Three sustainability megatrends to watch in 2017

Megatrends are large, transformative global forces that impact everyone on the planet. Many companies use megatrends to forecast risks and opportunities. Just this past month, Shell’s CFO created waves by revealing that the oil giant has long expected oil demand to peak as early as 2020. In response to this emerging risk, Shell has already begun to diversify into natural gas, biofuels, and hydrogen, which they see as supporting the business for decades to come. 

Delphi analyzes megatrends to determine how sustainability will impact our clients and their industries. It helps us project a clearer idea of what Canada’s shift to a low-carbon future will look like, and what Canadian companies can do now to prepare for it. We’ve identified three megatrends that will likely influence how companies do business in the next decade.

Trend #1: Digitization as an Enabler of Resource Efficiency

Digitization is the integration of digital functions into the way we move, work, and live. It can look like autonomous devices organizing themselves, the internet of things, cloud computing, and mobile devices.

As digital technology becomes increasingly ubiquitous, it will play a larger role in Canada’s transition to a low-carbon economy. Today, warehouses can cut energy waste by up to 90 percent by relying on intelligent lighting systems that only turn on when needed, significantly reducing electricity bills.  Cloud computing helps reduce emissions associated with company internet use while also improving efficiency and reliability of software applications, primarily due to economies of scale, higher server utilization rates, and data center efficiency. A 2010 report from Accenture and WSP found that, depending on company size, using cloud services compared to on- premise applications reduced energy and emissions between 30-90 percent.[1]

The examples above are part of the ‘cleanweb,’ or the emerging global ecosystem of digital technologies that enable more efficient use of resources. Look for this to grow in the future.

Trend #2:  Increased Transparency and Access to Information

Business is facing more pressure than ever to increase its transparency with government and customers. According to The Economist, three factors are driving this trend: governments are demanding greater corporate accountability in the wake of the global financial crisis, investigative journalism is becoming more prolific and NGOs that monitor corporate transparency are increasingly active.[2] Demand for sustainability information is also coming from investors. A 2016 report from the MIT Sloan School of Management and Boston Consulting Group (BCG) found that 75 percent of senior executives in investment firms stated that sustainability was material to them when making investment decisions.

Sustainability reporting is one way to meet this growing demand.  According to Ernst & Young (EY), 95% of the largest 250 companies in the world produce a sustainability report.  Investors are increasingly interpreting information from sustainability reporting as a proxy for good management practices – George Serafeim of the Harvard Business School says that sustainability reporting boosts share price by signalling that management is tackling hidden risks.  In that same vein, more than 50 percent of executives responded to a 2014 EY survey saying that the principal objectives of a sustainability strategy were to mitigate risks and add value.

Canadian companies can boost their reporting practices by using popular voluntary reporting guidelines and standards such as  the Carbon Disclosure Project (CDP), the Sustainability Accounting Standards Board (SASB), and Global Reporting Initiative (GRI). The Delphi Group is the GRI Community Leader for Canada, and regularly helps clients adopt GRI guidelines.

Trend #3: The Greening of Urban Infrastructure

According to the UN, by 2050, 66 percent of the world’s population will live in cities.  By 2025, 82 percent of Canada’s population will live in cities[3]. According to EY, an extra $8 trillion worth of additional infrastructure capacity is needed by 2030 as a result.

More than 60 percent of the world’s greenhouse gases are associated with aging power plants, roads, buildings, sanitation and other structures. The infrastructure choices that are made over the next two to three years will lock the world into either a climate-smart, inclusive-growth pathway, or a high-carbon scenario that will require more investment to correct decades from now.

The shift towards green infrastructure could affect Canadian companies in three ways:

1. Companies will be pressured – through regulations and carbon pricing – to build and use energy-efficient buildings, as well as fleets and water and energy infrastructure. Last month, the federal government outlined ambitions to phase in a net-zero building standard over the next 15 years.
2. There will be more investment opportunities associated with green-energy infrastructure projects. Governments like Canada’s are setting up tools and policies to reduce the risk for businesses and investors to enter the infrastructure investment space. Just this month, Finance Minister Bill Morneau’s Federal Fall Economic Statement announced a national infrastructure bank to attract private investment of over $100 billion over the coming decade.
3. Canadian technology and service companies will be able to realize a share of this new business sector. The smart cities market, as a sub-sector of sustainable infrastructure, is expected to balloon to a size of $1.57 trillion by 2020, according to a 2014 report by Frost & Sullivan. To further incentivize Canadian participation in this space, our federal government announced a Smart City Challenge that would see Canadian municipalities and businesses implement clean, digitally connected technology to create green buildings, smart roads and energy systems, and advanced digital connectivity for homes and businesses.

Where to from here?

In summary, in anticipation of these three megatrends continuing to evolve, Canadian companies should consider:

1. Engaging with the digital world now in order to stay competitive in their industries, and reduce the cost of emerging climate regulations.
2. Collecting sustainability information (such as the impact of climate change on their industries), and incorporating that information into their management decisions.
3. Looking for emerging markets in which they can lead and capture market share, such as the green infrastructure space.

Founded twenty-five years ago and one of the first sustainability consulting firms in Canada, The Delphi Group has been preparing for the shift to a low-carbon economy since day one.  To learn more about how we can help integrate megatrend analysis into your company’s business strategy, guide you through sustainability reporting, or update you on the latest policy developments, visit the services section of our website.

 Contributor: Ingrid Hoffmann, Policy Analyst (ihoffmann@delphi.ca)

[1] http://gesi.org/files/Reports/AssessmentMethodologyCasteStudy_CloudComputingSustainability-Nov2010.pdf

[2] The Openness Revolution, http://www.economist.com/news/business/21636070-multinationals-are-forced-reveal-more-about-themselves-where-should-limits

[3] http://www.edu.gov.mb.ca/k12/cur/socstud/frame_found_sr2/tns/tn-40.pdf