A new role for natural resource companies

[Editor's note: Mary Stacey, this article's lead author, and s+b editor-in-chief Art Kleiner are leading a scenario session based on the premise of this article at the Authentic Leadership in Action (ALIA) institute in Halifax, Nova Scotia, Canada, June 18-23, 2012. For more information, see http://aliainstitute.org/summer2012/.]

Around the world, natural resources companies -- producers of agricultural staples, oil and gas, lumber and wood products, basic chemicals, and many minerals -- are facing unprecedented volatility in supply and demand. The global population is poised to reach 9 billion by 2050, and much of the growth will be in emerging markets.

Millions of people in China, India, Latin America, and Southeast Asia are entering the middle class for the first time, increasing their demand for energy, housing, and transportation. At the same time, because of economic turbulence, rapid technological change, and the ever-present dynamics of gluts and shortages in most resource industries, there is no guarantee that the price of raw materials will continue to rise. Adding to this uncertainty are concerns about the impact this growing demand will have on the environment.

These challenges suggest that we need a new way to think about natural resources -- a shift in mind-set from simply managing resources to practicing resource leadership.

Resource producers have always been constrained by their view that the primary goods they sell are commodities with which they compete on the basis of price alone; their customers determine how they should be used. That approach, however, has led producers to the status quo: a largely reactive position with a short time horizon, and little opportunity to differentiate themselves from competitors.

Resource leadership, in contrast, entails thinking strategically about natural resources from the moment they are pulled from the earth through to their end use. This form of leadership is rare in all too many industries. It involves the ability to see the complex interdependencies of the natural resources system; to engage key stakeholders upstream, downstream, and across sectors; and to promote innovation with economic and ecological benefits within the resource system. Resource leadership thus represents a shift from short-term thinking to stewarding resources for the long term.

Imagine a company that embraced this new model. As a resource producer at the beginning of the value chain, it would contribute solutions and expertise -- culled from working directly with the materials at the earliest stages -- in collaborating with its customers to find cost savings, reduce waste, and improve service.

The expertise developed this way would also lessen the impact on the environment, by helping all users, starting at the source, operate more effectively, with less waste.