Editor’s Note: On Nov. 15, 2012, Western News celebrated its 40th anniversary with a special edition asking 40 Western researchers to share the 40 THINGS WE NEED TO KNOW ABOUT THE NEXT 40 YEARS. This is one of those entries. To view the entire anniversary issue, visit the Western News archives.
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Sustainability for business translates into effectively managing the triple bottom line – financial, environmental and social outcomes – whether now, or 40 years from now. Will business be more sustainable in four decades? I see both signs of hope, and indications history will repeat itself.
But let me begin with three quick caveats. First, natural resources always will be crucial for business (and us). Second, business is making much progress, and continued progress is expected, but the pace of change will not be faster than consumers and communities are willing to substantively support (beyond mere lip-service). Finally, a forecaster is always wrong, but like horseshoe pitching, being close counts.
For business, two key resources will become ever more important: energy and water. To be sure, access to inexpensive energy limits growth and widens the divide between those that have and those that don’t.
The good news is I expect us to make significant strides toward non-carbon energy. Nuclear energy will grow in absolute terms. But thankfully, with accelerating technology improvement, renewable energy will form a greater portion of this non-carbon energy.
Perceived social costs and risks also increasingly favour renewable energy.
Now the bad news: I expect the speed of this transition depends on the cause of the next global crises – economic, environmental or social. (For a variety of reasons, we can all predict that a crisis of some form is unavoidable.)
For example, you might recall the financial crisis of 2008 derailed many development efforts for renewable energy. Consumer-driven cost pressures further prompted faster development of inexpensive carbon-based fuels (e.g., natural gas fracture drilling).
So, while I predict the ‘slow-train wreck’ crisis around global warming will push firms to ramp up intended development of nuclear and renewable energy, one must assume we dodge catastrophic economic crises. If another large-scale financial crisis occurs, society will again favor low-risk, inexpensive carbon-based energy, to the detriment of our climate.
The second key resource, water, is both different, and yet, very much related. Water has few substitutes other than conservation and reclamation. So, business will rush to expand business models and develop technologies that purify and conserve water (inexpensive energy might help, too).
But global warming and market growth can be expected to exacerbate current water shortages. Thus, a negative spiral occurs: economic crisis spurs use of inexpensive carbon-based fuels, which accelerates climate change, which further raises water and food prices. And higher prices for these staples spurs more use of carbon-based fuels.
Overall, not a pleasant set of predictions.
So, for me, making substantive gains in triple bottom line sustainability in 40 years comes down to a push by both business and the regulators to improve financial governance, accountability and transparency, while simultaneously investing in renewable energy and water conservation.
We will not get every one of these ‘bets’ exactly right, but like a portfolio manager, supporting multiple approaches to these issues will yield high-value sustainability winners.
Robert Klassen is the Magna International Inc. Chair in Business Administration in the Richard Ivey School of Business.