It’s that time of year when we all look in our crystal balls and try and predict what will happen in the next 12 months. To avoid wishful thinking, I’m not going to predict sudden disruptions to the status quo (those are by definition unpredictable), but the likely repercussions of existing trends:
1. The ‘resource crunch’ will surge up the political agenda
Give or take the occasional blip like the 70s oil crisis, commodity prices spent the 20th Century falling as new technologies allowed resources to be produced more efficiently. However at the turn of the millennium, something strange happened – prices suddenly started shooting up and are currently higher than at any time in the last century. Despite the shale gas revolution in the US and a sluggish global economy, oil prices remain stubbornly high.
The pressure is starting to tell on business. A recent EEF survey found 80% of senior manufacturing executives thought limited access to raw materials was already a business risk. For one in three it was their top risk.
Unfortunately this threat has yet to penetrate the political debate, but I can’t see how it can be brushed under the carpet any longer. By the end of the year, politicians will start talking resources and the new economy.
2. Renewable electricity will hit several new tipping points
A decade ago, the proportion of electricity generated from renewable resources barely bothered the statisticians – and what was generated came largely from massive hydroelectric schemes. In recent years there has been an extraordinary boom in sustainable energy. Renewables accounted for 15.5% of UK electricity in the second quarter of 2013. Portugal generated a whopping 70% of their electricity from renewables in the first quarter. In Spain, wind power was the largest contributor to annual electricity production with 21.1%, pipping nuclear to the post. And of course that’s just the electricity that flows into the grid – many renewable energy systems are off grid, whether a wind turbine on a remote farmhouse to a solar powered motorway sign.
This soaring contribution of renewables will continue to drive down costs, creating a virtuous circle. I believe we should ignore the reported fall off in investment (partially due to lower costs) – renewables will muscle their way to new records in 2014, leading us to my next prediction…
3. New energy synergies will be identified and exploited
It is well known that a centralised power grid, designed to distribute energy generation from fossil fuels to passive consumers, is not the most efficient or effective way to manage distributed renewable energy. Already we are shifting from the centralised model to what I call Energy 2.0 where the line between generator and consumer has blurred. The rise of other compatible technologies such as electric vehicles, mobile computing and home energy management systems will start to trigger new thinking and synergies. We have seen this already in 2013 with the Nest intelligent thermostat and the use of Tesla EV batteries to store solar energy in individual houses in the US. By the end of the year I predict that we will see the essential building blocks of local smart grids starting to emerge, although I expect it will take another few years for those grids to take over a significant proportion of distribution.
4. The focus of sustainability will move from the organisation to the whole value chain
For most organisations, sustainability is still focussed within the factory fence/office walls. However the resource crunch and the continued focus of NGOs on supply chain issues – targeting brands on issues like deforestation and palm oil production – will bring the whole value chain into the mainstream. You might say “but we already manage our supply chain impacts”, but what I am predicting here is companies actively aligning their supply chain and business models to sustainability principles. Suppliers will increasingly find themselves being dropped not because of poor environmental performance per se, so much as the fact they are offering redundant products and services.
5. Sustainability will start reshaping the economy
As a result of prediction 4, I believe we will start to see the rapid maturity of the circular economy in particular as economies of scale start to kick in to the production of secondary materials to the point where they start to compete with primary materials (due to the resource crunch in prediction 1). This has already occurred in niches such as glycerol production where the virgin glycerol sector has all but been wiped out by the glycerol by-product of biodiesel production. My prediction is that this effect will start to spread to other non-food commodities, a surge of creative destruction which will threaten many established businesses, or even entire sectors, and provide opportunities for many others. Be warned!
Gareth Kane is a sustainability consultant, author and speaker. You can follow him on Twitter @GarethKane.