Megatrends are global forces that are generally well known. They are large scale, long term, and have an established trajectory—for example, the growing economic influence of China, India, and Brazil, or increasing natural resource demands, or the increasing need to address disruptions in the global climate system.
Companies may recognize these trends and challenges, but continue to act on short-term interests, thus overlooking long-term business risks and opportunities. Or they may recognize a handful of trends and ignore or discount connections to other important changes. WRI and our partners in the Next Practice Collaborative are working together to develop methods for using megatrends to find and highlight hidden risks and opportunities.
How can megatrends help companies foresee future needs?
Something interesting happened a few years ago. For the first time in recorded history, more than half of the human population was living in urban areas. This shift to an urbanized world—and major changes like it—present new risks for companies to consider, and open new doors for business innovations that can help solve global climate change and energy challenges.
Urban areas will likely absorb three billion more people by 2050, a shift that creates and affects many future needs. Innovative business solutions must be able to meet these needs in new ways. These solutions will need to help cities collectively reduce greenhouse gas (GHG) emissions by 80 to 90 percent, for example, and adapt to a changing climate.
Picture this: as increasing numbers of people migrate to cities, urban energy and water demands also increase. There are rapidly growing needs for housing, food, health care, transportation, and other urban infrastructure. With a changing climate, more frequent heat waves and drought create additional stress on existing energy and water supplies. The need to reduce GHGs, meanwhile, opens new windows of opportunity for different business models and technologies in fast-growing urban areas.
How can subtrends make megatrends more actionable?
Megatrends may have an established trajectory—for example increasing urban population—but companies need information they can act on. For example, what does urbanization mean for markets in China over the long-term? How will large-scale changes affect (or be affected by) national- or city-level changes?
Consider the value of knowing what drives rapid growth in what cities, or how climate challenges will transform a city’s energy systems and infrastructure. A city like Shanghai faces specific challenges with rising sea levels, transportation, and building energy demand. Urban growth, meanwhile, is happening in the context of a rapidly aging population and increasing migration. The city has a negative fertility rate (fewer births than the replacement rate), but its population could double to 50 million by 2050 due to an influx of people moving from rural areas.
What innovative business models could provide affordable, sustainable housing—with zero greenhouse gas emissions and away from risky coastal areas—for rural migrants flowing into Shanghai?
What innovative power solutions can help the city’s residents stay cool during summer heat waves while easing stress on a power grid struggling to keep pace with growth?
What transportation or health care innovations, in light of Shanghai’s aging population, will be needed to address (or avoid) the air quality impacts of increasing cars and traffic?
Megatrends like urbanization and climate change may be global, but the business risks and opportunities are local. Risks due to increasing global demand for water, for example, is only actionable if companies understand the important subtrends.
WRI’s Aqueduct project is creating a more local and actionable picture for better business decisions that account for water risk. The image below is from an interactive water risk map depicting relative risk within the Yellow River Basin in China. For any facility location, the tool will present risk scores for 23 indicators of water scarcity, water quality, water cost, water governance, and socio-economic risk.
By looking closer at subtrends and systems relating to water scarcity, companies can begin asking and answering questions like:
What would be the costs if future water supply disruptions were to shut down production at key manufacturing facilities?
What is the long-term value of innovations that help ensure adequate water supply to meet the needs of growing local populations, as well as the needs of industry, agriculture, and power generation?
How can megatrends interact over time?
Megatrends, and the subtrends driving them, are dynamic. Companies may also overlook risks and opportunities if they are too focused on specific trends or specific time periods.
Yes, urban areas in China are growing and there will be a need for new business models to create affordable, sustainable buildings. But companies who actively look at how multiple megatrends play out over time can be the first to see new risks and opportunities.
What about the long-term need (and near-term opportunity) to retrofit the country’s 470 billion square feet of existing buildings?
How should business strategies factor in long-term trends relating to critical building materials? How should long-term climate resiliency, supply availability, cost, and emissions factor into near-term decisions?
How can our buildings account for (or even help solve) a city’s power, water, and transportation infrastructure challenges over the coming decades?
How can megatrends interact across sectors?
Companies can also find new innovation opportunities if they can draw connections to benefits across sectors. Next practices, by definition, are solutions for challenges that impact multiple industries.
For example, fast-growing cities are likely to face even more gridlock in the years ahead. Traffic congestion issues have implications for any industry relying on efficient transportation systems to move goods, services, and consumers. There are also links to other megatrends and challenges like energy consumption (e.g., wasted fuel), climate change (e.g., greenhouse gas emissions), and health hazards (e.g., air pollution).
Innovations in mobility can provide clean, reliable options to transport customers, employees, and supplies in tomorrow’s megacities. The bus rapid transit (BRT) system in Guangzhou, China, for example, gets 800,000 riders to their destinations daily (three times as many as any other BRT system in Asia). The award-winning system was also cheaper and faster to build than other transit options. Companies that find ways to create, support, or utilize these types of solutions stand to reap benefits as megatrends reshape tomorrow’s markets.
The changes, challenges, and questions highlighted here are just a few examples of how companies might use megatrends to make a case for next practices. Companies that fail to recognize and respond to such sweeping changes risk obsolescence. Innovative companies who identify and meet increasing needs in new ways can find major business opportunities.
We look forward to sharing updates as we develop methods for recognizing, acting on, and creating long-term competitive advantage in a changing climate. For more information about WRI’s Next Practice Collaborative, click here.