5 ways businesses can take sustainability from ideas to impact
Our new report ahead of the annual Ecosperity conference reveals how businesses can grow by honing their sustainability strategies.
Solving global problems can be big business—up to $12 trillion globally and $5 trillion in Asia alone—but it will mean doing away with conventional means of producing and selling, and taking bold steps to integrate new business models and forge new partnerships.
In a region where food fraud is worth $40 billion and 512 million people lack access to electricity, a new report that we commissioned is calling on the private sector to take action to bring about a better quality of life for people in Asia.
Ecosperity Conversations 2018 - Better together: Business, government, society and our sustainable future, outlines seven areas in which developmental challenges exist - healthcare, food and agriculture, energy and materials, cities, textiles, Industry 4.0 and resource recovery.
It is one of four deep-dive reports that have been unveiled before our annual Ecosperity conference on responsible business, which this year focuses on how businesses can go "From ideas to impact". Ecosperity Conversations 2018 highlights the benefits businesses stand to reap from stretching the use of natural resources through improved efficiencies and new business models, prioritising public-private partnerships, and serving low-income customers.
Here are five of the most critical ways businesses can make an impact in the region.
1. Design your business for the low-income segment
Bottom of the pyramid is a term referring to the poorer two-thirds of the global economy, who often have little access to basic amenities such as electricity or clean water. Representing 4 billion of the world population, serving this market is a chance to do the most social good while also generating new business opportunities.
Statistics from International Finance Corporation have found that the poor can spend up to 10 per cent of their monthly household income on energy access. This includes fuel sources like kerosene, wood and charcoal that are not only inefficient but also pose a threat to health.
Creating lean business models that can profitably serve low-income customers such as mobile “pay-as-you go” solar energy services can tap latent opportunities in this market.
2. Improve efficiency
This nugget of wisdom makes the most conventional business sense, but the potential of its impact cannot be underestimated, especially in labour-intensive industries such as textiles, which makes up more than half of total manufacturing exports in Cambodia, Bangladesh and Pakistan.
Increasing efficiency here requires little capital expenditure, and the European Union-funded SWITCH-Asia organisation was able to help factories in Myanmar reduce fabric wastage by 18 per cent, energy consumption by 20 per cent and water consumption by 16 per cent. Safety precautions and training reduced the monthly labour fluctuation rate by 20 per cent.
Innovation can play a key part in this by better matching demand and supply, and negating losses. For instance, 65 per cent of all food losses occur in developing countries within the value chain due to inadequate transport or storage, despite technologies to address these issues being readily available today.
A new artificial intelligence system in Japan, developed by the Japan Weather Association, Mizkan Holdings and Sagamiya Foods, is helping food production companies predict food demand based on weather and sales data to prevent overproduction.
3. Sell services, not products
One trend that has been popularised by the sharing economy and is the sale of services rather than goods. Studies have noted that cars tend to be unused for 90 per cent of the time, and 40 billion square metres of office space is unused during work hours, giving rise to car-sharing and office-sharing arrangements. This reduces the need to produce new cars or office spaces and cuts down the upfront costs of usage.
Complex consumer items such as vehicles are often scrapped due to the failure of a small number of components and new business models are emerging that target the repair of these parts, thereby extending the lives of these items.
Tyre manufacturer Michelin, for example, bills trucks and airlines based on the distance each vehicle travels, the weight transported, or plane landings achieved through the use of its tyres, rather than for the tyres themselves.
4. Stay ahead of regulation
To those who have been paying attention, the writing’s on the wall: the natural resource free-for-all is almost over, and stricter regulations to address the social costs of business are coming. This could take the form of carbon taxes or stricter legislation on energy and water use, and it has been estimated that climate regulations could result in $300 billion in stranded assets worldwide by 2035.
A number of companies have already begun to react by internalising the social costs of their business, including Olam. The agribusiness giant is developing digital solutions to monitor and shrinking its environmental footprint.
Attempts to ease traffic congestion in cities will likely take the form of dynamic road pricing and carpooling could have the effect of reducing demand for cars and carparks. Those who own parking space could consider putting this space to alternative business uses.
The report recommends that companies in the extraction business mitigate the threat of regulatory action by improving recovery rates, reducing water and energy use, and improving the rehabilitation of used mining sites. Energy companies can do the same by shifting to renewables and spurring demand for smarter grids with energy storage capacity and the ability to balance clean energy inputs.
5. Create new forms of collaboration to encourage sustainable behaviour
Every day, 3.5 million tonnes of waste is generated in cities, with more than 40 per cent of total waste disposed of through unregulated burning each year. With as much as 5 per cent of global emissions coming from incinerating trash, resource recovery is a growing imperative.
But to do that, customers should be seen no longer as end-points in the value chain but another link in a reorganised, circular chain of production. Consumer durables could be leased out or sold back to manufacturers and recyclers at end of life, or consumers encouraged to recycle with monetary incentives as consumer goods firm Unilever is doing in Indonesia and Morocco.
The right business model can encourage behaviour change. Outdoor apparel brand Patagonia offers product repairs and lifetime warranties for its products, which gives customers a reason to reuse the same jacket, for instance. Insurance company AIA offers monetary incentives for consumers to keep fit through an app. This has the long-term effect of keeping healthcare more affordable for the wider population.