Impending Resource Scarcity - The Trend Is Blue
Resource scarcity is one of today’s sleeping monsters, but the pervasive neglect of the business and political worlds regarding this issue, resulting in the use of old and unsustainable business models, has seen us sleepwalk right into the cave of this monster!
The demand for finite resources continues to mount in the wake of the relentless escalation of the world’s population, the constant evolution of technology, the overwhelmingly rampant expansion of the global consumer base, increasing purchasing capacities, and the rapid development of emerging economies. To compound the problem, the supply of natural resources, such as crops, water, energy, and minerals, has continually been constrained by factors including political instability and the repercussions of environmental degradation and climate change.
The growing chasm between supply and demand has pinned a big question mark on the future profitability of a business world overly dependent on finite material resources. This dependence may paralyse the whole manufacturing and business world, including its subsidiary supply chains, if a significant transformation in the basic operational strategy, towards more resource- and energy-efficient business models, is not witnessed in the imminent future.
Outlook for natural resources by 2020 and 2030
When analysing the demand scenario, it is important to take into consideration the potential increase in the world’s population in the coming years. According to UN Department of Economic and Social Affairs estimates, the world’s population is likely to increase to about 9.1 billion by 20501, with under-developed and developing countries expected to be responsible for the majority of this increase. Moreover, the demand for resources is expected to increase enormously, both in developed and wealthy countries, as well as in emerging economies like those of India, China, Brazil, South Africa, and others, for commodities such as energy, food crops, mineral resources, as well as meat and dairy products2.
According to The World Development Report released in 2008 the demand for food is projected to rise by 50% by 2030, with that for meat rising by an even larger than 85%3. However, with average crop productivity growth rates having dropped from 2% for the period 1970-1990 to 1.1% for 1990-2007, and being projected to decline further in light of the falling amounts of land on offer, the food crop supply is expected to experience increasing constraints4.
The BP’s latest Energy Outlook 2030 forecasts that global energy demand is likely to grow by 39% by 2030 or 1.6% annually, in non-OECD countries, while energy consumption in OECD countries is expected to rise by just 4% over the same period5.
While the debate over the capacity of the world’s current oil and natural gas reserves to meet rising demand levels has never really been put to rest, the increasing political instability in major oil-exporting countries has encouraged further scepticism about the future availability of fossil fuels, and pushed countries to embrace renewable energy sources on much larger scales.
Meanwhile, UNESCO is forecasting that global water usage will increase by 32% between 2000 and 2025. At the same time UNDP estimates highlight that global water use has been rising nearly twice as quickly as have population levels for more than the last century, with the trend expected to continue. Another study has suggested that, by 2050, about 1.8 billion people would be subjected to absolute water scarcity, with up to two-thirds of the world’s population, mainly in non-OECD countries, residing in water-stressed conditions6.
Over the past few years, the world has gradually increased its inclination towards a low-carbon global economy as a response to the looming dangers posed by climate change. This low-carbon shift majorly depends on a large number of metals that are themselves getting scarcer and are unfortunately hard to substitute. These metals include indium and tellurium, used in solar PV thin films, neodymium, used in permanent magnets, and cobalt and lithium, which are used in batteries7.
Given all this, what might be termed a ‘sheer ostrichism’ on the part of corporates around the world may not exactly be deemed a prescient business attitude. A 2012 survey-based report, released by PricewaterhouseCoopers (PwC), highlights that business leaders across the global manufacturing sector are aware of the rising scarcity. Mineral and metal scarcity (77%), as well as energy scarcity (75%), is of high priority for top executives, while water (57%) and land (35%) scarcities are considered to be relatively less significant. The minerals which were placed on the critical list include:
- Beryllium, used in military equipment and the aerospace industry
- Tantalum, used in mobile phones, computers, and automotive electronics
- Lithium, used in wind turbines and lithium-ion batteries in hybrid cars
- Flurospar, used in manufacturing of cement, glass, iron, and steel castings
- Cobalt, a material used in industrial manufacturing
Impending scarcity is expected to destabilise supply over the next few years, and the resultant impact is likely to trickle downwards throughout the entire supply chain8.
Recently, resource scarcity has slowly taken centrestage in the policy agendas of many countries. Out of this, major pushes towards energy and resource efficiency, as well as the promotion of large-scale recycling and metal substitution, have been witnessed. Moreover, global calls for more sustainable practices in the production and consumption of goods have been issued through international platforms such as the United Nations’ Conference on Sustainable Development (UNCSD). They further highlight the growing need for new business models and lifestyle changes, such that concerns over sustainability might be addressed more swiftly and more extensively.