Business ‘Sleepwalking Into Resource Crunch’

Companies remain unprepared for the effects of dwindling natural resources, according to research from UK nonprofit the Carbon Trust.

The survey, of 475 senior executives in Brazil, China, South Korea, the UK and the US, shows that many are not prepared to look at the issue of resource shortages now and believe they will not need to make significant changes in their business operations to combat resource scarcity until 2018. Most consumer-facing companies predict that they will only need to take action within the next ten to 15 years at the earliest, meaning they may not have plans in place until 2025, according to Are Businesses Sleepwalking into a Resource Crunch?

This inaction was found to be widespread, with 43 percent of organizations surveyed stating that they do not monitor the risks to their business of environmentally-related shocks such as energy price rises and environmental disasters. Over half (52 percent) have not set targets for managing the reduction of carbon, water or waste.

This could be related to the fact that almost half (47 percent) of executives believe that acting on sustainability issues such as these decreases profits – and only 13 percent of board directors are remunerated for achieving sustainability metrics.

However, when resource constraints become a reality, 60 percent of organizations think the cost of their products and services will need to increase, 55 percent that they will need to engage in fewer markets and 43 percent that they will deliver a less varied service or product offering.

According to Tom Delay, chief executive of the Carbon Trust, the research shows that many organizations are “asleep at the wheel” when it comes to addressing sustainability and resource scarcity, doing nothing to address a problem they indicate could hit their operations by 2018.

According to research conducted by PricewaterhouseCoopers, some of which was released earlier this month, 53 percent of CEOs see energy and raw materials costs as the biggest threats to business growth prospects. The results from PwC’s Global Annual CEO Survey, which will be released in January, show a seven percent increase over corporate leaders’ concerns last year about energy and raw material costs. The issue has now topped consumer spending and behavior as a top threat, PwC says.