The Future of Travel – Impacts and Implications

It is uncertain how far climate change will impact destinations over the next 20 years, but it is highly likely that we will start to see the effects of a warming world in this time frame, especially in those destinations that already experience extreme weather, such as at the equator and the poles (as well as the Caribbean, the Mediterranean and Australia), where particularly water scarcity will impact on the tourism industry.

Companies will increasingly be accountable for their environmental and social impact, and demonstrate how close they come to providing a ‘net positive impact’ in the destination.

The Future of the Company – Options and Possibilities

There is little that is guaranteed but change is certain. In the words of Lawrence Bloom, the co-founder of B.e Energy (a triple bottom line energy company), we are no longer in an age of change but in a change of age. The world faces three converging crises – economic, environmental and social – that require urgent and visionary action. Behind these crises are the failure of a worldview based on the single-minded pursuit of growth and the failure to work collaboratively to ensure that benefits are shared widely.

In the next decade, we will certainly see the effects of our failure to proactively address challenges such as inequality, the regulation of financial markets and youth unemployment. The effects of our failure to make capitalism inclusive will become apparent: we have a generation of young people with uncertain prospects and we face rising inequality with a rising share going to the wealthy even as our wages stagnate. The corporation will be increasingly associated with these problems due to its status as the place where much of the distribution of the benefits of capitalism take place.

We have already started to see the effects of climate change and business has started to sit up and take notice. How will we react and will we be able to turn the ship around? The answer to this question largely depends on the readiness of the corporate sector to support progressive political solutions. It is becoming patently clear that exhausting the planet’s resources is not an option – a growing number of politicians and business leaders recognize we cannot burn our fossil fuel reserves without destroying the world as we know it.

Not all is grim; in the next decade we will witness the continued rise of a new generation of leaders pushing for responsible business, broader recognition of the need for gender and racial diversity in boardrooms and C-suites, and the shift of power from the global north to south and from west to east. Companies from emerging economies will certainly take on a key role in the global economy. They will bring with them different models of governance which might be more able to respond to changing conditions, although they will also introduce new challenges. Finally, the line between public and private will continue to blur. There will be mounting pressure from civil society and the general public for sustainability in business and for corporations to take responsibility for the impacts generated by their value chains and off-shore operations. The reordering of transnational legal and political frameworks will offer us the opportunity to revision the respective roles of the State, the corporation and civil society. Concerted effort is needed to nudge the process in the direction of democracy and broad-based participation.

On our current path, another crash of the financial markets is highly likely. We have not addressed the root causes of the 2008 crisis and momentum for a significant overhaul of the markets has slowed to a crawl. Will the erosion of trust in business caused by the cyclical boom-and-bust nature of markets have an impact on policy-making? It’s hard to say.

The relative power of stakeholders within companies is similarly uncertain: will employees regain their voice? Will responsible investors play a more important role in influencing companies?

There are several events that could occur at the world stage that would have a profound impact on the global economy: another global energy crisis, the eclipse of Western economies by emerging economies, and the dissolution of the European Union.

The overarching uncertainties are whether we will see a rebalancing of power between different stakeholders, whether big business and key interested parties will lead or resist a rebalancing of influence, and how big a crisis is needed to jar us from our current trajectory. The risk is that entrenched interests that benefit from the current state of play will thwart reforms that threaten to limit their influence.

The Future of the Company – Proposed Way Forward

The backlash against big corporations has already fostered interest in alternative business models that will continue to gain momentum over the next decade. There is not one perfect alternative to publicly listed companies but rather a plurality of legal structures that each have certain benefits and drawbacks, including privately held companies, partnerships, benefit corporations, cooperatives, and worker-owned enterprises.

Major changes are on the way for company boards. Although problematic, the concept of stewardship has become the go-to response for regulators seeking to address short-termism in the markets, along with increasing shareholder rights. In theory, strengthening ‘shareholder democracy’ by giving shareholders additional powers such as a say-on-pay seems like a good way to encourage institutional investors like pensions and sovereign funds to steer companies in the right direction. In practice, however, it is unclear whether we can expect investors to take on this responsibility. A slight variation on this would be to assign different powers to different classes of shares.

It may be that other stakeholders besides shareholders will take on an increasingly important role. Board level employee representation is well established in much of continental Europe and has started to receive some attention at the EU level. Board diversity is also a key topic now and will almost certainly be into the future. We may see reserved seats for women, visible minorities, and other traditionally under-represented groups.

The classic maxim says that what is measured is what matters. The traditional focus of firms on measuring and reporting on almost exclusively financial indicators is changing to look at a broader set of indicators. In the EU, the recently adopted Non-Financial Reporting Directive requires certain large European companies to disclose information about environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. Integrated Reporting (<IR>) was devised less than a decade ago but has been picked up by an increasing number of companies who welcome the ability to tell a story about the whole picture of the company, which is often overlooked in quarterly reports. Closely related is the question of how to share information about companies to potential investors and the public. There are several ideas out there for developing benchmarks and labeling standards to identify sustainable companies and financial products, similar to what has been done for Fair Trade products.

There are two main ways to influence behaviour: sticks and carrots. Ideally, we will push companies to be pro-social through a combination of both regulatory policy and economic incentives. For example, there has been a lot of discussion in the context of climate change about introducing taxation of externalities, e.g. carbon taxes, as well as a carbon market. The EU has also considered proposals to impose a transaction tax on financial markets to reduce volatility and generate revenue, which has been used in other jurisdictions with inconclusive results. We may see requirements imposed to devote a certain percentage of revenue to CSR, as is being implemented in parts of Asia.

The Benefit Corporation and similar models might be supported by governments, either by tax incentives or by preferential treatment in public procurement. Farsighted States may reform their company law to introduce mandatory elements of corporate purpose, such as, for example, the concept of making decisions with an aim to remaining within our planetary boundaries, and adjusting directors’ duties and responsibilities accordingly. These changes have the potential to have high impact because they could shift economic activity to a new model – and for that reason, they are unlikely to be implemented. Other debated regulatory reforms include caps on executive pay and/or pegging executive pay to non-financial returns; changing the rules on the legal liability of multinational enterprises to allow parent companies to be held legally liable for the actions of their foreign subsidiaries; and restrictions on firms’ right to buy back their shares. Each of these reforms is potentially important but it is only when they are taken together that they have a chance to lead to system-wide changes to business conduct.

In terms of incentives, almost any of the regulatory reforms discussed in the previous paragraph could be framed instead as an incentive with a bit of ingenuity. Additional ideas include introducing incentives for boards to change their composition or to balance the short-term financial interests of the company with long-term and/or non-financial interests. Thoughtful policymaking is needed; indeed, perhaps the best we can do is to try to ‘nudge’ behaviour in the right direction and closely monitor the results, ever ready to react to changes.

The Future of Water – Options and Possibilities

The UN has sagely noted that “water is the primary medium through which climate change impacts will be felt by humans, society and the environment” and accordingly climate change will necessitate improvements in water resilience systems in cities across the globe. Increasingly they will have to focus on local water sourcing, reuse and recycling in order to sustain their ever-expanding population. There are multiple ways in which efficiency can be improved not least through significant investments in green infrastructure, the adaption of smart technology and widespread public education which will help to manage water demand through a broader understanding about its natural process. Water is a key contributor to life. We need to be constantly reminding ourselves of this and take action.

Many countries are currently working to maintain and improve the quality of their sources.  About 96% of the earth’s total water supply is found in oceans and there is broad agreement that extensive use of desalination will be required to meet the needs of growing world population.  Worldwide desalination plants are producing over 323 million cubic metres of fresh water per day, however energy costs are currently the principal barrier to its greater use. The State of Singapore has innovative water technology, aiming, despite its size and population density, to become fully self-sufficient by 2061.  Plans include tripling its desalinated water supply by 2030, the large-scale collection of rainwater, and the collection of recycled water which, as well as the standard procedures, uses micro filtration processes, reverse osmosis and UV treatment to deliver potable water to its citizens. In short they are converting their city into a catchment and focusing on source diversity.

Elsewhere efficiencies will be improved by the use of intelligent robots, which will play a greater role in the inspection of infrastructure.  New materials, such as graphene, that are lighter, stronger, smarter and greener will also become more popular replacing traditional materials such as stainless steel pipes.

Growing concern for the environment and for public health means that water companies will be held to greater account for their environmental impact and water quality. A stronger emphasis on green infrastructure will support a trend for companies to transform from providing base utilities to creating a system of amenities that support the water cycle. An example of this can be found at the Illinois Institute of Technology. Rain gardens have been reutilized as communal meeting spaces, through-ways turned in to permeable walkways and three acres of new native plant communities with underground cisterns collect rainwater for future non potable reuse. Once all the changes are implemented the IIT predicts a 70 – 80% reduction of run-off into Chicago’s sewer system while making the collected non-potable water available for irrigation. Expect this repurposing of public spaces for multi-functionality for both amenity and wider sustainability purposes to be widely adopted.

Alongside making improvements to the infrastructure, there is a pressing need to do more with less water. Smart technology and big data will help. Changing public behavior is a huge challenge however.  Although there is widespread understanding that rising consumption of raw materials is both intensifying resource scarcity and increasing competition, most people, certainly in the developed world, live materialistic lifestyles resulting in high levels of waste.  In Australia for example, on average around 20 million tonnes of waste per year is thrown away at a value of AUD10.5 bn. Digital lifestyles can increasingly link consumer behavior to consumption and growing connectivity, utilizing the Internet of Things, will mean that it will be possible to monitor the consumption and cost of water in real time allowing consumers to understand their impacts and take action.

Data analytics can help build understanding on how to use the water cycle to respond to the challenges of climate change. It can also lead to increased scrutiny of water utilities and a better understanding of cost. Companies will therefore be able to integrate the true cost of water into their decision-making. In addition the availability of data provides an opportunity to educate customers about consumption. Publicity campaigns and a growing sense of urgency will nudge consumers to reduce consumption and should be used in partnership with economic levers that recognize the true value of water.

Growing populations and changes in diet mean that we need to produce more food. Water is a fundamental part of this process. In Australia, for example, the agricultural sector accounts for around 65% of total water consumption.  This could be greatly reduced if we could change consumer behaviour. It is estimated that Australians throw away AUD5.3bn of food waste every year. This is simultaneously wastewater. There is a real need to change this approach and developments in this sector will continue to have tangible knock on effects for the water supply industry and the natural environment from which this water is sourced.

Science will also have a key role in reducing the amount of water we use. Nano and biotechnology is a potential game-changer for the water industry, and can enable breakthrough products and technologies to tackle pressing global challenges such as reducing environmental footprints, using less and cleaner energy and decreasing water usage and waste generation. For example microorganisms are now being used to treat water that has been contaminated by hazardous materials. The global market for nanostructured product used in water treatment was worth an estimated USD1.4bn in 2010 and is expected to rise to USD2.1bn in 2015.[1]  Initial success in this area has also raised the possibility of the utility as a self-healing ecosystem.

Greater efficiency is the driving force for manufacturing companies where energy and water can be as much as 50% of the total manufacturing cost.  In the future expect more green manufacturing and increased co-operation when companies forge alliances across traditional boundaries, for example to share common costs. In the water industry this will manifest itself in knowledge sharing and contributions to joint research and development across catchment boundaries.  Through using resources more efficiently countries could also become more active trading partners; this would allow for more equal water redistribution amongst users. This could include a water balance concept similar to carbon emissions reduction strategies where water saved in one country offsets additional water use in another.

Looking ahead, users are likely to have to pay for the real cost of infrastructure. One short-term option is the financial recycling of assets and capital where old assets are sold or leased to fund the new. However, in the longer-term we will have to pay the true value for key resources. This shift could also lead to the greater application of the circular economy, which will help stretch resources through end of life recycling and reuse. More awareness will lead to increased scrutiny of water utilities and pricing of services as the widespread availability of data provides the opportunity to educate customers about consumption and managing resource use.  Looking through an international lens, water trading would allow for the efficient redistribution of water amongst users, so countries could become active trading partners. As the amount of water used in agriculture in arid regions is two to three times higher than in rain fed regions water trade could help save water on a global scale.

Once efficiencies and improvements are made, consideration should be given to the most cost effective way to provide access to basic services.  The fixed nature of water supply infrastructure and its history as an essential government supplied service gives rise to natural monopolies within supply areas. Governments need to ensure the pricing policy is appropriate to balance the essential need for water, the impacts on consumers (particularly those on lower incomes) and the requirements of the suppliers to remain financially viable.  To do this there should be better integration between urban water planning and urban development planning with considerations on limitation to green-field development.

Recognizing innovation opportunities for the future more and more companies are tapping into the public’s intellectual capital by crowdsourcing product ideas and solutions.  In exchange they are giving creative consumers a direct say in what gets developed, designed or manufactured. Crowd-funding added at around 270,000 jobs and injected more than US$65bn into the global economy by the end of 2014 with an expected industry growth of 92%.

[1] . Nanotechnology Now. Nanotechnology in Water Treatment. 2012; Available from: http://www.nanotech-now.com/news.cgi?story_id=45894

The Future of Water – Proposed Way Forward

Over the next ten years our waterways and other water sources will continue to suffer from over-extraction. This will continue to compromise the quality of the environment and the organisms it supports. In particular mining and other activities will continue to move into our water supply catchments affecting water quality and altering inflows. This will mean that we may be obliged to move water long distances in times of drought to services existing cities. In turn this could lead to increased GHG emissions at the very time when we are trying to reduce these.

We need to change this trajectory.   In doing so it is important that we reconnect ourselves with water in its pure elemental form. We should all be able to enjoy access to clean water, not just for drinking, but also for recreation and connection to nature. Putting water at the centre of the urban design process and re designing our cities and towns to respond positively to water is fundamental to ensuring a better understanding of the water cycle.  We need to develop better Green infrastructures – the networks of green and blue spaces such as parks, agriculture, woods, rivers and ponds in and around cities systems – that replicate nature and enable communities to connect with water.  The benefits include the reduction of flood risk, improved health and well being as well as providing a habitat for wildlife. Extensive green networks can be formed over time to create encompassing city ecosystems that can support the sustainable movement of people, rebuild biodiversity and provide substantial climate change adaption and resilience.

The focus should extend to solutions that do more with less: irrigation efficiency, automated farming techniques and demand management in our cities.  Smart infrastructure will help responding intelligently to changes in its environment to improve performance. Smart water networks could save the industry USD12.5bn a year.  In Israel, data analytic company TaKaDu takes information supplied by sensors and meters dotted around a water company’s supply network to build a sophisticated picture of how the network is performing.  It can spot anomalies in its behaviour from a small leak to a burst water main.

We should also start to re-think our traditional approach to drainage.  Working with natural site conditions for example, water, wastewater and storm water could be combined into one cycle. The AJ Lewis Centre for Environmental Studies ecologically treats and recycles wastewater within its buildings, integrating processes of wetland ecosystems with conventional procedures and in so doing recycling wastewater into reusable grey water.  While conventionally supplied water is used for drinking and hand washing, the recycled non-potable water is used in the Centre’s toilets and for landscape irrigation and recharging the wetland pond. Others should and are following suit.

A multitude of new tools are available to help us.  Alongside smart technology there are new biodegradable materials made from natural fibres that can provide greater resilience at less energy and lower cost. Beyond this, innovations will transform wastewater into a resource for energy generation and humidity into a source of drinking water.  We can see the beginnings of this already; consider, for example, the Israeli company, Water Gen, which has developed a device for extracting drinking water from air. Other advances including fog catchers, thick mesh nets that collect the water contained in fog, will soon be more widely adopted.[1]

We need increased investment in basic water and sanitation services both in new and the renewal of existing services.  Water treatment can come at a high price. The OECD has estimated that around USD50 trillion would be needed worldwide in the period to 2030 to satisfy the global demand for infrastructure[2]. However, accessing funding is an ever-present challenge.  In the US alone, if current trends continue, the investment needed by 2040 will amount to USD195bn and the funding gap will be USD144bn[3].  While most infrastructure investments are local, the sources of finance are increasingly global.

Beyond everything we must improve public understanding about the value of water and the services it provides. Globally public opinion still varies on the issue of climate change.  Better engagement with customers including education and information will have a large effect on calls to action around water. Education is fundamental to help the public to accept the need to reduce overall water use and to increase the use of wastewater for potable purposes. In particular city dwellers must learn to conserve more or utilize different sources of water such as storm water to provide for their needs, allowing potable water to be freed up to feed a growing population. Small adaptions by multiple individuals will make a difference.

[1] National Geographic. Fog Catchers Bring Water to Parched Villages. 2009; Available from: http://news.nationalgeographic.com/news/2009/07/090709-fog-catchers-peru-water-missions.html
[2] OECD. Infrastructure to 2030: Telecom, Land Transport, Water and Electricity. 2006; Available from: http://www.keepeek.com/Digital-AssetManagement/oecd/economics/infrastructure-to-2030_9789264023994-en#page4
[3] American Society of Civil Engineers. Failure to act: the economic impact of current investment trends in water and wastewater treatment infrastructure. 2011; Available from: http://www.asce.org/uploadedfiles/infrastructure/failure_to_act/asce%20water%20report%20final.pdf