KPMG: “Ten sustainability megaforces”

I’m reading about the ten “sustainability megaforces” identified by KPMG, in a report they published in February this year.

They’ve analysed “dozens of forecasts” to identify ten “sustainability megaforces that will affect every business over the next two decades.”

While they’ve picked ten good headings, and had a good stab at showing how they interact, I can’t help thinking that they’ve missed a trick when it comes to showing business leaders how these issues will have serious consequences for them.

For example, their summary take on climate change is:

“Predictions of annual output losses from climate change range between 1 percent per year, if strong and early action is taken, to at least 5 percent if a year if policymakers fail to act.”

Ignore for a moment the fact that this statement passes responsibility for taking action on climate change from the authors or anybody reading the report to unnamed ‘policymakers’.

What KPMG are telling business leaders is that:

  • climate change is negotiable (1% now or 5% later), completely ignoring the ‘tipping point’ aspects of the reality we face. And
  • the scale of impact is around 1%-5% of output. (One percent if you act now. Five percent if you leave it for your successor to deal with.)

The fact is that “one percent” is an average. For some businesses the impact of will be much greater. Remember that brief floods in Thailand last year helped push Sony from a $1bn profit forecast to a $1bn loss. Some companies will be put out of business altogether by climate change events. That is the message CEOs and boards need to wake up to. And that is why they need to act.

Look also at what the report says about water:

“It is predicted that by 2030, the global demand for fresh water will exceed supply by 40 per cent.”

And then food:

“In the next two decades the global food production system will come under increasing pressure from megaforces including population growth, water scarcity and deforestation. Global food prices are predicted to rise 70-90 percent by 2030. In water scarce regions, agricultural producers are likely to have to compete for supplies [of water] with other … industries such as electric utilities and mining, and with consumers.”

First, the language fails to bring home the reality of the future we face: demand for water will exceed supply by 40%, and we will be choosing whether to give it to people to drink, or use it to grow food, or generate electricity, or to dig things out of the ground (presumably for the benefit of a different group of people).

Beyond that, the report fails to bring home what the impact of a 70-90 percent (average) rise in food prices on business will be.

For the average executive in a non-food business this probably seems minimal. They can easily afford to spend more on food.

But what would the impact be of a 70% increase in food prices for an average employee? What would be the impact on their health? Their children’s health? On their morale at work? On their ability to concentrate and their subsequent productivity? What will be the consequent impacts on health and safety? On disruptions to workflow and the ability to get things done?

Employees also act as consumers? What will be the impact of a 70% food price increase disposable income? What will be the impact on foreign holidays, new cars, new furniture, new toys for the kids, the ability to repay mortgages? On house prices? On the area where you live? If more disposable income is taken up with paying for food (and fuel/energy) how far will demand for your business’s products and services fall? And if you are not a consumer business, what is going to be the impact on your customers, or on your customers’ customers? And consequently what is going to be the impact on your business, and you?

These are the issues KMPG has decidedly failed to bring home: the impact of these distant ‘megaforces’ on the lives and businesses of the readers, and the lives of their children.

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