For the past century, many companies have thrived on business models that feature ever-increasing consumption as a driver of financial success. But in an open letter published by GreenBiz, corporate CEOs are advised that the next wave of successful innovation in business will need to focus on a long-term investment in sustainability. The piece warns innovation in current business models may not be keeping pace with global consumption. It’s time to move beyond “comfortable” discussions about climate change and efficiency improvements—and address more challenging changes on the near horizon.
According to the article, the worldwide number of potential consumers is expected to grow dramatically in the near future. It’s estimated that the global middle class will increase by 3 billion by 2030—almost 10 times the current U.S. population.
From the article:
These demographic shifts represent a human development milestone and a rich market opportunity for businesses, but it will not be possible to meet soaring consumer demand with business models that depend on increased consumption.
This expansion of the middle class will pose a growing challenge to distributing a finite supply of natural resources. It will become increasingly difficult to fulfill consumer requests without a shift to sustainable business practices. Current projections show the demand for materials could triple by 2050, compared to 2000 levels. This will make it difficult to find enough raw materials and energy necessary to meet production goals.
Also from the article:
Better technology and improved efficiency will help bridge the gap, but business growth purely through increased consumption is a risky strategy in such an environment.
Industries that adopt “sharing and repairing” rather than “dumping and replacing” consumer business models may see better long-term success. Other companies may choose a shift to providing services rather than products. For example, now that light bulbs are extremely long-lasting, Phillips is moving away from selling bulbs to selling the light itself to commercial clients as a system, not just a product.
In general, improved energy efficiency is a good step forward for all businesses, but each industry will also need to develop their own unique business model innovations. The best advice for corporate leadership is to encourage their sustainability teams to frankly discuss long-range natural resource consumption and its possible impact on business. Looking past traditional models toward more sustainable business practices can help ensure continued economic growth in the future.