Businesses ‘sleepwalking’ into resource shortages

Businesses ‘sleepwalking’ into resource shortages

New international research carried out by the Carbon Trust suggests that listed companies are unprepared for the impact of diminishing natural resources.

The study found widespread inaction: 43 per cent of the organisations included said that they do not take into account the possible risks of issues such as environmental disasters and rising energy prices, while 52 per cent have not set targets for carbon, water or waste reduction.

The study included 475 senior executives in Brazil, China, Korea, the UK and USA and found that many of them are not currently willing to examine the issue of resource scarcity and believe that major changes in their business operations will not be necessary until 2018.

These findings link to the fact that only 13 per cent of board directors are rewarded for achieving sustainability metrics, and nearly half (47 per cent) of executives feel that acting on sustainability issues decreases their profits.

However, many of the organisations felt that when resource scarcity does become a reality, this will impact negatively on their businesses: 60 per cent think the cost of their products and services will need to increase, 55 per cent that they will need to be involved in fewer markets and 43 per cent that they will deliver a less varied service or choice of products.

Tom Delay, Chief Executive of the Carbon Trust, commented on the study’s findings: “The research shows that many organisations are ‘asleep at the wheel’ when it comes to addressing sustainability and resource scarcity, doing nothing to address a problem they indicate could hit their operations by 2018.

“Too often businesses see taking action on resource and sustainability issues as an obligation and a cost. We know from our extensive work on carbon that good management of resources can lead to new commercial opportunities and thriving businesses.

“Currently, many organisations seem to accept that they will have to make significant changes to their business because of resource scarcity, and that these changes could impact their profits. But many are sleepwalking into a resource crunch.”

The study found, however, that UK businesses are the most likely to believe that managing and reducing carbon emissions, water and waste would benefit them. UK companies currently spend the most on sustainability and are the most likely to implement a programme with targets and reporting practices.

Delay added: “UK listed companies are better placed than most for the upcoming resource crunch – could this mean that despite the current shift in the world economic order the UK will gain commercial opportunities as competitors in other markets struggle to cope in a resource-constrained world?”

Contrastingly, Brazilian companies are the least likely to have a sustainability programme: 51 per cent do not currently have one, compared to 13 per cent in the UK. This corresponds to lack of investment in Brazil: 76 per cent of Brazilian companies reported that they could not afford the necessary investment, compared to 31 per cent across all countries included in the survey.

The study also found a significant difference between business-to-business (B2B) and consumer-facing organisations’ attitudes to sustainability, with B2B organisations believing that action on resource scarcity will need to be taken sooner. “B2B” companies feel that they will need to take action in four years time, and just 19 per cent of them do not have a sustainability programme.

In contrast, consumer-facing companies believe that they will need to take measures in the next ten to 15 years at the earliest, 54 per cent do not have a sustainability programme, and 33 per cent admit that they have no plans to introduce one at all.

The study suggests that there is still a long way to go until awareness about sustainability becomes common within boardrooms. Only four per cent of boards included in the research are responsible for sustainability, and a quarter (25 per cent) stated that no one is responsible or accountable for sustainability within their company.

Read the Carbon Trust’s infographic study.