Fit for the Future – getting ahead of the game

Commissioner Peter Davies, says competitiveness in the face of future threats is something that Scottish businesses must begin to deal with now.

Long term growth and a competitive edge is what any business looks towards achieving. In today’s fast moving world, companies need to be nimble and ready to adapt, prepared to absorb shocks and sudden changes in the market, while also looking to access new markets and take advantage of opportunities that arise.

But what opportunities and threats are out there for businesses in Scotland?

Growing markets in Asia have seen raw material prices soar. As competition for natural resources continues to increase as predicted, these costs will continue to rise, increasing pressure on Scottish businesses. The world is fast approaching a $100 barrel of oil scenario where costs will become debilitating for companies that are slow to adapt to the changing market.

At the same time, Shell have estimated that the market for products and services that help to combat climate change in the UK alone could reach £30bn within the next decade, with Stern estimating that a low carbon market worth at least $500bn a year could be created by 2050.

We hear almost daily now about the effects of climate change, and there is a strong business case for companies to look at more sustainable approaches to their business, to respond and survive in this changing world. But where to start?

At the Sustainable Development Commission (SDC), we have responded to this question by outlining real and practical opportunities for businesses and government to start by taking a products-focused approach to the challenges and opportunities of the current market.

Recent examples in the media of embarrassing product stories, particularly from the clothing industry, are a reminder to business that we should always be aware of product history.

By actively examining a product's journey from its source, to the shelf and beyond, weaknesses and areas for improvement can be identified to save money, improve brand reputation, manage resource risk, and enable business to access and grow in the emerging low carbon markets.

There are excellent examples of businesses transforming product standards alone, like Walmart’s development of LED lighting systems for refrigerator cabinets - achieving significant cost and energy savings, while also creating a potentially huge market for itself.

Walkers is another example – where a mapping of their product journey showed that just by changing the way they bought potatoes, £1.2 million a year and 9,200 tonnes of CO2 could be saved – a real win-win situation!

But other examples clearly show that businesses need government support and leadership to build consensus, enable change, support and signal the way forward. The SDC wants to see better collaboration between government and business towards improving the sustainability of products, and we see product roadmapping as an effective method that can achieve significant and rapid change.

Who remembers leaded petrol? Strong government incentives transformed this market in twenty years. With A-rated white goods, government and business using their tools to complement each others’ actions has achieved a radical shift in the market in favour of more energy efficient goods.

The Japanese government’s 'top-runner' target approach is a great example of government setting priorities to drive change. So when new household goods are manufactured, they are required to be the equivalent standard of the current most efficient product, driving a virtuous cycle of rapid innovation and choice editing, which has improved the efficiency of new appliances by as much as 78%.

We want to see a sustainable economy in Scotland – developing and manufacturing the best quality products, with the highest and most sustainable standards throughout a product’s lifecycle actively encouraged by the Scottish Government. This will help ensure better job security and long term prosperity for Scottish businesses in the emerging low carbon markets.

The Scottish Government has levers to support businesses, for example through grants, and innovation funding, but strong and decisive leadership on this agenda is the priority. By targeting key sector clusters along with SMEs through their networks, convening the appropriate stakeholders, offering strong leadership and delivering decisive policy interventions, Government can drive real change towards the development of sustainable products and services in Scotland.

Procurement is a crucial area where government intervention and leadership could support and enable businesses to grasp this agenda. Its bulk purchasing power can drive down the cost of new technology towards mainstreaming more sustainable products, and the use of forward procurement - where standards are specified above those currently achievable to set a clear direction of travel for business - can also be a powerful tool.

Working together, government and business in Scotland needs to start making the changes to take advantage of the emerging and promising markets for sustainable and low carbon products and services. The Commission's product roadmapping guide will help support practical action and show how progress can be achieved.

Read more about the Commission's work on Sustainable Consumption