Oct 07, 2011
Thinking of value-add in a way that guarantees future of sustainabilityBack
© Reuse this
The growth of these countries has implications for all of us as we simultaneously watch a new world unfold before us. How these demands will be met is a matter of speculation, but what we know is that, if you have five or six large economic engines running all at the same time, resource demands will be stretched beyond current capacity.
Since 1900, according to a BP World Energy Outlook report, real income has grown by a factor of 25 and energy demand by a factor of 22.5. But most of this growth was in the last 20 years. For instance, real income grew by 87% in the last two years.
To continue with the BP analysis – world primary energy consumption grew by 45% in last 20 years and is projected to grow by 39% in the next 20 years. By 2030, non-Organisation for Economic Coop- eration and Development growth in energy consumption will be 68% higher, averaging about 2.6% a year.
Between 1990 and 2010, fossil fuels contributed 83% to the growth in energy supply. However, in the next 20 years, fossil fuels will contribute 64% of this growth and nonfossil fuels 36%, of which renewables will account for 18% by 2030.
Clearly, for both countries and corporations, it cannot be business as usual. This demand can only be met by either increasing supply, making production more efficient or through technological innovation.
In the meantime, the surge in demand has generated supply scarcity and vola- tility problems. The prediction is that conditions for opening up more supply chains are not going to be as rapid as the pace of demand.
Countries are facing constraints and trends not experienced before for a very long time. Countries are responding to these pressures in different ways. Those that are better resourced are seeking to lock long-term contracts or build inventories in critical resources, all of which merely compound the problem rather than resolve it.
Why has value-add become so important? Firms and countries are judged by their output but a better way is to judge them by their value-add. Value-add, in simple terms, means the value of outputs minus the cost of inputs. Traditionally, the focus was primarily on capital deployment (cost of capital) and labour. Value-add quickly has to shift from a supply cost issue to a demandside cost issue as well. Value-add is generated at every step of the production chain – right up to sales – that is, the value added in each step and the price at which the product or service is sold.
Indeed, Unilever has already recog- nised this challenge. The corporation’s new CEO threw a stretch challenge to his team last year: to double the output of Unilever products within the next 20 years but remain within its current resource consumption footprint.
With large firms, the integration of this new type of value-add has a long range and focus than smaller firms. They are better at it because they have greater capability.
For countries, this is even more challenging as it is dependent on the state of the national economy and ways in which politi- cal decisions are efficiently and timeously made around various national investments.
Putting it more simply – it is not a question of paying cheap to get more but rather having to use less to generate more. Value-add, as a result, must make use of multiple strategies to sustain a country’s or a company’s competitiveness. This is one of the reasons why sustain- ability or resource optimisation both at the supply and demand ends is now becoming far more integrated and mainstreamed. This is not only in terms of production but also in terms of employee effort. In other words, not only does optimisation of input use matter but also employee practices outside the production system – within the workplace and at home. Employees do not become just an input cost but intelligent and conscious social actors in and outside the firm, which is key to the integration of sustainability in a more universal sense.
If countries and firms achieve this, then, in the long term, the idea of value-add extends beyond the boundaries of the firm or the borders of a country.
Smart countries and firms want smart citizens and employees. All this contributes to the new value-add notion or a more integrated approach to sustainability effort, or VA+Sef.
Edited by: Martin Zhuwakinyu© Reuse this
Creamer Media Senior Deputy Editor
To subscribe email firstname.lastname@example.org or click here
To advertise email email@example.com or click here
Other Saliem Fakir News
Updated 12 minutes ago Africa was entering a phase of becoming the factory of the world requiring the building of facilitating infrastructure, Credit Suisse Securities chairperson Rick Menell. Speaking during a panel discussion at the 2016 Investing in African Mining Indaba, Menell...
Updated 45 minutes ago If the latest mosquito-borne Zika virus breaks out in Africa the continent would be less prepared than any other to deal with the outbreak. Zika fever is a mosquito-borne viral disease caused by the Zika virus which is suspected of leading to the birth of deformed...
Updated 1 hour 22 minutes ago The Gupta brothers on Tuesday obtained an urgent interdict to stop the EFF from threatening them. Judge Johan Louw granted an order in the High Court in Pretoria, interdicting the party, its leader Julius Malema and its Gauteng spokesperson Ntobeng Ntobeng from...
Recent Research Reports
Construction 2016: A review of South Africa's construction industry (PDF Report)
Creamer Media’s Construction 2016 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; key participants; local demand; geographic diversification; corporate activity; black economic...
Energy Roundup – February 2016 (PDF Report)
The February 2016 roundup covers activities across South Africa for December 2015 and January 2016 and includes details of a Government Gazette notice that confirms Cabinet’s decision to move ahead with the 9 600 MW nuclear procurement programme; State-owned power...
Energy Roundup - December 2015 (PDF Report)
The December 2015 roundup includes details of State-owned utility Eskom’s application to claw back R22.8-billion; South Africa’s ranking as an investment destination for renewable energy; and a nuclear expert’s thoughts on reactor designs for South Africa’s nuclear...
Water 2015: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2015 Report considers the aforementioned issues, not only in the South African context but also in the African and global context in terms of supply and demand, water stress and insecurity, and access to water and sanitation, besides others.
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
This Week's Magazine
Power and automation company ABB is in the launch phase of its highest payload, multipurpose industrial robot, the IRB 8700. The robot has a reach of 3.5 m and can handle a payload of up to 800 kg. “When designing the IRB 8700, we emphasised reach and payload, as...
Identity and Access Management (IAM) is a critical facet of a connected security ecosystem, as controlling the confidentiality, integrity and authorisation of data access and use is key to securing new digital business channels. However, companies face several...
Data underpins digital business models, the digital economy, the Internet of Things and the fundamental changes in the ways people interact and protecting data is crucial to securing new ways of doing business, says T-Systems South Africa information and...
The City of Cape Town will issue a tender for the procurement of electric buses for its MyCiTi service, in line with the council’s commitment to lower its carbon footprint, says executive mayor Patricia de Lille. The tender, to be advertised early in February, will...
The iSimangaliso Wetland Park Authority signed a R10-million contract last month with local tailings storage facility specialists Cyclone Engineering Projects to remove about 100 000 m3 of dredge spoil obstructing the natural course of the uMfolozi river, in...