Business has, over the past 20 years, recognised how it impacts on the world, but only recently has it become evident how the world affects the way in which companies do business, reports professional services firm KPMG.
The firm highlights that decoupling human progress from the use of resources, as well as environmental decline, is a central challenge. This challenge will also be one of the greatest sources of future success.
In its report, ‘Expect the unexpected: building business value in a changing world’, released in February, KPMG identified ten sustainability megaforces that will affect businesses between now and 2035.
The ten megaforces are deforestation, climate change, energy and fuel, material resource scarcity, water scarcity, population growth, wealth, food security, urbanisation and the decline of the ecosystem.
KPMG climate change and sustainability director Neil Morris believes that wealth, in particular, will have a significant impact on the way businesses operate in future.
“Wealth is a key driver for many governments. Many aspects of South Africa’s National Development Plan are geared towards growing our middle class,” he says.
The global middle class is predicted to grow by 172% between 2010 and 2030. The challenge for businesses will be to serve this new middle-class market at a time when resources are likely to be scarcer and more costly.
“For example, if someone moves from a low-income household to a higher-income household, the person will inevitably start changing his or her diet.
“On a low income, the person will maintain the staple diet of the country he or she lives in but, as soon as the person moves up the income scale, he or she will require more water and food, placing increased strain on food security,” he points out.
Morris adds that this will likely increase the inflation of food prices to between 70% and 90% by 2030.
He reiterates that many people are striving to become wealthier.
“I do not disagree that wealth is a way out and a key leverage to solving our social challenges but this is highly interconnected to many other challenges that we face,” explains Morris.
Role of Businesses
Morris believes that businesses can help by engaging with governments about the challenges they face, so that more informed environmental policymaking decisions are made.
It is also important that these policies are informed by fact-based research. In the absence of this, policies may be poorly designed and have unintended consequences.
As a strategy to help businesses be more sensitive about their environmental impact, KPMG has introduced a carbon-optimisation programme, which is aimed at helping companies understand carbon in their processes.
A detailed analysis of carbon in one’s business allows for an informed discussion with National Treasury on the proposed carbon tax for industry.
Morris believes that it is important for KPMG to engage on a one-on-one basis with its clients to understand carbon better in order to reduce the carbon emissions in industry.
“It’s all about trying to find the right balance of instruments, which may include carbon tax, that will change the behaviour of industry to reduce carbon emissions,” he concludes.