More Demand for Resources

Resource Scarcity

A growing global population and a rising standard of living contribute to increasing demand for natural resources, such as energy, water, food and various materials. As a result, companies could be faced with resource scarcity issues, leading to disruption of supply and/or cost increases. Some industries will be affected more than others, depending on the type of resources used.


Energy
World consumption of primary energy exceeds 12 billion tons of oil equivalents per year, and has been rising consistently for decades, except for a small decline in 2009 due to the economic downturn. Global demand for energy is forecast to grow by 35% by 2035, which means more demand for both fossil fuels and renewable sources of energy. Meanwhile, conventional oil & gas reserves are getting depleted, forcing fossil fuel companies to turn to unconventional sources such as tar sands and shale gas, which have significant environmental impacts compared to conventional sources.

Industries most affected: oil & gas industries, energy companies. All other industries through higher energy prices.


Water
Around 70% of the earth’s surface is covered by water, but only 3% is freshwater, most of which is stored in icecaps and glaciers. The remainder is available for withdrawal from groundwater, lakes, swamps and rivers. Around 70% of the water withdrawn is used in agriculture, e.g. for the production of cotton and food products such as corn and meat. Of the remaining 30%, two thirds (20%) are used by industry and one third (10%) by households.

Water is increasingly scarce in certain parts of the world. Today, around 800 million people do not have access to safe drinking water. In some areas, groundwater levels are getting depleted fast by irrigation. Meanwhile, demand for freshwater is forecast to triple in the next 50 years. As a result, the FAO predicts that by 2025, 1.8 billion people will be faced with water scarcity, and two-thirds of the world population could be under stress conditions.

Industries most affected: agriculture and food industries, and water intensive sectors such as apparel, beverages, high-tech/electronics, pharmaceuticals.


Food
The global population is growing, which means more mouths to feed. Furthermore, higher affluence leads to more demand for meat, which implies more acreage for pasture lands and animal fodder. On top of that, biofuels and biobased materials also compete for land. To meet all these demands, the amount of farmland would have to increase by a billion hectares by 2050, this is roughly the size of China. Clearly, this is not possible.

Agricultural companies need to achieve a drastic increase in productivity, especially in developing countries, while reducing the sector's substantial environmental impact (greenhouse gases, soil and water pollution, deforestation, biodiversity loss, etc.). This is a real challenge. Therefore, food prices are expected to rise. Some studies predict that food prices will double in the next twenty years.

Industries most affected: agriculture industries and food producing companies.


Materials
Various other materials will also become increasingly scarce. A case in point are the so-called rare earth elements, like gallium, terbium, indium, germanium and neodymium. These metals are used in growing industries such as mobile phones, computers, automobiles, and many other applications. Experts predict that demand will more than triple between 2006 and 2030. China currently dominates the world market, but is increasingly reserving them for domestic production, leading to shortages in other countries. In response, the European Commission has identified 14 minerals with high supply risks. To reduce these risks, the Commission is developing a strategy to ensure access to primary resources, to stimulate recycling, and to conduct research on substitutes for critical raw materials.

The case of rare metals merely illustrates that in an increasingly resource intensive world, scarcity of resources is imminent. This also applies to other materials, such as oil-based products (plastics, pharmaceuticals), minerals (e.g. phosphorus, a vital resource for fertilizers), other metals such as strontium and zinc, etc.

Industries most affected: many different industries, depending on the materials. In the case of rare earth elements, industries most affected include electronics, IT and the automotive sector.


Companies need to be aware of their resource dependencies and potential scarcity issues, and manage their exposure accordingly.