Strong crosswinds are in the global economy. The Fourth Industrial Revolution is here, with pervasive transparency, unlimited information access and accelerating disruptive technology and change.
Rapid adaptation never has been more important as corporates spread globally, facing new regulatory and environmental challenges across their operations and supply chains. Security and immigration concerns are everywhere.
Climate change poses not only an environmental threat, but has become a disruptive change agent for business, driving new requirements for growth with lower carbon footprints. What is new in all this is flux the enormous economic opportunity created in the emerging global response to these challenges.
But sustainability is the transformative economic catalyst which also happily aligns with our own basic self-interest. Specifically, it’s about "sustainable growth," by which I mean increasing prosperity while at the same time improving environmental and social performance.
Why does this "sustainable growth" matter so much? The answer is because the great movers of our global economy are orienting towards it, rewarding better performance and punishing risk. Here is how they are concentrated:
Customers everywhere, of all sizes, increasingly are asking about sustainability performance when making purchasing decisions. On the business-to-business side, large players with even larger supply chains are requiring increasing disclosure and performance around greenhouse gas reduction, diversity, labor rights and anti-corruption. On the consumer side, as transparency and reporting get better, consumers are increasingly able to make informed decisions to buy products which cost the same, but do less harm to the world.
New regulatory frameworks around carbon, diversity and many other sustainability related factors are emerging and growing. Examples include the new European requirement that corporations report on sustainability risk, and the U.S. Clean Power Plan, coupled with the corresponding double digit growth in the global consulting industry to advise on these trends.
These "impact economy" frameworks are emerging, and will mandate that companies innovate in incredible new ways, to grow without doing social and environmental harm. These frameworks will unleash a torrent of adaptive innovation, creating unforeseen and surprising technological advancement, and new potential for human prosperity.
Investors are increasingly seeking less carbon-intensive and more environmentally and socially friendly portfolios. Global bank HSBC recently reported that around 30 percent of all assets under management are using some kind of sustainability strategy or filter.
This trend is up from almost zero 10 years ago, and all of this money seeking new sustainable business models will create opportunities for new entrants in the marketplace, and older players who can adapt and thrive. It’s a capital rules reset, with an accidental but happy ethical bias. New fortunes will be made for those who adapt, and the rules don’t necessarily favor the current economic and political oligarchies.
4. New energy
New energy-infrastructure build-outs are booming, especially in the developing world. The COP21 gathering of global policy-makers, corporations, investors and innovators points more than ever to this enormous opportunity for economic growth.
The consequence of all this capital flowing into energy infrastructure not only will be economic growth as these systems are built out, but also new capacity for access to the information and innovation which comes from reliable energy. The end game is a developing world with ubiquitous, cheap and renewable energy, and a huge new economic powerhouse with its human capital no longer inhibited by the daily struggle to eat and stay alive.
With all of this movement towards finding and enforcing sustainable growth, we inadvertently are finding a common language across cultures, religions and even politics. The headlines are full of news about what divides us ideologically and spiritually, but these belie the great areas of commonality shared by the vast majority of human beings. I’m talking about the instincts we all share for preservation of those we love, and the desire to see subsequent generations enjoy meaningful and healthy lives.
Sustainability and sustainable growth will help to make these ethics transparent and explicit. It will celebrate them. Sustainability taps this common spiritual and psychological space, and creates a common ethical language around which the world’s innovators, investors, regulators and consumers can rally. And in this common space, we can find a new global prosperity.
Tim Nixon is Managing Editor of Sustainability at Thomson Reuters.