Tuesday, October 12, 2010

Sustainability - the Balanced Scenario

Oh no, not another article on green issues! We’ve got a recession to dig ourselves out of, we’ve got the dreaded cuts just round the corner...


We need to stimulate growth, we need to get our businesses going again...


Yes, we’re very sorry about the polar bears and the Gulf of Mexico is a bit of a mess, but the economy needs energy and we all need jobs...


And anyway the scientists can’t agree, can they? And what about that lot down at the University of East Anglia?


You still here?

It’s not easy being an environmentalist. One of the major problems I find is other environmentalists, whose ideas are often impractical, naive and extreme. Of course if you believe that we are on the threshold of a total global catastrophe and no-one is doing anything about it, it’s tempting to climb up a power station chimney, ram a whaling ship or devastate a field of GM crops. It’s easy to write people like that off as vandals (and some of them are!) and go back to business as usual.

Business is what it’s about. Sustainable business. Staying in business and staying in profit, in spite of what’s happening in the environment at large. Business has always faced threats - from competitors, from technology, from politicians, from the bank! Successful businesses - sustainable businesses - have recognised these threats, made plans, taken action and survived and prospered. They have recognised that business as usual is an illusion, and all too often a primrose path to ruin.

So what’s changed? All the traditional risks are here, with the added excitement of government cuts and a global recession. I could add a whole litany of environmental threats, with the added assertion that it’s all the fault of business as so many activists like to believe. Passing round the blame will not get us anywhere, but nor will ignoring realities and failing to plan. And let’s not forget there’s good news - opportunities - as well as bad.

If we look at the whole field of sustainability, it’s about a whole lot more than just climate change. Yes, climate change is a significant threat. Regardless of whether it’s our fault or not, increased-intensity weather events can devastate markets and cut supply chains. Since most governments believe that it is our fault, businesses are increasingly faced with taxes for emitting CO2.

From a physical point of view there are increasing constraints. Rare earth metals, key components of wind turbines and electric cars, are becoming rarer. Helium will run out well before the end of the century at the current rate, and that won’t just mean no more party balloons but no more MRI scanners, LCDs or fibre optics! Agriculture is struggling to keep pace with ever-increasing population and natural disasters. Floods in Pakistan this year and wild-fires in Russia have sent up the price of grain. The loss of habitat and bio-diversity means the loss off potential new medicines and new crops. Peak Oil and the increasing reliance on oil from hostile nations and hostile locations threaten the price and security of our energy supply.

All right - that’s the bad news, and I accept that the natural reaction of most people is that it’s very sad and very serious but they don’t have the time or the clout to do anything about it. True. But whatever happens you can take action to protect yourself.

Planning, and in particular scenario planning, is becoming increasingly vital. Let’s just distinguish this from contingency planning.

Contingency planning is being ready to keep the business going in an emergency; so you’ll have a plan for a public transport strike that keeps half your staff from getting to work, for a power cut that could threaten your freezers, for a suspicious parcel in the post room and other things like that. It’s essentially about preserving the current business model.

Scenario planning is taking a point in the future - five, ten, twenty-five years ahead - the period will be governed by your capital investment cycle - and predicting what the world will then be like from a social, economic, competitive and technological point of view. It is usual to produce one or two scenarios, changing the major assumptions each time. The key question is then “In the projected scenario, is my business going to be viable?” For example, in the face of increased health propaganda, will a tobacconist be a viable business in 2020? If the government achieves its 35% CO2 reduction by 2020 should we still be selling petrol cars or electric ones? Remember what happened to the radio valve when transistors were invented? What happened to saddlers and harness-makers when Henry Ford brought out the Model T? And who makes a living out of developing photographs these days?

So sustainability is all about staying in business, as well as saving the planet and doing what we can to preserve a future for our kids. We need to reduce, re-use, recycle - and re-engineer if our businesses are going to survive. But first, forget about the alligators and draining the swamp for a minute. Take a moment to look at some future scenarios and ask yourself whether where you’re heading is where you want to go - or even if you’re likely to get there!

Anthony Day is director of Cyber Associates, the environmental management consultancy He worked on the Management Accounting Guideline on Sustainability published by the international accountancy bodies and joined the DEFRA consultation on the greenhouse gas reporting standard.

He delivers workshops to senior management on scenario planning for sustainability, has made conference speeches throughout UK and Europe and now facilitates regular webinars. http://cyber-associates.com/scenario-planning

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