These top 5 sustainability risks present big opportunities

These top 5 sustainability risks present big opportunities

Global climate risks and market opportunities
A new report seeks to align opportunities for social progress and business innovation related to lacking water supply, building for resilience to extreme weather and other sustainability-related fields.

With great risk comes even greater potential reward — or at least that's the optimistic way to interpret a first-of-its-kind report (PDF) on the biggest sustainability risks facing the planet.

Extreme weather, a lack of clean water, disease, unmitigated urbanization and continued reliance on fossil fuels were identified as the top five risks by the Global Opportunity Network — a sister organization of the Danish nonprofit Sustainia created by the UN Global Compact, DNV GL and Monday Morning Global Institute.

The group then outlined reasons to believe that the dual drivers of both opportunity for social progress and business market openings might lead to new breakthroughs with both human and financial benefits.

The report also comes on the heels of a World Economic Forum "Global Risk Report" published last week, which pointed to water shortages and weather volatility as chief global economic concerns ahead of the organization's annual meeting of business and political leaders in Davos happening this week.

For the new Global Opportunity Report released on Tuesday, researchers combined workshops held for government and business leaders on five continents with a survey of some 6,100 business leaders in 21 countries. The emphasis on opportunity was intended in part to help nudge readers toward concrete action.

"You can see it as a choice: what path do we want to travel down when we try to address these financial risks?” report author and Sustainia Project Director Morten Jastrup told GreenBiz. "We are trying to be holistic and take as broad a view as possible. This opportunity mindset can be applied (to) a range of issues.”

Extreme weather and a lack of fresh water were the top two risks in the Sustainia report, echoing the World Economic Forum's own warnings last week. When it comes to related business opportunities, Sustainia points to fields like new warning systems, more resilient infrastructure and water-efficient agriculture:

Sustania sustainability risks water, climate, weather

Rapid urban population growth, non-communicable diseases and "lock-in to fossil fuels" round out the top five risks identified by Sustainia's pool of public and private sector leaders.

In this realm, potential opportunities span the gamut from much-discussed smart city technologies to new models for public health services to massive opportunities for renewable energy sources to gain market share on coal, oil and gas:

Sustainia risks urbanization, fossil fuels, disease

The report also notes that these areas dovetail with several major global demographic and economic shifts, or "megatrends." That includes variable like: the aging of the baby boomer generation; migration to urban living; more pronounced natural resource constraints; the emergence of unconventional connectivity and the Internet of Things; a push for open data and increased transparency; socially-responsible business initiatives and broader systems thinking approaches to address complex sustainability challenges. 

While those factors may add weight to the opportunities forecasted in the report — and it certainly sounds nice to turn colossal sustainability threats into a positive — major barriers for large-scale implementation also remain.

In addition to perennial concerns about the existence and viability of new financial models to fund things like resilience programs, the report pinpoints friction between new models in sustainability and slow-to-evolve government regulatory standards.

"The report findings are encouraging and concerning at the same time,” said Erik Rasmussen, Founder of Monday Morning Global Institute. “The strong interest in pursuing sustainable business opportunities in the private sector is very positive. Yet, the governmental sector seems to be more reluctant and not seeing the same opportunities. This is a pity."

While anxiety about slow-moving, red-tape-intensive government processes is far from a new concept, the report does note that government officials are also more skeptical of opportunities related to than their counterparts in business. That tension becomes particularly important when considering the emphasis being placed on public-private partnerships to explore new financing models or strategies, new climate agreements and more sustainable cities.

"The governmental sector is the least positive sector, both when it comes to evaluating the benefits for societies and how opportunities will affect their own activities," the report notes.

Seizing the moment

The authors of the report don't mince words about the context of their findings, making it clear from the first sentence that it will require a serious shift in perspective to recognize and capitalize on new opportunities in the field of sustainability:

“The future is not what it used to be," the report begins. "Past expectations of ever-growing abundance cannot be met. Infinite growth is not possible on a finite planet.”

With that measured opening, the report offers a nuanced look at just how likely business leaders say they are to actually jump on emerging opportunities in areas like renewable energy, smart cities and water.

Water-efficient agriculture was the most popular opportunity when viewed through the dual lenses of potential social impact and market opportunity, followed by enlisting non-doctors to help limit the spread of non-communicable disease.

But researcher Jastrup was particularly intrigued to see which sectors seem to be paying closest attention.

“One of the most interesting findings is that we see the private sector at the front — and not the private sector as a whole," he said. "We see the manufacturing sector and the finance sector in the front."

In particular, Chinese manufacturers are more optimistic than their global counterparts about turning risks into new revenue streams. The sector as a whole pegged green consumer choices, new public health delivery models and smart cities as the biggest opportunities.

Financiers, interestingly, say green consumer choices as one of the biggest threats to current business interests, and regulation of emerging renewable energy sources was another big concern. In general, however, the report notes that, "The opportunities that are expected to have a large positive impact on society are also seen as the attractive ones for developing new business ventures."

Despite the discord on nuanced topics, Jastrup is encouraged by engagement from the sector because of the need for new financial models to pay for sustainability-oriented programs. Almost two-thirds of climate finance in 2012, or about $224 billion, came from the private sector, the report notes.

And on a smaller scale, the report does offer tangible examples of programs that have capitalized on each area of opportunity.

In the realm of extreme weather, for instance, the Global Opporttunity Network cites examples of innovators like Planalytics — a company that provides businesses with weather forecasts focused on the predicted impact to specific components of operations. Closely related is the example of insurers in Austria partnering with government authorities to promote awareness of climate risks through an open access risk zoning and mapping tool.

"It’s not like we're lacking solutions, but we are lacking finances," Jastrup said. "We need both more money… and we also need new financial instruments, financial innovation."