Production and Consumption

The revolution of production and consumption
May 29, 2006 -- By Timo Mäkelä, Sitra

Growing numbers of decision-makers, scientists and economists believe that the world economy is heading towards a crisis because of diminishing natural resources and their consequently high prices. What is more, the race after energy and natural resources will lead to ever wider and more acute environmental problems. The climate will change while storms and draughts will become commoner and the environment impoverished and polluted. The Earth simply cannot long support the accelerating rate of production and consumption.

We do not need to look far for an example. At its current growth rate, the amount of grain and paper that China would need in 25 years’ time equals 70% of all grain production in the world and 200% of paper production. More oil would be consumed than the global oil production of today put together.

The UN and the World Bank issued recently an extensive report on the state of the world. It did not make for an amusing read.

Out of the 25 natural resources sustaining life on Earth, nearly 20 are endangered. If every single person in the world consumed like Europeans do, it would take more than two Earths to sustain it. The Americans consume even more, at a rate that according to the same calculation would require four Earths.

Some companies and investors are beginning to worry. A sustainable development classification will be gradually introduced and required of companies as evidence that their ethics are high and the environmental risks under control. In fact, we are moving towards a new industrial revolution, this time directed by the limits of our planet and environmental risks.

Part of this revolution is the rapid growth of global markets for new environmental technologies and services. According to estimates, the markets have already exceeded €500 billion, which is close to those of pharmaceutical and aviation industries. The annual growth rate is 5–10%. As much as 15% of new risk investments in the world are made in the production of renewable energy sources, environmentally friendly technologies and cleaner production. Here, Japanese and American companies are striving for market leadership.

The largest corporation in the world, the American General Electric, has recently revamped its strategy and launched its “Ecomagination” programme. The company will focus in the future on producing more sustainable and environmentally friendlier technologies.

Japan, on the other hand, is ahead of Europe in the efficient use of both energy and natural resources. Japanese products and technologies are taking markets by storm.

Europe is still the leader in environmental technology markets. The German recycling industry produces technologies and innovations for global markets, and Spain is one of the leading utilisers and producers of wind and solar energy. In Denmark, wind energy has surpassed meat products as an export.

But time is running out. That is why Europe is keen to seize this new opportunity. Ecological innovations and the more efficient use of natural resources and energy are an integral part of the EU’s growth and jobs strategy, the Lisbon strategy.

EU’s new environmental technology programme promises research and risk funding for companies investing in environmental technologies. The programme also aims to improve the pull and functionality of the markets. Public procurement, financial steering mechanisms and new product regulations and standards play a key role. Many of the EU Member States, including Finland, have issued their own national environmental technology programmes.

The new and more efficient technologies and methods that save natural resources and energy are a rational choice now and in the future. More efficient production decreases environmental damage but is also financially justified, as it simply saves money.

The industrial revolution geared towards sustainable development will mean efficient recycling of natural resources, extensive use of renewable energy sources, innovative production, materials and technologies, as well as new concepts of how we should move from one place to another. Nothing less will suffice, and as long there is a will, there are plenty of ways. New companies and innovations are in great demand.