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April 12, 2017

Green Supply Chain News: Business Growth is the New Enemy of Sustainability, World Resources Institute Says


Radical Innovation Needed to Reduce Consumption and Materials Use; Are we at Dawn of "Peak Stuff?"

By The Green Supply Chain Editorial Staff

Business leaders should have seen this coming.

Business support for various aspects of sustainability – such as CO2 reduction, improved water management, and reduced deforestation – have been essential to the significant progress that has been made in these areas, says environmental group the World Resources Institute.

But, the WRI says, the very nature of today's business model puts the world at risk. Current sustainability efforts are simply not enough.


The Green Supply Chain Says:
The WRI notes that a review of 40,000 corporate sustainability reports between 2000 and 2014 found that only about 5% of companies mention some type of ecological limits.

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"Underneath this welcome progress lies an uncomfortable truth: Most businesses' growth is still predicated on more people buying more goods," the WRI writes in a new report titled The Elephant in the Boardroom: Why Unchecked Consumption is not an Option in Tomorrow's Markets.

Businesses look favorably on the expected growth of the world population by 9 billion people by 2050, and some 3 billion new entrants to the middle class by 2030, as a source of continued growth in sales volumes.

The problem with that plan is that "the planet's natural systems and finite resources cannot keep up," the WRI says, adding that "Studies cited in this paper show that we are already at or close to the limits of the planet's ability to provide."

The WRI adds that "Whether we look at consumer durables, fast-moving consumer goods, or consumables, the pattern and risk of selling more stuff to more people is the same, and we see that improved practices are not sufficient to counteract anticipated global growth."

In fact, business growth predicated on consumption is "the new elephant in the corporate boardroom," WRI writes.

Those words caused to recall an interview we summarized in 2013 with former Walmart CEO Michael Duke, who was asked about the fact that for all the progress Walmart had made in CO2 reduction, its total emissions were actually continuing to grow.

"There's nowhere in our strategy that says we want to shrink the company. We still want to keep growing," Duke said at the time.

The WRI says news business models will be needed, such as those connected with "circular economy" thinking, and that the purpose of its new paper is to mainstream those ideas.

Such a change is critical, the WRI says, because already growth is "causing the world to approach or exceed the limits of the planet's ability to provide the raw materials, energy, and water needed to run business."

It adds that "We find that sustainability teams in most companies can comfortably talk about climate change and efficiency improvements but not about consumption."


This perspective already has some corporate proponents.

For example, in 2016, Steve Howard, chief sustainability officer for home furnishings retailer IKEA, said that "In the west, we have probably hit peak stuff. We talk about peak oil. I'd say we've hit peak red meat, peak sugar, peak stuff, peak home furnishings."

Howard continued: "What we mean by "peak stuff" is that we live in a world of finite resources and we recognize that consumption needs to reflect this. At IKEA, we are therefore seeking new ways to meet people's needs and aspirations whilst staying within the limits of the planet."

But IKEA is an exception.The WRI notes that a review of 40,000 corporate sustainability reports between 2000 and 2014 found that only about 5% of companies mention some type of ecological limits.

Materials to support population and consumption growth are a huge issue, the WRI says. It notes that many materials have finite resources, and even for those that are more abundant, "processing materials from extraction through manufacture, distribution, and end-of-life treatment requires the use of land, water, and energy."

A new approach to this will ultimately be good for business, the WRI argues, because as resources and natural systems become overextended, supply chain risks and costs will increase.

The WRI outlines three scenarios for how this plays out, as seen in the graphic below. Business as usual means consumption increases by three times by 2050. Aggressive actions can cut that down to just 40% consumption growth, but even that won't be sufficient to avoid real issues. Only "unprecedented innovation" that keeps net consumption somehow flat over the period will enable planetary resources to keep up with all the economic and population growth.


So what to do about all this? In the end, the WRI calls for companies to embrace this resource and consumption issue and make it part of their sustainability plans. That, we say, will be a real challenge.

Earlier in the paper, the WRI notes the following approaches that can help address the challenges:

Circular Economy: An economy-wide approach to environmental impact, broadening the cradle-to-cradle concept. The model rejects the idea that the economy must shrink or be moved to a steady state in order to be sustainable.

Rather, the economy can grow with a systemic circular approach to all product, service, and infrastructure decisions, such that value is not wasted along the value chain but maintained and reinvested.

Cradle To Cradle: A product-oriented approach to reducing environmental impact by "closing the loop" on the take-make-waste model. Instead of disposing of materials as waste at the end of a product's life, materials have value as the input to a next iteration of product or service.

Dematerialization, Materials Decoupling, Materials Efficiency: Overlapping terms capturing the intent of eliminating the link between economic growth and materials throughput.

Eco-Efficiency: Refers to the concept of creating value while minimizing resource use and waste.

Industrial Ecology: A science- and research-oriented approach to understanding and reducing the environmental impact of industry by studying material and energy flows through industrial systems.

Product As A Service: A commercial mechanism for the relationship between company and the customer in which the company does not sell the physical product (for example, lightbulbs) but instead sells the service (for example, lumens of light). In this relation-ship, the company is incentivized to make the product and the service as durable and resource efficient as possible.

Reduce, Reuse, Recycle: Offers a hierarchy of sustainability value. Recycle is good, reuse is better, and reduce best of all.

Sharing Economy: Maximization of under-utilized assets through sharing. Applies best to capital assets such as cars and housing. Also known as collaborative consumption.

It contrasts that type of thinking to what it calls Take-Make-Waste, which it says is the traditional business model in which materials are extracted from the ground, used to make a product, and then disposed of at the end of the product's life. Is also known as the linear model.

TheGreenSupplyChain's Take: Let's face it, this perspective dates at least back to early 19th century thinking of Thomas Malthus, who predictions that population growth would exceed the ability of the world to feed them all has been proved wrong time and again. In just recent years, the handwringing about "Peak Oil" has largely gone away over a glut of oil. Companies have found ways to engineer around the dominance of China for so-called "rare earth metals" needed for many manufacturing processes. Commodity prices in recent years have been falling, not rising.

That said, would we be surprised if there is a lot more "re-use" of materials in the future? Not at all, as that may prove the most economic approach in some cases to sourcing those goods.

It does seem likely that clashes between environmental groups worried about consumption and businesses focused on growth are likely to increase in coming years.


What is your take on the WRI's perspective? Is consumption a bg issue, and how will this play out with businesses? Let us know your thoughts at the Feedback button below.

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