Means and ends

Mckinsey's circular economy

It would be fantastic if we all delivered work, lived our lives, bought stuff etc etc for the right reasons. But sometimes, the right reasons aren’t enough. Climate change and the environmental consequences have been discussed for many years, and many people understand that in an ideal world, we should all use less energy, less water, eat less food and so on. At the conceptual level, there are few who would not subscribe to the view that we should always, indeed must, consider future generations. And yet, it is clear from the limited changes to date that environmental concerns, and debates about impact are insufficient to change behaviours substantially.

At the organisational level, financial and commercial drivers sit more comfortably with day to day strategies and tactics. And increasingly environmental issues have a direct earnings or profitability impact. Interestingly these are by no means all negative. So on the risk side, the Thai floods of 2011 are illustrative of the issues:

  • A single extreme climatic event flooded three quarters of the world’s hard disc drive production.
  • We began to wake up to the fact that HDDs were not just in computers, but cars, entertainment etc – the immediate production implications were huge and for the organisations themselves the loss of profitability substantial
  • But it created an awareness of the systemic nature of risks – and put external risks firmly at the centre of the attention of analysts and market commentators, impacting share prices and market valuations as well as the immediate P&L
  • Finally it engendered more innovation and investment in storage since solid state drives have increasingly become cheaper and more accessible since 2011

But what about opportunity? The McKinsey report in Sept 2015 on Europe’s circular economy opportunity illustrates that addressing environmental concerns through recycling, repurposing and making supply chains more efficient can provide huge returns. This is therefore a real opportunity as well as an essential move. And beyond the direct economic benefits, the rise of the collaborative consumption economy fuelled in part by a desire by some consumers to use less, have less of an environmental impact and make more of what we already have is a further indication of the commercial opportunity here.

Author: macinn2013

Comments in my blog represent my personal views not those of my current or previous employers but are inevitably influenced by my working life, past and present colleagues, friends and family - such is life!

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