Wednesday, March 30, 2016

Industry Implications of Resource Scarcity

The Issue
According to the Global Trends 2030 report, the Food-Water-Energy Nexus has the ability to increase the issues surrounding a crisis-prone global economy, as well as general resource-born conflict around the world.[1] Oil, water and usable land imply difficult issues for sustainable and long-term strategic planning for industries and companies that rely on these natural resources. As climate change and growing associated inter-state conflicts continue, this issue has the ability change the way the companies implement business strategy to continue creating profits as well as focus on sustainability. 

The Economics
Global Trends 2030 states, regarding the US, “If not properly managed, water scarcity will directly affect the local ability to grow and create jobs.”[2] However, these issues on a global scale could be even more pronounced. As low-skilled labor for large multi-national companies continues to grow in developing countries, what is the effect on this system when water wells dry up, or a converse climate change effect, are under water? Workforce and infrastructure concerns plague many companies when considering where to locate factories or other needed infrastructure. Climate change, and specifically the changing nature of water globally, could uproot industries that have historically needed moderate or high levels of this resource, changing the way these companies do business and focus their resources.

Strategic Answer
Industries and companies that invest in climate neutral technologies, including companies that match the shift to produce or provide services that directly assist geographic regions that will become resource scarce will not only provide needed assistance, but have the ability to receive higher profit margins. As companies plan to tackle growing resource issues, it will be those who maneuver themselves into a new space who will advance. However, planning for these strategic changes needs to come in the next 5-10 years for ease of implementation. According to a CDP Global Water Report 2014 survey of some of the world’s largest corporations, 82% are setting goals to reduce water usage while 90% are incorporating strategies for water resource management.[3] Water resource management is just one strategic avenue to consider in a changing world. Resource reliant industries and companies are going to need to make further strategic decisions regarding location, products, and consumer base – while always keeping in mind the environmental effect of their decisions, and their future profitability.


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