By 2020, demand for natural resources will outstrip supply, resulting in higher and more volatile pricing in the consumer industry, according to a new research report. The report indicates that these pressures could significantly impact the profitability of consumer industry companies, and makes several recommendations for a sustainable industry.
The report, Sustainability for Tomorrow’s Consumer, published by the World Economic Forum in collaboration with Deloitte Touche Tohmatsu, suggests that unless businesses can rapidly redesign their value chains to reduce resource use and decouple economic growth from environmental degradation, their ability to help economies grow, provide consistent shareholder returns and meet the needs of consumers will be threatened.
The report highlights the potential impact that rising prices of resources could have on businesses in the consumer industry. As an example, one company with revenues of $80 billion has 40 percent of its revenue tied up in covering the cost of resource-based inputs and a profit margin of around 10 percent. A ten percent increase in its resource-based inputs cost will result in an 80 percent decline in profits, assuming the company will not be able to transfer the cost increase to the consumer, according to the report.
This is a very sobering prediction which builds a strong case for the corporate sector to take action right now and stop talking about it!
Source: http://www.environmentalleader.com 21 Sep 2009