Environmental constraints are triggering changes in demand, resources, and policies, resulting in new business opportunities.
According to Navigating an uncertain future: Environmental foundations for long-term success, a new report by the now-defunct New Zealand Institute, these include:
• Strong demand for safe and
healthy food leading to price increases for commodities, price
premiums for traceability and quality assurance, and growth of value-added food product exports
• Demand for products and services
that will facilitate the transition to a low-emissions economy
with less environment impact
• International sale of technologies developed to adapt to environmental changes or for value-
added products and services
• Using a green lens in all businesses to identify environment improvement opportunities that also provide commercial benefits
Written by the NZI's Rick Boven, Catherine Harland and Lillian Grace, the report was nearly complete when NZI merged with the
New Zealand Business Roundtable to form the New Zealand Initiative.
The paper is now complete and can be found here.
The study opens with the well-worn message that Earth’s resources are being used in an unsustainable way and that environmental constraints are affecting prosperity and well-being.
And it offers a few recommendations as to what action we – mostly led by government, with a smattering of business input – can take.
Why aren't we more concerned?
As the authors point out, people who live in cities want goods and services that place demands on ecosystems but do not understand the consequences for ecosystems because they do not observe those consequences directly.
Other rationales include not believing climate risks are material, prioritising short-term economic growth over long-term outcomes and preferring to wait until change is required.
Whatever the reasons, Navigating an uncertain future reminds us that New Zealand has the fifth highest greenhouse emissions per capita among OECD countries, with 47 percent of emissions from agriculture
And as customers in other countries become more focused on climate outcomes, they are asking New Zealand exporters to comply with their expectations about the impact of production and distribution.
"Food miles and carbon footprints influence purchasing choices by retailers and consumers while some products earn price premiums by having strong environmental credentials, effectively marketed."
Predicting the future
Crystal ball gazing is a tricky business. Treasury’s forecasts in 2006 and 2007 assumed ongoing growth and nobody anticipated the GFC.
"In the mid-2000s there was widespread belief that economies and asset values would continue to grow, stimulating debt-fuelled speculation. Observation of a strong asset appreciation trend led many to believe the trend would continue indefinitely.
"Now, only a few years later, a very different economic reality is recognised. Paradigms, over- confidence, failure of imagination and lack of robust analysis can easily produce unrealistic assumptions about the future."
The report concludes that there may be no practical alternative in economic forecasting other than to assume continuous trends.
"However, we should be aware that such forecasts are likely to be disrupted by unexpected surprises."
The report projects four possible futures illustrating what might happen next.
Future 1 is the consequence of maximising growth with a limited environment, with growing resource use and environmental deterioration until the environment can no longer support the output.
Future 2 is the outcome of compromise, where resource use is slowed and there is effort to reduce environmental damage. Resource use remains much higher than the sustainable productivity so eventually a correction occurs, but it is deferred.
Future 3 is the outcome that growth maximisers should seek, the report says. Growth and resource use continues to grow but restoration and improvement of the environment combines with technology development to rapidly increase the sustainable output. The authors write that it might be possible to invent cheap energy and technologies that alleviate resource scarcity, and that growth maximisers should be the strongest advocates for protection of the environment and for green technologies.
Finally, Future 4 illustrates the path that may lie ahead if recent energy, food and materials cost increases signal the end of the age of abundance. As the environment deteriorates and resource costs increase, output growth turns into output decline.
After 2050 things become much more uncertain, according to the authors.
"Population growth will have slowed as the demographic transition is completing in most developing countries. Forty years is long enough for resource scarcities to emerge and play out geopolitically, for some climate change and ecosystem effects to mature, and for unanticipated breakthrough technologies to be developed and deployed."
The report warns New Zealand needs to acknowledge the possibility that continuing to maximise undifferentiated economic growth will "increase the overshoot risk and eventually lead to a collapse of output and population".
Developing an environmentally informed long-term strategy might seem futile given the amount of uncertainty about the future and the scale and scope of possible global changes.
But the report suggests developing an environment strategy with three themes:
• No Regrets strategies that allow New Zealand to take advantage of or respond to expected changes in ways that realise benefits or have only low costs if changes do not occur as anticipated
• Mini-max strategies that protect against catastrophes by minimising the maximum
• Long term strategies that develop New Zealand’s capability to manage and adapt to anticipated and uncertain environment futures
See below for an overview of its 16 specific recommendations, beginning with immediate No Regrets actions and culminating in suggestions for longer-term implementation.