Demand Apr16Companies and investors need to refocus on demand as the key driver for revenue and profit growth.  Supply-driven business models are no longer sufficient.

‘How do we do this?”  is the key question, as I discuss in this short video interview with ICIS deputy news editor, Tom Brown:

  • The key is to focus on critical issues where change is urgently required
  • As the World Economic Forum has warned, water and food are critical issues for the world over the next 10 years
  • It suggests they are 2 of the top 5 major global risks – wars are already being fought over water supplies

Newly released diplomatic cables show that the problems have been growing for years.  As Newsweek magazine reported this week:

“In 2009, U.S. Embassy officers visited  Nestle’s headquarters in Switzerland, where company executives, who run the world’s largest food company and are dependent on freshwater to grow ingredients, provided a grim outlook of the coming years. An embassy official cabled Washington with the subject line, “Tour D’Horizon with Nestle: Forget the Global Financial Crisis, the World Is Running Out of Fresh Water.”

“Nestle thinks one-third of the world’s population will be affected by fresh water scarcity by 2025, with the situation only becoming more dire thereafter and potentially catastrophic by 2050,” according to a March 24, 2009, cable. “Problems will be severest in the Middle East, northern India, northern China, and the western United States.”

Today, we can clearly see that Nestle’s warning was right.  But very little has yet been done to solve the problems of water or food shortage, and time is starting to run out.

As we discuss in our major new Study, ‘Demand – the New Direction for Profit’, the chemical and plastics industries are vital to solving the problems.  The reason is that 40% of more of all the water and food produced in the world is currently either lost on the way to the consumer, or wasted.  So it makes no sense to simply focus on supply-driven models that aim to produce more water or food.

Instead, we need to understand how to reduce the loss and waste that currently takes place:

  • Plastics can potentially add days, sometimes weeks, to shelf life – helping to avoid food decay
  • Indicators could be added to packaging to tell the consumer when food is still safe to eat
  • Plastic pipes can be installed to stop water leaking away on its way to the user
  • We could radically improve water supply by abandoning outdated civil engineering techniques.  It is ridiculous that we are still focused on digging big holes and pouring concrete.  Modern, cheaper process engineering technologies could dramatically change the way water is provided

But there is little time to lose.  Nestle’s fears from 2009 are already coming true.  California is in its 5th year of drought, which experts say is probably the worst for 1200 years.  War is raging in Yemen due to drought, and 10 states in India are also suffering from drought.  As one expert told the Financial Times, a change of mindset is long overdue:

We’ve always looked at the problem from the supply side, not from the demand side.  This sector has always been in the hands of technocrats, particularly structural engineers. They only know how to construct . . . The general feeling is, ‘We have plenty of water, it’s available free of cost, it’s the government’s duty to provide me water’.”

Companies and investors now need to move very quickly to the demand-led approach.  Time is not on our side.