Thursday, April 19, 2012
Prepping Business for a Turbulent Environmental Future
'Business as usual' is on the way out. And that warning is coming from global consulting giant KPMG.
Business is finally recognising what Buddhists have taught for thousands of years and development NGOs have struggled with for decades – that everything is connected and no problem can be effectively dealt with in isolation.
Systems thinking is increasingly filtering into the mainstream and perhaps has finally came of age with consultancy behemoth KPMG shifting its sustainability thinking to a more holistic approach.
In a new report, Expect the unexpected, KPMG says companies need to understand 10 "sustainability megaforces that will impact each and every business over the next 20 years. These forces do not act alone in predictable ways. They are interconnected. They interact."
The megaforces that KPMG highlights represent all the usual suspects, from climate change, unpredictable energy supplies and water scarcity to urbanisation, deforestation and food security.
...Where the report concentrates most of its attention is on the likelihood that companies will increasingly need to factor in the cost of environmental impacts on their balance sheets as governments respond to the many systemic pressures they come under.
This is likely to include the removal of subsidies on input commodities, such as fossil fuels and water, and the wider introduction of mechanisms to increase the cost of environmentally damaging outputs.
The report says that the external environmental costs of the 11 sectors it studied rose by half between 2002 and 2010 to $854bn and are doubling every 14 years, which makes it unsustainable even in the medium term.
Across all these sectors, the report calculates that if companies had to pay for the full environmental costs of their production, they would lose 41 cents for every $1 in earnings on average, with the costs of food producers exceeding the sector's entire earnings.
The only sector to demonstrate an absolute reduction in its external environmental costs over the eight-year period was automobiles, which achieved a drop of 14%, while mining recorded the largest increase.
When I read the assessment that many companies run unpaid environmental costs equal to 41 cents per dollar of earnings, I began to think about our Athabasca Tar Sands. What are the unpaid environmental costs of the Tar Sands? What will be the unpaid environmental costs of the Northern Gateway pipeline and Kitimat bitumen/oil tanker operation? Just how much is Canada giving away for free and why is Big Oil not paying its way? Are the Tar Sands just a giant eco-Ponzi scheme that will leave Canadians holding the bag when the party's over?