Resource inefficiency risks $2 trillion

23rd January 2012


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IEMA

Failure by businesses to improve energy efficiency and resource use could cost the global economy trillions of dollars by 2030, warns the World Economic Forum (WEF)

In its latest report, the WEF estimates that if governments and industry do nothing to address steel and iron shortages $2 trillion-worth of output will be put at risk. However, the WEF concludes that if businesses take a lead on resource efficiency they will help to protect economic growth and drive sustainable consumption.

Political action to cut greenhouse-gas emissions and improve resource use globally is not working on the scale needed, argues the report, but the private sector has the ability to separate growth from environmental impacts by helping consumers make sustainable choices, engaging with suppliers to improve resource use and working with governments to shape environmental policies moving forward.

According to the report, if consumer goods manufacturers improve their use of steel and increase recycling rates they could save up to $46.9 billion by 2030, while improving energy efficiency could create savings of $37 billion – the equivalent of 1% of the entire sector’s projected output.

Across all sectors, the report predicts that the costs associated with carbon emissions could rise to $ 1.8 trillion across the US, the EU, Japan, Brazil, Russia, India and China, 55% of which it says could be avoided through investment and the adoption of more efficient technologies. To achieve these savings, governments would also need to adopt a steady, targeted policy approach over the coming decades.

“The sustainability agenda is not an abstract development concept,” commented Sarita Nayyar, managing director and head of consumer industries at the WEF. “There is real economic value at stake. Companies that effectively weave resource efficiency into their core strategy and operations can drive revenue growth, reduce cost and improve brand reputation.”
Unilever CEO Paul Polman agreed: “Making your business sustainable in today’s world is an absolute imperative. The business case for sustainable growth is clearer than ever and the urgency of the issues we face means that business leaders have no choice but to act.”
However, the report warns that there remain significant barriers to decoupling economic growth and environmental impacts, including continued subsidies for fossil fuels, transport and water use, and short-termism in both businesses and political outlook.

Nyvar warns that greater collaboration between organisations and governments: “Decoupling needs to happen in every business and every country through a commitment to action,” she said.

The report cites five key elements that business leaders and CEOs regard as crucial for businesses to embed sustainability, including: direction by top management, the alignment of sustainability with the core aims of the business, financial incentives for carbon and resource efficiency and frequent reports detailing company performance.

The WEF’s report was followed by new guidance from the International Energy Agency on how governments can encourage more public–private sector partnerships to provide finance for energy-efficiency measures. The IEA argues that while energy efficiency can provide a high rate of return for businesses, a lack of available finance remains a key barrier to investment.

The IEA concludes that more policies like the UK’s forthcoming Green Deal, Energy Companies Obligation and the proposed Green Investment Bank are needed across the globe and describes how policymakers can best develop such initiatives.

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