January 6, 2017

Majority of Business Executives Are Encountering Global Resource Challenges

Sponsored by the Sealed Air Corporation, the Economist Intelligence Unit (EIU) conducted a survey of 800 business executives in the food & beverage, hospitality services, healthcare services and consumer goods industries. Respondents are drawn equally from North America, Latin America, Europe, Middle East and Africa, high-income Asia-Pacific countries and emerging-market Asia countries; 29 percent hold C-suite positions, with the rest being senior vice presidents, directors or senior leaders. Thirty percent of the respondents are from organizations with more than US$500 million in revenues.

To complement the survey findings, which may be found in a report titled Global resource challenges: Risks and opportunities for strategic management, "the EIU developed the Global Resource Management (GRM) Index, a set of four unique, interrelated industry-focused indices that examine how companies and governments monitor resource use, plan for future challenges and commit to sustainable, intelligent resource management across 25 countries. The industries and countries in the GRM Index are the same as those included in the EIU survey, with the exception of Denmark and Luxembourg."

Key findings of the report are listed below:

Labor is a constant challenge
  • "Access to labor was identified as the biggest challenge by respondents across industries. Fully 70% of respondents say they face labor challenges, alone or in combination with other resource issues, and half say access to skilled labor is a top challenge. Food & beverage and hospitality services are the industries hardest hit by labor challenges.
  • Improving overall working conditions is most often cited by survey respondents as an effective solution for both skilled and unskilled labor challenges, chosen by 27% of respondents. The other solutions in the top three are local training and education and relocating trained workers to locations with need for their skills.
Natural resource scarcity is particularly complicated to manage
  • 40% of survey respondents who say their company is facing natural resource challenges say these add time, cost or complexity to their operations.
  • Consumer goods and food & beverage companies are leaders in natural resource management. The index shows companies in these industries are more focused on sustainable management of environmental resources, such as committing to global standards, while the healthcare services and hospitality services industries have been slower to adopt such practices, in some cases because they are not as relevant to operations.
  • To address natural resource challenges, food & beverage companies focus on training employees and vendors to manage resources more effectively; consumer goods companies say working with suppliers to reduce resource use is the most effective strategy.
Physical infrastructure challenges affect the entire supply chain
  • Physical resource capacity, which includes the quality and reliability of the power network, is particularly low in emerging-market Asia, according to the index. In these countries, poor physical infrastructure exacerbates energy use and intensity due to waste and inefficiency. Europe, on the other hand, scores particularly well in this category.
  • The most effective ways to address physical resource challenges, survey respondents say, are mainly operational—such as adding flexibility to more easily operate in many locations (26%), training workers (25%) and reducing overall reliance on physical resources (24%).
Companies can be short-sighted regarding long-term risks
  • The index shows that water is a critical natural resource challenge for companies operating in many countries, but it is not cited as a top concern among survey respondents. This suggests that respondents are not necessarily aware of or focused on the long-term risk that water scarcity and climate change can have on their operations—even though 66% of respondents say climate change has had some effect, positive or negative, on the resource challenges they face. The lowest share saying so was respondents in North America (54%), while the highest was respondents in emerging-market and high-income Asia (81% and 71%).
  • One in five hospitality, consumer goods and food & beverage executives say climate change has made resource challenges more difficult to manage in the past two years; a separate 11% say climate change has increased the priority of managing these challenges, suggesting that organisations focused on resource challenges today may have an opportunity to get ahead of their peers as those challenges become more acute.
  • Collaboration with suppliers to reduce the use of natural resources is cited as an important way to mitigate natural resource challenges across industries (chosen by 24% of survey respondents as effective), while working with industry or consumer groups is cited as effective by only 11%. This suggests that most executives are not taking advantage of external collaboration partners to address critical resource challenges. This, too, seems short-sighted since best-practice companies very often gain significant benefits by doing so."
The report's conclusion begins by noting "most companies today face labor, physical or natural resource challenges, often in combination. The good news is that when they address these issues—individually and, more powerfully, together—most companies see hard and soft business benefits. The difficulty often comes in determining how to address all three challenges in a way that derives the most business benefit while mitigating a broad range of short- and long-term risks."

Moreover, "while many companies are focused on near-term talent issues ... they may be setting themselves up for long-term problems if they don't seek solutions that address labor in the context of the other issues facing them."

Do you agree with the findings of the report? Is your company facing labor, physical or natural resource challenges? And if so, what tactics are being utilized to mitigate these issues?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

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