Elephant in the Boardroom: Why Unchecked Consumption is Not an Option in Tomorrow’s Marketsby , , and -
The Elephant in the Boardroom: Why Unchecked Consumption is Not an Option in Tomorrow’s Markets is a new working paper from WRI that can guide discussion within companies about an uncomfortable truth: many of today’s business models are not fit for tomorrow’s resource-strained world. Normalizing the conversation will set the groundwork for the pursuit of new business models that allow growth within the planet’s limits and generate stakeholder value in new and exciting ways.
There has been a sea change in business leadership on environmental and sustainable development issues over the past 20 years. Many CEOs speak “sustainability,” and many multinational companies have invested resources to build internal capacity on sustainability. It has become common for these companies to establish greenhouse gas emissions reduction targets and renewable energy goals and to address water risk and deforestation. Indeed, it is difficult to imagine how the historic Paris Agreement on climate change or the United Nations’ wide-ranging Sustainable Development Goals could have been cemented without the support of business. However, underneath this welcome progress lies an uncomfortable truth: Most businesses’ growth is still predicated on more people buying more goods. The world will have more than 9 billion people by 2050, and the middle class will have swelled by 3 billion by 2030. On top of this, consumer expectations for yet more are being stoked by trends such as fast fashion. The rapid expansion of consumption-driven markets in the coming decades is the anticipated engine for continued business growth. The problem is that the planet’s natural systems and finite resources cannot keep up. Studies cited in this report show that we are already at or close to the limits of the planet’s ability to provide. A continuation of business as usual would mean not just a slight additional strain, but three times our current consumption on the planet’s already overused resources. Without a change to current business models in which growth is predicated on selling more goods to more people, environmental stresses will pose increasing business risks and costs. Ultimately, it will be a brake on business growth. Whether we look at consumer durables, fast-moving consumer goods, or consumables (this paper looks at all three), the pattern and risk of selling more stuff to more people is the same, and we see that efficiency improvements underway are not sufficient to counteract anticipated global growth. Fifteen years ago, climate change was the “elephant in the corporate boardroom.” Now the conversation is so normalized that more than 200 companies have science-based carbon reduction targets, a dramatic increase in ambition. Business growth predicated on consumption is not surprisingly an elephant in the corporate boardroom. It is uncomfortable and unmentioned, both because the model has worked so well financially in the past and because addressing it challenges the traditional business model. Analysis of sustainability reports cited in this paper uncovers an alarming lack of attention to natural resource limits. The few quotes in this report attributable to corporate spokespeople boldly referencing resource limitations are notable for their rarity. It is not necessary to insist that people make do with less goods or that some people cannot have goods but rather that companies innovate new business models that deliver shareholder value and that shape and meet consumers’ needs in a different way. There are encouraging signs that some companies are examining their business models in a new light. Examples include companies that have put ideas like circular manufacturing and collaborative consumption into practice or that have created new ways of selling the services their products provide instead of selling the product itself. Several examples are discussed in this paper; however, none are yet mainstream. The purpose of this paper is to begin to normalize the topic so that sustainability professionals, the C-suite, the board, and investors are able to openly recognize and discuss the challenges. It is only by having these conversations that businesses can start to identify transformational business models; models that will enable business to thrive by serving the markets of the future within the limits of the planet’s resources. This report calls on companies to do the math by looking openly and honestly at their dependency on natural resources and the associated limits on business growth; take a leadership role by using their influence to change the conversation with key stakeholders; and transform the business to one that will thrive in a resource-constrained environment. Through the Sustainable Development Goals, the world has accepted the challenge of delivering growth in societal well-being while staying within the limits of the planet’s resources. Business sits at the nexus of this challenge. Future business success demands that business growth be delinked from increasing resource and environmental impact. Businesses that do so will be there to serve their customers and their shareholders. Those that do not will be outcompeted by disruptive new entrants that are more innovative and transformational.