BLOG POST: I'm Shrikant Ramakrishnan, Global Business Development Director at Plantagon. This week I'm presenting some thoughts on the new business ecosystems and growth patterns.
New Business Systems
The rules of business growth have changed rather quickly over the past decade. The increased attention to how businesses address environmental and social issues enabled by the digital connectivity and "frictionless" access to information by stakeholders. Anyone with a social media account and access to information is a stakeholder. No longer is business growth solely tied to how businesses relate to their customer base.
While these changes are disruptive to traditional business models, we view these changes as positive. The promise of the digital revolution is being fulfilled as consumers and civil society reap the benefits of greater access to information, services, products and a global voice. This digital revolution, coupled with an increase in the value placed on environmental and social performance, is re-writing the rules of business growth.
Awareness of global and local environmental and social issues is enabled by access to data and information. The internet and social media is connecting the world, and this connection is allowing civil society to unite and have a voice as to how business operates.
To capture the growth potential of the developing world, companies are now engaging in both traditional and new ecosystems that are addressing resource, environmental and social issues.
There are several high profile examples where civil society has withdrawn companies’ social license to operate due to perceptions of how these companies have affected water resources. In some cases, local opposition has scaled to a global boycott of products resulting in loss of sales revenue and brand impact. The voice of stakeholders has been amplified and both the private and public sectors are under increased scrutiny.
This is most apparent in many emerging markets. To capture the growth potential of the developing world, companies must begin to engage in both traditional and new ecosystems that are addressing resource, environmental and social issues. The new ecosystems will consist of governments, non-profits and even competitors (small and large) and in many cases will need to be built to unlock the business innovation and growth potential.
While historically companies have focused on "social license to operate" in emerging markets, they are moving towards a "license to grow" strategy which incorporates programs to address complex environmental and social challenges by working with governments, civil society and other companies.
Key activities in this "license to grow" strategy consist of proactive engagement with diverse stakeholders, including working with competitors in a pre-competitive framework along with integrating environmental and social sustainability strategies into business strategies. This new way of thinking about growth is a departure from a more traditional risk mindset (social license to operate).
This shift from a risk to growth strategy is gaining traction. The reason we are possibly seeing more companies embed environmental and social sustainability strategies to their business growth strategies in emerging markets are in response to several global trends outlined below.
The Food-Energy-Water (FEW) nexus
There is an tremendous increase in competition for water, energy and food due to population growth. According to the International Union for Conservation of Nature, "By 2050, a global population of over 9 billion will increase water demands by 55 percent, energy needs by 80 percent and food demands by at least 60 percent." Add to this the rise of the middle class in emerging economies and the associated demand for goods, and the increasing strain on the world’s water, energy and food systems becomes clear. Consider these projections:
Population growth — The global population recently crossed 7 billion and is increasing by about 70 million people per year, with most growth in emerging economies. Total global population is expected to reach 8.1 billion by 2025 and 9.6 billion by 2050. Staggeringly dangerous numbers these.
Energy demand — Global primary energy consumption is projected to grow by 1.6 percent per year from 2011 to 2030, adding 36 percent to global consumption by 2030.
Water demand — By 2030, assuming an average growth scenario without additional efficiency gains, global water requirements will grow from 4,500 billion cubic meters to 6,900 billion cubic meters — about 40 percent above current accessible and reliable supplies.
Food demand and changing diets — In the last 3.5 decades, food consumption increased from an average of 2,370 kcal/person/day to 2,770 kcal/person/day. This growth was accompanied by significant dietary changes, as diets shifted towards more livestock products and vegetable oils and away from staples such as roots and tubers. Total food consumption globally, as measured in kcal/person/day, is projected to increase from 2,373 in 1969/1971 to 3,070 by 2050. One key point to also note here is the lack of arable land to meet any increased demand - for even staple food.!
Climate change is resulting in shifts in agricultural production, extreme weather events, changes in the marine environment and geopolitical risks. The two major sinks of CO2 within the atmosphere and the ocean are both showing signs of saturation and major change. The current atmospheric carbon saturation level is the greatest in human history, and issues such as stronger, more damaging storms and increasingly anomalous weather patterns are beginning to emerge.
What needs to change?
As businesses focus their growth, strategies on emerging markets they will have to re-evaluate some fundamental assumptions.
Social impact & Innovation
The boundary between public and private sector always has been blurry.
There long have been "company towns," where companies have been responsible for the social welfare of their workers and their families. Indeed, many companies viewed — and some still view — their sole mission as returning profits back to their shareholders so that they could make "societal" decisions. While there are still some adherents to this line of thinking, more companies are realizing that by limiting their interaction as a global citizen, they are also limiting their long-term growth potential.
Innovation and product development traditionally have been closely held within private business. In fact, many companies pride themselves on the secretive nature of their product development process.
Because wicked problems are unable to be solved by a "silver bullet" product, and the solutions are too diverse and unknown for one company or product team to solve, these closed methods of innovation are increasingly ineffective. The traditional process of R&D is expensive and as a result, stakeholders along the product value chain are increasingly participating in the process. This can free individual companies to focus on specific parts of the R&D cycle rather than shouldering the burden of lab-to-market innovation.
Ecosystems as a way to address complex issues
Ecosystems in the natural world co-evolved over millions of years to gracefully solve problems. Within an ecosystem, organisms create and share resources, compete and collaborate, interact and co-evolve, all while moving toward a common goal with a minimum of waste.
Companies that are bold enough to participate in the solution to complex environmental and social problems will find they are not only granted a social "license to operate" within emerging markets, but also a "license to grow."
Global Business Development Director
Plantagon International AB
DISCLAIMER: This is a blog. That fact means nothing. It is not a peer-reviewed journal, a final archive of my writing, a sponsored publication, or the product of gatekeeping and editing. That does mean something…it means that while the ideas and thoughts are often vital and personal, the writing and views need not subscribe entirely to Plantagon. It is essentially as it came from the keyboard: spontaneous, unproofed, unrevised, and corrected afterward only when necessary to address mistakes that grossly effect the intent. Where such changes have been made they are explicitly noted… In your response section, try and be polite please.
Please watch out for up-coming blog post by:
- Sepehr Mousavi, Sustainability Strategist, Plantagon and Chair to Swedish Standards Institute ‘Sustainable Urban Food Production’ committee
- Joakim Rytterborn, Head of Research & Development at Plantagon