National Intelligence Council Report: Megatrends That Matter For Business
This post originally appeared on Forbes.com.
Two-hundred page policy reports don’t normally sit on a CEO’s bedside table. But the U.S. National Intelligence Council’s (NIC) wide-ranging new assessment of what the world will look like in 2030 is essential reading for smart, forward-looking corporate leaders.
Most international media attention around Global Trends 2030, produced every four years, has focused on its geopolitical analysis—rising China, plateauing United States, and potential failing states. But the private sector should pay careful attention to the megatrends the report highlights. Many relate to the profound sustainability challenges facing a warming world that will house around 8 billion people in 2030.
Below is my take on how four of these trends—resource scarcity, a booming global middle class, the rural-to-urban transition, and transformative information and communications technology—will impact businesses, and why corporate leaders should start preparing today.
1) The Resource Crunch
Perhaps the most alarming of the “relative certainties” the NIC predicts is soaring demand for food, water, and energy—growing by 35 percent, 40 percent, and 50 percent respectively over the next 15 to 20 years. Nearly, half the world’s population, it warns, will live in water-scarce regions by 2030. Agriculture and associated industries are particularly vulnerable, accounting for a staggering 70 percent of all water use.
Especially for businesses that operate globally, the impact on corporate operations and bottom lines is hard to overestimate. Last summer, the World Economic Forum similarly cited water scarcity as one of the five top global risks.
The NIC report concludes that better resource management, wider technology use, and improved governance are vital to weather this resource crunch. The private sector can play a critical role: by better managing resources, especially water; by developing efficient technologies; and by helping reduce the shockingly high volume of food lost between farm and fork.
To bring shareholders along and identify specific strategies, companies need to mainstream natural resource risk management into their business models and operations. Global electronics and technologies supplier, Delphi, for example, is starting to look into “zero waste to landfill” practices.
2) A Booming Middle Class
By 2030, NIC forecasts, a majority of people in most countries will be middle class, with Asia positioned as the world’s consumer powerhouse. More people with more money to spend are obviously good for business. But if we are to avoid depleting the world’s finite natural resources, we need to pursue a more sustainable approach to consumption and production.
Here, again, business has a big role to play in its own interest. First, companies can lead the way in making natural resources go further. The McKinsey Global Institute has found, for example, that up to 30 percent of global resource demand in 2030 could be met simply by efficiency improvements.
Second, companies can deploy their innovative powers to develop and market a new generation of resource-efficient products and services. Some are already showing the way. Kingfisher, the European home improvement group, generated a tenth of retail sales from eco-products in 2011. In the United States, household names like GE, Kimberly Clark, and Nike are setting targets for developing sustainable products and services.
Realistically, to live within the Earth’s means, we will also need to re-think current consumption models. Cradle-to-cradle reuse of materials needs to become the norm in production, as first mover companies such as Nike already recognize. Even dietary considerations should not be considered off limits given that beef farming, for example, requires nine times as much water as growing cereal crops.
As we head toward 8 billion people in 2030, it is in everyone’s interests – including agribusiness – that we recognize the heavy costs of today’s consumer habits and engage in serious discussion about alternatives.
3) Urban Explosion
By 2030, NIC forecasts, six in 10 people in the world will live in cities. This concentration of humanity offers huge opportunities to address the intertwined challenges of resource scarcity and sustainable consumption. The private sector, in partnership with city governments, can help make our cities work more efficiently and sustainably by providing capital, infrastructure, and technology.
The McKinsey Global Institute reports some eye-opening examples of what is achievable. Sensors and smart grid technology, it concludes, can reduce water system leaks by half, while making buildings worldwide more efficient could save more energy than the volume generated by air travel and shipping combined.
4) Empowering Technology
Lastly, the report concludes that the dizzying development of communications technology will prove “a great leveler” in the next 20 years, shifting power to citizen networks.
This welcome development could transform transparency, forcing governments and companies to be more engaged with, and accountable to, citizens and consumers. Most multinational companies are already investing in stakeholder engagement. But increasingly sophisticated cloud computing, crowdsourcing, and social media, combined with global internet connectivity, could enable businesses to further engage their consumers in decision-making, with profitable results.
Wanted: Corporate Leadership
The NIC is careful to say that a world plagued by scarcities is not inevitable. But it gives a clear warning that “policymakers and their private sector partners will need to be proactive to avoid such a future.”
Doing so is in the private sector’s own interest to stave off risks and maximize opportunities. Any CEO who isn’t already convinced should spend his or her holidays with Global Trends 2030.