The Impending Sustainability Resource Shortage
Companies must act quickly to secure a supply of scarce inputs needed for net-zero goals.
As momentum builds toward curtailing climate change, investors, governments, and consumers are all gravitating around ways to secure a future with net-zero greenhouse gas (GHG) emissions.
Corporations are under growing pressure to take action and adopt more sustainable business practices. Record numbers of organizations – including BCG – have made bold pledges to achieve net-zero climate impact by zeroing-out their GHG emissions or even becoming climate-positive by removing more carbon from the atmosphere than they emit.
These pledges are impressive, but with public awareness strengthening, organizations will be held accountable for their actual performance against sustainability metrics. They had better be ready to live up to their public net-zero commitments by developing clear roadmaps for how to make sustainability an integral element of their core business strategies. Based on our extensive experience working on sustainability transformations, we have identified six actions that companies can take to become truly sustainable by integrating an environmental, social, and corporate governance (ESG) perspective in every element of their business and then capturing the value that the transformation can create.
But there’s a major challenge endemic to this issue. As companies all race toward the same sustainability goals, they will be chasing a limited reserve of sustainable energy inputs that cannot yet meet this explosive demand. This mismatch between supply and demand will lead to a period of sustainability-driven resource scarcities.
For example, our analysis indicates that demand for carbon credits will outstrip the available supply by at least 300 million metric tons of carbon dioxide equivalent (MtCO2e) by 2030. Similarly, demand for recycled plastics, especially recycled polyethylene terephthalate (rPET) will be nearly twice as high as what’s on hand by 2025. This will cause problems for consumer packaged goods companies that have set ambitious goals for using recycled content in their product packaging.
The list of sustainability-related shortages is long. Cairn Energy Resource Advisors predicts that the current supply of raw materials such as lithium, nickel, cobalt, manganese, and graphite used in batteries is less than one-third of what will be needed to meet demand in 2030 as manufacturers of electric vehicles and energy storage systems seek to ramp up production. Similar shortages of substances such as green hydrogen and sustainable cotton are likely to impact other industries, for example, industry and fashion.
What can companies do to avoid these impending shortages? Act now. Early movers have a better chance of securing the inputs they need to meet their own sustainability targets, comply with increasingly stringent regulatory standards, satisfy investors with sustainability mandates, and appeal to customers who have their own ambitious sustainability goals.
In some cases, the best option for securing access to sustainable inputs could involve signing long-term contracts with suppliers. In other instances, it may make more sense for companies to acquire or develop new sources of sustainable inputs so they can become suppliers themselves.
Yes, those who hesitate risk being locked out of the market for these scarce sustainable resources, but even if that happens, all is not lost. Companies that struggle to obtain sustainable inputs can channel their innovation into redesigning goods and services to reduce or eliminate the need for those same hard-to-obtain resources.
To create durable competitive advantages, companies must find ways to make sustainability an integral part of their strategy and their business model. So far, our research has found that fewer than 20 percent of companies that pursue sustainability outcomes do so in ways that reinforce advantage and value creation. An even smaller percentage use sustainability to reshape the boundaries of competition and reimagine what their business could be.
By staying ahead of shortages of sustainable inputs, corporations can reconcile profitability and sustainability as they progress toward essential net-zero targets.
Discover more of BCG’s latest thinking on Climate & Sustainability here.