Climate change and resource scarcity by Dennis Nally

Climate change and resource scarcity by Dennis Nally,
Chairman of PwC International Limited

As the world becomes more populous, urbanised and prosperous, demand for energy, food and water will rise. But our planet’s natural resources to satisfy this demand are finite.

Just how finite is becoming increasingly clear. At current rates of consumption, we may have just half a century’s worth of oil and gas left. Yet to meet our development needs, we’re highly dependent on fossil fuels which in turn drive carbon emissions. That’s why we look set to miss the carbon target to keep temperature rises to 2°C by 2034.

The impact of our economic development model is amplified by the linkage between climate change and resource scarcity. Our resulting projection could lead to either of two extreme outcomes: a policy shock, with a global agreement that severely penalises carbon emissions; or a climate or resource shock, where a natural event causes massive environmental and economic damage.

Faced with these risks, many people are looking to governments for solutions. However, in practice, policy actions will remain unpredictable, inconsistent and reactive. So businesses must take the lead in mitigating environmental damage and tackling climate and resource challenges, while simultaneously striving to make their organisations more agile and resilient.

If businesses are to rise to these challenges, sustainability will be vital. Corporate responsibility has evolved from a ‘luxury’ to a business imperative. Ultimately, sustainability is the lens through which every business will be judged by its consumers, workforce, society and even investors. And as businesses move to embrace sustainability, they also need to be able to report on it in a credible and trustworthy way.

As a result, an increasingly important area of focus for businesses worldwide is understanding, measuring and reporting on the environmental and social impacts of the decisions and actions they take. This need is driving the development of innovative ways of measuring and reporting more transparently and holistically on companies’ overall impacts. Over time, progress in this area will help businesses understand and explain their impacts more fully, make better-informed decisions, and rebuild public trust by providing wider and more credible insights.

Not surprisingly, PwC is supporting these efforts to enhance measurement and reporting, through our development of the Total Impact Measurement and Management (TIMM) framework (see page 39). Specifically designed for today’s multifaceted world, TIMM helps business leaders and stakeholders understand how an organisation’s activities contribute to the economy, public finances, the environment and society as a whole. And the wider insights it provides enable external stakeholders to decide for themselves how much trust they should place in a company’s reported information – both financial and non-financial – and how sustainable its business model really is.