect sustainability supply chain policies and management and will challenge consumer labels and auditing.

What this means for you

> Plot your path to success. Over time, the shift to distributed manufacturing will affect everyone. How could this disrupt or present an opportunity for your business model? When is the right time for your business to respond?

> Identify your big sustainability wins. What materials will be used? What labour will be needed and where? You’ll need to answer these questions to get the best from the change.

> Prepare to expose your supply chains. Localisation and access to data are driving interest in the origins of supply. Strong connections to suppliers could help a brand to make better decisions about the future origins of its raw materials.

6. Citizen innovators take change in hand

While incumbents have a role to play in driving change, we’re increasingly seeing creative destruction coming
from entrepreneurs, new entrants, or an idea that had
been hidden in an R&D lab. The role of citizen innovators
is strengthening and outpacing the conventional role of large R&D labs in producing new products and services. People are looking at the problems around them and trying to address them directly, rather than asking politicians or existing businesses to do the heavy lifting.

Thanks to digital platforms like crowd funding sites, individuals now have the ability to execute new solutions that previously only big institutions could try. According to the Harvard Business Review, 6.1% of adults in the UK had created or modified consumer products within the past three years. Currently at the margins, we see more and more people moving from being passive consumers to active citizen innovators.

What this means for you

> Innovate with the end users. They are closest to the problem you are addressing, and their experience should set your brief. Use their insights and ideas as your springboard, and treat them as long-term partners, not just ad hoc focus group fodder.

> Be a platform for others’ innovations. Imagine if your business provided the foundations that were integral to the success of many other businesses. Then you’d be like Amazon’s cloud service. If you can help citizen innovators scale, then you can be relevant and successful for the long term.

7. Ways to scale niche innovations

There is growing sophistication around how market forces can be shaped to support and scale up innovations. Techniques like the creation of competitions that provide funding opportunities for specific innovation areas as well as the facilitation of sustainable innovation through the creation of technological niches are more familiar than ever. We expect more companies testing how to scale their sustainability bets through.

What this means for you

> Get sophisticated. Think more creatively about the system that your business is operating in and the innovation opportunities at your disposal. Be prepared to experiment with a wide variety of approaches.

8. Growing influence of Chinese regulations on global operations

China has been increasingly active on sustainability issues, since first outpacing the US in clean energy investments and finance in 2009. Last year, China accounted for 29% of the world’s total renewable energy investment at $89.5 billion.

Its tough new environmental protection law, introduced in January 2015, levies stiff penalties on polluting companies on a daily basis and with no ceiling cap. In addition,
public awareness is growing, with environmental protests increasing by 29% annually since 1996, according to
state news agency Xinhua. In response, many companies operating not only in China but across APAC have recently upped their game on sustainability measures. One example is McDonald’s, which is “accelerating” work on sustainability “in line with government expectation”.

What this means for you

> Consider matching leading Chinese standards globally.

In the past, companies have decided to apply European or US standards globally, to make sure they can sell to those markets. Has the time come for you to treat Chinese standards as the global benchmark?

David Bent and Christie Clarke, Forum for the Future

Image Credit: Wevio / Flickr 

What might the implications of this be? What related articles have you seen?

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