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Aris VrettosFeb 2016, London

Sustainable business NSF Conference

#RewireEconomy

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“If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” ― Jack Welch, former CEO, GE

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CISL: A unique Cambridge institution

Executive and graduate education

Business and policy platforms

• Low carbon transformation

• Responsible finance(banking, insurance, investment)

• Natural resource security

Independent research

25+ years of building strategic leadership capacity to tacklecritical global challenges

60 staff in Cambridge, Brussels, Cape Town

Patron:HRH The Prince of Wales

Active network of 7,000 members

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What’s driving the discussion?

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Economic concerns

Food, water and energydemand are growing

Resourcesare being depleted

Ecosystemsare being degraded

Inequalityis rising

GHG levels are rising

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Implications for business

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The choice: transition or disruption?

• Science illuminates the impactsof an unsustainable economy

• Most policy and business growth takes us in a straight line

• Structural transformation (‘rewiring’) needed to make sustainable business the norm

Business As Usual

2015

SustainableEconomy2025

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Is food special?

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Most business operations rely on a set of critical assumptions

“The climate will remain stable”

“There will be enough water and land”

“We understand our exposure to natural resources, it is manageable”

“We can source the same quality at reasonable prices”

“We know what our main risks are, we can adapt to shocks”

“Environmental regulation will mainly hit other sectors”

“Our sector will not change dramatically”

“People will always prefer to eat food”

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Food has a major impact on earth systems

Steffan et al.The Great Acceleration, 2015

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Do businesses know their dependencies on natural capital?

Farms Good soil structure

Erosion

Water

Biodiversity

Soil

Farms

“Natural systems that produce and regulate soil are vital to support agricultural and natural resource production and processing. Investment in solutions need to focus on upstream suppliers and even the landscapes where these raw materials are sourced.Returns on investments are likely to be longer term and dispersed between multiple stakeholders.”

Source: CISL Natural Capital Leaders Platform, 2015http://www.cisl.cam.ac.uk/business-action/natural-resource-security

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Climate change and agriculture

If temperatures increase by 3oC or more, agricultural adaptive capacity is projected to be exceeded in regions closest to the equator. Climate change is projected to:

• Increase price volatility for agricultural commodities, and reduce food quality

• Overall, climate change is projected to cause food production to fall, with lower yields from major crops.

The potential for reducing GHG emissions from agriculture through changes in consumption could be substantially higher than technical mitigation options.

Approaches include:

• Reducing food waste

• Reducing overconsumption in regions where this is prevalent

• Changing diets towards less GHG-intensive food

Source: IPCC Climate Science briefs: implications for Agriculture, CISL, Cambridge Judge Business School and BSR (2014)

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Managing risk?

Disruption of operations and supply chains

Globally extreme weather events resulted in $175 billion in losses over the past decade.

Rising insurance premiums and un-insurable risks as a result of increased incidence of flood and drought affecting operations and supply chains; and the reduced capacity of local natural systems to mitigate this risk.

Competitors push best practice

Consumers increasingly expect retailers to offer sustainable products Promotion of third party certification.

Customers increasingly making the link between increased meat production and land conversion for livestock, human food versus animal feeds, deforestation and environmental degradation.

Restricted access to land & resources

Many business models rely on access to natural ecosystems, natural resources and areas of biodiversity.

Governments are introducing new measures; land and resource allocation for production is increasingly tied to recognised best practices and the public expects that these risks will be well managed.

Reputation not guaranteed

“Food is the world’s largest land user, water user, polluter and undermines essential environmental systems.

Food is also one of the main causes of ill-health; a billion people lack it; and another billion have too much of it.”

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Managing climate risk?

Farmers can adapt to some changes, but there is a limit to what can be managed.

mitigation

adaptation

Unavoidablerisk

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How deeply will the food sector be disrupted?

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Solving the global nutrition challenge - paradigm shift?

If, because of more people, with more spending power, less resource to produce, more extreme weather, and changing lifestyles and diets, we cannot continue to source and eat protein in the way we have been doing up to now:

What will replace it?

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“Today, business as usual, considering nature as free and unlimited.. .. is economically stupid, socially unacceptable and legally dangerous. Business as usual is dead.”

- Philippe Joubert, Executive Chair, Global Electricity Initiative, former President, Alstom Power

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Seizing the opportunity

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Manage risks like an opportunity

Understand impacts and critical dependencies on environment

Think differently about value, and purpose

Communicate transparently about problems and failures- just like the success stories

Create capacity- new knowledge, skills and teams- for a volatile, uncertain and complex environment

Work with others for change- be part of the transition, not the disruption

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Thank you

Aris VrettosDirector Open Programmes, CISLaris.vrettos@cisl.cam.ac.uk

www.cisl.cam.ac.uk

Business As Usual

2015

SustainableEconomy2025