23 September 2013
2030: A "perfect storm" of global resource shortages
By CNBC's John W. Schoen. © 2013 CNBC.com
Corporate leaders give themselves a lousy grade on their efforts to develop sustainable supplies of natural resources strained by a growing global population and a rapidly expanding middle class of consumers.
With demand for everything from food and water to rare earth minerals expected to continue to rise, companies and governments are increasingly undertaking a variety of efforts to develop a more sustainable supply chain, one of the topics highlighted at the Clinton Global Initiative's annual meeting.
Among other projects, the Clinton Global Initiative last year helped launch Sustainable WasteResources International to tackle the health and environmental impact of billions of tons of waste produced worldwide.
(Read more: Clinton Global Initiative is 'mobilizing for impact')
This year's weeklong conference will bring together more than 1,000 global leaders—some 60 current and former heads of state, including President Barack Obama, along with NGO and philanthropy leaders from over 70 nations— to brainstorm ways to head off increasing strains on the natural resources that keep the global economy on track.
They have a lot of work ahead of them, based on the main finding of a recent survey conducted for the U.N. Global Compact, the world's largest corporate initiative to develop a more sustainable global economy. The survey of more than 1,000 CEOs across the world—the largest of its kind ever conducted— found that two-thirds believe the global economy is not on track to meet the demands of a growing population.
Despite wider awareness of the need to adopt sustainable practices "business efforts on sustainability may have plateaued," according to the report, conducted by Accenture and released Friday.
In the short term, the tough economic climate has made it more difficult for businesses to justify these investments. But the longterm outlook hasn't changed, according to Craig Hanson, director of the People and Ecosystems Program at the World Resources Institute.
(Read more: A hungry world: Lots of food, in too few places)
"The outlook does look dire for many types of natural resources if we continue on the status quo," he said. "The tough issue is that many of the places that face those resource constraints don't have the technical or human capacity to adjust and deal with an acute shortage."
But corporate CEOs report that they're having a harder time justifying the investment in overhauling their supply chains to promote sustainability. "Signals from consumers are mixed" and "investor interest is patchy," according to the U.N. Global Compact study.
The CEOs also say that for these efforts to succeed, both businesses and governments need to collaborate better to apply solutions across industries and sectors. Both also need to better share the financial impact.
Global businesses may also feel less urgency to advance sustainability at a time when sluggish economic growth has eased the upward pressure on supplies of raw materials and commodity prices. Ongoing advances in supply chain management also may have sparked hopes that future technologies may help head off looming resource crises.
German software giant SAP, for example, is among a broad range of companies helping businesses and governments apply new processes and technologies to squeeze more efficiency out of a variety of resource supply chains. Rapid advances in data analytics, for example, are helping track down and reduce waste.
"There is always the hope that you'll find more," said Peter Graf, chief sustainability officer at SAP, one of the companies participating in the Clinton Global Initiative conference. "Mankind has become more and more sophisticated as over the last 100 years to go and exploit those resources. The problem right now is that demand is outgrowing our ability to find new resources. The risk is that we're outgrowing our ability to find new stuff."
(Read more: As drought spreads, firms could be up the creek)
The relentless growth of human population in the modern world has brought dire warnings of resource shortages ever since British economist Thomas Malthus more than 200 years ago predicted that overpopulation would bring a catastrophic famine.
Since then, tight supplies of raw materials and commodities have typically spurred investment in new production, and research in efficiency and substitution of cheaper materials have helped head off shortages. As a result, for much of the last century, the global economy was fueled by a seemingly endless supply of cheap, abundant raw materials.
But the rapid expansion of the global pool of middleclass consumers is straining the world's supplies of natural resources—from energy and minerals to water and food—at a pace that would make Malthus say "I told you so."
"It's not the total number of people, it's the number in the consuming class," Fraser Thompson, a senior fellow at the McKinsey Global Institute, coauthor of a 2011 report on resource sustainability. "That's where the real transformational change is happening."
(Read more: The American invention India really craves--exurbs)
The numbers are stark. While the current world population of about 7 billion is projected to top 8 billion by 2030, almost all of that growth is expected to come in the developing world. That means the current population of consumers— people with more than $10 a day to spend— is expected to more than double from 1.8 billion to 4.8 billion.
Still, experts in sustainability say the story of the human race doesn't have to end badly.
After dire predictions of "peak" oil a decade ago, for example, rising energy prices spurred investment in new production. New technologies prompted a boom in production of "unconventional" shale deposits. Consumers have switched to higher efficiency cars, bending the demand curve for gasoline, which has been in decline since 2007.
But the solutions to energy shortages are more difficult to apply to resources like water or food, especially in the developing world where demand is expected to grow even more rapidly than at any time in history.
(Read more: How Google Earth surveillance will protect forests)
As Thompson explains, much of the resources that exist are in harsh geographic locations with limited access to infrastructure. And much of the supply is in countries fraught with political risk. That makes sustainable resource development more difficult.
One solution is to use a much larger share of resources more than once. But while it's easy enough to recycle an aluminum can; it's a lot harder to reuse the raw materials used to make cars or shoes.
"The only way out of that is the way we design products (for recycling) in the first place," according to SAP's Graf. "Because a lot of what we do right now ends up on landfills."
Those technologies have the potential to substantially alter the projections of looming shortages, according to Fernando Miralles a hydrologist at the InterAmerican Development Bank (IAB).
"What people fail to consider is that these trends will drive the development of different approaches and different technologies that will help solve the problem," said Miralles.
"Trying to say that you're doomed because you're not going to be able to solve it with today's technology is a selfdefeating premise."
(Read more: Firms try to outwit Mother Nature using big data)
The IAB, for example is helping officials in Argentina develop new water infrastructure, introduce more efficient agriculture practices and spur conservation in the northern part of the country where both urban residents and farmers face a projected 20 percent decline in water supplies by 2050 because of climate change, he said.
Many of the world's major cities lose as much as 50 percent of their waiter supply to leaks; rebuilding aging infrastructure could go a long way toward heading off shortages. Improved efficiencies in agriculture—the biggest source of water demand—could stretch supplies by substituting drop irrigation for sprayers or lining irrigation ditches with plastic.
As Graf sums it up: "We can sit here and hope and wait that research or someone will come along and figure it out and let us continue to do what we've done in the past, or we can take the bull by the horns and optimize our use of resources today."