Founder of the Smith School of Enterprise and the Environment at the University of Oxford, Sir David King explains why the world is at a critical juncture in terms of natural resources and what must be done by communities, governments and businesses to deal with the issue of limited resources in the face of growing demand
The Smith School of Enterprise and the Environment at the University of Oxford was formed to help leaders in business and government make well-informed decisions to secure a sustainable low carbon future. The challenges we face as we move through this century are critical, and it is vital that we equip decision makers with the very best skills, knowledge and expertise.
Looking back over the past five years, I am enormously proud of what the Smith School has achieved. The impact and influence of the Smith School has resonated globally and draws together academics from all over the world to work on these issues, forging links with global businesses and politicians from every continent to come together to achieve our aim.
One of the ways we have brought people together is by hosting the annual World Forum on Enterprise and the Environment (WFEE), which is now a leading international environmental conference. In July this year we rebranded the forum as Re|Source 2012, focusing the event on the challenges of managing food, water and energy resources.
Why Re|Source 2012?
During most of the twentieth century, the world experienced unprecedented economic growth aided by falling prices of natural resources such as energy, food, water and minerals/materials. However, during the past decade the price of natural resources has risen sharply; commodity prices have increased nearly threefold since 2000, according to the MGI Commodity Price Index.
Why is this? Firstly, the demand for natural resources has increased not only due to population growth, which is likely to stabilise by mid-century at around 9.5 billion, but particularly the growth of the middle class. Three billion more middle-class consumers will emerge in the next 20 years from the 1.8 billion that exist today. This soaring demand occurs at a time when finding new sources of supply and extracting them is becoming increasingly challenging and expensive, and resource scarcity has become a significant issue in meeting demand.
The clamour for the world’s natural recourses was highlighted by former Governor of Hong Kong, Lord Patten, at Re|Source 2012. ‘Over the past century, our population has increased by four times, urban population 13 times, industry output grew by a factor of 40, energy 13 times, carbon dioxide emission 17 times, water use nine times and catch of marine fish by 35 times.’ The two day forum hosted by Oxford University and the Smith School sought to address pressing resource issues.
The huge pressure on natural resources has far-reaching consequences; effecting poverty and security, along with the environment and ecosystems, increasing the vulnerability of supply systems and effecting economic growth.
Therefore it is critical that national and international communities, governments and businesses find ways to manage resources sustainably and mitigate the risks of scarcity. By bringing together great thinkers and leaders in the financial and business communities, Re|Source 2012 facilitates these discussions.
What is required to prevent resource constraints?
The good news is that opportunities and solutions do exist to address these challenges. A number of these were discussed during Re|Source 2012:
1. Integrated Approach to Sustainable Resource Management (Increasing energy efficiency, resource productivity and reducing resource wastage. Currently one third of food produced for human consumption globally is lost or wasted.)
2. Disruptive Innovations (Required in technology, financial products, legal and governance frameworks, as well as the market incentives and finance to fund the innovators.)
3. Transformative Economic Strategies (For example, supply chain regulation, the monetisation of social and environmental impacts, and pricing externalities would all be needed to incentivise the emergence of deeply innovative businesses that are fit for the twenty-first century.)
4. Transformative Political Strategies (For example, carbon pricing that resource prices capture the cost of their impact on the environment.)
5. Subsidy Reform (More than US$1 trillion of subsidies spent annually on resources, including US$400 billion in 2010 susidising consumption of fossil fuels.)
6. Investment to help drive sustainable growth in developing economies (To enable them to leapfrog the resource inefficiencies inherent in more developed economies.)
7. Good leadership, decision-making and long-term thinking (In my view, short termism has over the past three decades been endemic in political, investment and business circles, and is the root cause of our current parlous situation – in both economic and environmental terms. An appropriate response is urgently needed from the political, business and financial communities, to reform, rethink and renew the system.)
8. Collaboration (Environmental protection is a global issue, affecting people of all nations and requiring a global response in both public and private sector and society.)
9. Raising awareness and encouraging a change in behaviour (Including raising awareness about resource-related risks and opportunities, mitigate the impact of these risks on vulnerable communities, educating consumers and businesses to adapt their behavior to a resource-constrained world.)
Furthermore, examples of best practice were discussed in both the private and public sectors.
Jochen Zeitz, Chairman of PUMA SE, spoke about pioneering a ground-breaking environmental profit and loss audit that puts a monetary value on the impacts across PUMA’s supply chain, creating a new paradigm of corporate social and environmental sustainability.
John Brock, President and Chief Executive Officer of Coca-Cola Enterprises (CCE) commented on the importance of leadership: ‘in our view individual leadership by business and importantly governments is what it’s all about – the old ways of leading are not sufficient – we need to do what’s right for the planet because it’s also right for business.’ CCE have three major environmental components – reducing their carbon footprint, investing in water-saving technology and waste management. One of their commitments includes recycling or reusing 100 per cent of their packaging by 2020.
In the public sector, the Singapore government’s plans for water management are exemplary. Every water project is long term. Water falling on every street and rooftop is conserved and recycled, and plans are in place up to 2030 and beyond for maintaining supplies.
In the US and in the UK the military are forging radical alternatives to fossil fuel dependency. For the UK, Rear Admiral Neil Morisetti pointed out the challenges the rising cost of oil: one gallon of petrol can accelerate a carefully driven aircraft carrier just 12 inches. But at US$150 a barrel of oil, the cost becomes prohibitive and alternative solutions must be found such as solar blankets being used by military personnel to recharge mobile devices – a step towards improving output at reduced cost and risk. Price, inevitably, is one of the key motivators of change.
In the Netherlands today, a small group of CEOs, meeting regularly, reinforce each other’s actions in embedding the principles of long-term thinking, sustainability, resource efficiency, openness and honesty into all aspects of company practice. Unilever, Puma, Royal DSM, Dow Chemicals, General Electric and Rolls-Royce are all transformative and successful companies that can drive through change. In the absence of decisive government action, much can be achieved through alliances of like-minded enterprises.
In his closing speech, Former US President, Bill Clinton, reiterated the need for collaboration in addressing the resource challenges of the twenty-first century: ‘Either we have a policy of shared benefits and responsibility. Or we act as though each struggle is a zero sum game. The only strategy that makes sense is the one that says we are going to share the world with other human beings and we will share its natural resources.’ This, he said, ‘is the fundamental decision of the twenty-first century.’
The question is will we choose to collaborate and work together both nationally and internationally to implement solutions in time to avoid a period of even higher resource prices, increased volatility, and potentially irreversible environmental damage? Despite the enormous challenges and obstacles that we face there is every possibility in achieving this. Re|Source 2012 was just one step towards this goal and my wish from the conference is that each and every one of those that attended will have been inspired and motivated to become a part of the solution and help make the changes that are required.