Expect The Unexpected Executive Summary Eng

Expect the
Unexpected:
Building business value
in a changing world
kpmg.com
KPMG INTERNATIONAL
Executive Summary
In this report, KPMGs network
of firms analyzes a system of
ten sustainability megaforces
that will impact each and every
business over the next 20 years.
These forces do not act alone
in predictable ways. They are
interconnected. They interact.
Disclaimer:
Throughout this document, "KPMG" ["we," "our," and "us"] refers to KPMG International, a Swiss entity
that serves as a coordinating entity for a network of independent member firms operating under the
KPMG name, KPMG's Climate Change and Sustainability practice, and/or to any one or more of such
firms and/or to KPMGs Climate Change and Sustainability practice. KPMG International provides no
client services.
2012 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
Introduction
F
or 20 years or more the world has recognized that the next quarters results; that what is good for people
the way we do business has serious impacts on the and the planet can also be good for the long term bottom
world around us. Now it is increasingly clear that line and shareholder value.
the state of the world around us affects the way we do
In this report, KPMGs network of firms analyzes a system
business.
of ten sustainability megaforces that will impact each and
The resources on which business relies are becoming every business over the next 20 years. These forces do
more difficult to access and more costly. Increasing strain not act alone in predictable ways. They are interconnected.
on infrastructure and natural systems is likely as patterns of They interact.
economic growth and wealth change. Physical assets and
It is important for business leaders to understand this
supply chains will be affected by the unpredictable results
system of forces; assess the implications for their own
of a changing climate. And businesses can expect an ever
organizations; and devise strategies for managing the
more complex web of sustainability legislation and fiscal
risks and harnessing the opportunities. We can never
instruments.
know the future. But it is good business sense to be
But this is not the whole story. The central challenge of prepared for the possibilities: to expect the unexpected.
our age decoupling human progress from resource
This report cannot provide all the answers, and does
use and environmental decline can also be one of the
not set out to, but it does suggest approaches that we
biggest sources of future success for business. More
at KPMG believe will help to build business value in a
corporations are recognizing that there is value and
changing world.
opportunity in a broader sense of responsibility beyond
Global sustainability
megaforces will affect the
future of every business
Over the next 20 years businesses global energy demand; changes in the
For this report dozens will be exposed to hundreds of geographical pattern of consumption;
of forecasts have been environmental and social changes that supply and production uncertainties;
analyzed to identify the will bring both risks and opportunities and increasing regulatory interventions
in the search for sustainable growth. related to climate change.
changes that will have For this report dozens of forecasts have
Material Resource Scarcity: as
the greatest effects on been analyzed to identify the changes
developing countries industrialize
business. that will have the greatest effects on
rapidly, global demand for material
business.
resources is predicted to increase
The result is a set of ten global dramatically. Business is likely to
sustainability megaforces that we face increasing trade restrictions
believe will impact every business over and intense global competition for a
the next two decades. They are: wide range of material resources that
become less easily available. Scarcity
Climate Change: the one global
also creates opportunities to develop
megaforce that directly impacts
substitute materials or to recover
all others discussed in this report.
materials from waste.
Predictions of annual output losses
from climate change range between Water Scarcity: it is predicted
1 percent per year, if strong and early that by 2030, the global demand
action is taken, to at least 5 percent a for freshwater will exceed supply
year if policymakers fail to act. by 40 per cent.1 Businesses may
be vulnerable to water shortages,
Energy & Fuel: fossil fuel markets
declines in water quality, water
are likely to become more volatile
price volatility, and to reputational
and unpredictable because of higher
1
United Nations Environment Programme. (2011). Towards a Green Economy: Pathways to Sustainable
Development and Poverty Eradication.
Expect the Unexpected: Building business value in a changing world: Executive Summary | 3
challenges. Growth could be Growth over the next 30 years

compromised and conflicts over will be in cities. These cities will These cities will require
water supplies may create a security require extensive improvements in extensive improvements
risk to business operations. infrastructure including construction, in infrastructure including
water and sanitation, electricity,
Population Growth: global population
waste, transport, health, public construction, water and
is predicted to be 8.4billion by 2032
in a moderate growth scenario.2 This
safety and internet and cell phone sanitation, electricity,
growth will place intense pressures on
connectivity. waste, transport, health,
ecosystems and the supply of natural Food Security: in the next two public safety and
resources such as food, water, energy decades the global food production
and materials.3 Businesses can expect system will come under increasing
internet and cell phone
supply challenges and price volatility as pressure from megaforces including connectivity.
a result. This is a threat, but there are Population Growth, Water Scarcity
also opportunities to grow commerce, and Deforestation. Global food prices
create jobs, and to innovate to address are predicted to rise 7090 percent
the needs of growing populations. by 2030.8 In water-scarce regions,
Deforestation: Forests are big
agricultural producers are likely to
Wealth: the global middle class business. Wood products contributed
have to compete for supplies with
(defined by the OECD as individuals $100 billion per year to the global
other water-intensive industries such
with disposable income of between economy from 20032007 and the
as electric utilities and mining, and
US$10 and US$100 per capita per value of non-wood forest products
with consumers.
day)4 is predicted to grow 172percent (mostly food) was estimated at
between 2010 and 2030.5 The Ecosystem Decline: historically, US$18.5 billion in 2005. Yet forest
challenge for businesses is to serve the main business risk of declining areas are predicted to decline by
this new middle class market at a time biodiversity and ecosystem services 13percent from 2005 to 2030, mostly
when resources are likely to be scarcer has been to corporate reputations. in South Asia and Africa.9 T
he timber
and more price-volatile. The advantages However, as global ecosystems show industry and downstream sectors
many companies experienced in the increasing signs of breakdown and such as pulp and paper are vulnerable
last two decades from cheap labor stress, more companies are realizing to potential regulation to slow or
in developing nations are likely to be how dependent their operations reverse deforestation. Companies may
eroded by the growth and power of the are on the critical services these also find themselves under increasing
global middle class. ecosystems provide. The decline pressure from customers to prove
in ecosystems is making natural that their products are sustainable.
Urbanization: in 2009, for the first
resources scarcer, more expensive Opportunities may arise through
time ever, more people lived in cities
and less diverse; increasing the costs market mechanisms and incentives to
than in the countryside.6 By 2030 all
of water and escalating the damage reduce the rate of deforestation.
developing regions including Asia
caused by invasive species to sectors
and Africa are expected to have the
including agriculture, fishing, food
majority of their inhabitants living in
and beverages, pharmaceuticals and
urban areas;7 virtually all Population
tourism.
2
United Nations, Department of Economic and Social Affairs, Population Division, (2011). World Population
Prospects: The 2010 Revision.
3
Behrens, A. et al. (2007). The material basis of the global economy. Worldwide patterns in natural resource
extraction and their implications for sustainable resource use policies. Ecological Economics 64.
4
Kharas, Homi. (2010). OECD Development Centre Working Paper No. 285: The Emerging Middle Class in
Developing Countries. January 2010.
5
Ibid.
6
UN Habitat. (2009). Global Report on Human Settlements 2009: Planning Sustainable Cities. London, UK and
Sterling, VA, USA: United Nations Human Settlements Programme (UN-Habitat).
7
UN Habitat. (2010). State of the Worlds Cities 2010/2011 Cities for All: Bridging the Urban Divide.
8
Oxfam International. (2011). Growing a Better Future: Food justice in a resource-constrained world.
9
OECD. (2008). OECD Environmental Outlook to 2030
The systems approach to
sustainability: planning
for change
Existing projections provide some insights Trend projections prepared without
about a possible future, but should not be consideration of the entire system of Trend projections
relied upon to provide the whole story. sustainability megaforces no longer prepared without
Many predictions extrapolate current provide an adequate basis for strategic consideration of
rates of change without taking full account business decisions.
of the fact that sustainability megaforces the entire system of
Systems thinking around sustainability
reinforce, compete with, or balance the
embraces the entire structure of
megaforces no longer
effects of others.
megaforces rather than its individual provide an adequate
For example, increasing wealth and constituents. It is an important way basis for strategic
the growth of the global middle class to assess and manage new risks and
will accelerate demand for consumer uncover risks that were previously
business decisions.
goods and services, putting further unidentified. For example, a company
pressure on the natural and material may understand its direct dependency
resources needed to produce them. on water, but may not have thought
Regional freshwater availability about how the supply of its material
could struggle to keep pace with the resources could be impacted by
agricultural production necessary to feed increasing water scarcity.
the growing population. Urbanization
Companies may already be using
predictions generally do not account for
systems thinking, for example
the potential impacts of climate change
in strategic planning, revenue
refugees migrating from areas where
management or supply chain planning
water and food scarcity hit hardest.
but in KPMGs view it should be applied
Food production projections rarely factor
as part of a proactive sustainability
in deteriorating soil quality and the
strategy.
competing demands for agricultural land.
The nexus approach The Footprint Nexus For the purposes of this
The nexus approach has been The forces behind mankinds escalating report we have developed
widelyused by the World Economic footprint on the planet are interlinked
Forum and others to explore the through a complex network of
three nexuses which
drivingforces behind the challenge relationships. The Footprint Nexus together represent the
ofwater security. is a useful planning tool to help challenges of sustainable
business leaders envision the future
For the purposes of this report we
world and market conditions they
growth.
have developed three nexuses which
will be operating in and to develop
together represent the challenges
appropriate strategies.
of sustainable growth. KPMG
believes companies will benefit from
exploring these nexuses in their own
organizational context.
Figure 1: The Footprint Nexus
s = Same Direction
o = Opposite Direction
= Delayed Effect
Climate Climate
Change Change
s o
o
o
Population Wealth Population Wealth
s
s o
s s s
s o
Globalization Urbanization Globalization Urbanization
s s
s
s
s Material Use Material Use
o
Source: KPMG (2012). Expect the Unexpected: Building business value in a changing world
6 | Expect the Unexpected: Building business value in a changing world: Executive Summary
The Erosion Nexus the interactions between sustainability

megaforces. By considering the full
The Erosion Nexus helps executives system of megaforces, executives are
to explore in greater detail the many more likely to avoid sustainability quick
challenges and opportunities their fixes that can result in unforeseen
businesses could face as a result of problems and greater risks later on.
Figure 2: The Erosion Nexus

s = Same Direction
= Delayed Effect
Climate s Climate
Change Change
o o
o
s
o s
Water s Food Water Food
Security Security Security Security
o
s s
s
o s
s o
o o
s
s s s
Human Ecosystem Human Ecosystem
s
o
s
s
o
o o
Energy Forest Energy Forest

s
o
The Innovation Nexus suggests that sustainable lifestyles,

ecological restoration, renewable energy,
The Innovation Nexus is an example resource productivity, and the use of
of how executives can use the ICT to create smart cities, are among
systems approach to develop business the key innovations required to avoid
opportunities by innovating solutions to dangerous levels of climate change.
sustainability problems. This example
Figure 3: The Innovation Nexus

s = Same Direction
s/o = Same and Opposite Directions
= Delayed Effect
Climate s/o Climate o

Change Change
o
o
s o s
s
Resource Sustainable Resource Sustainable
Productivity Productivity
s Life Styles Life Styles
s
s s
s
s s s
s
Renewable Ecological Renewable Ecological

Energy Restoration Energy Restoration
s s
s s
s
s Smart Cities Smart Cities
Global Sustainability Megaforces:
A sectoral view
Over the next 20 years there is likely environmental costs which today
It is prudent for to be increasing pressure for the price are often not shown on financial
companies to expect of resources, products and services to statements.
to pay in the future reflect the full cost of their production
a rising proportion
including the cost of environmental Costs of environmental
impacts. Such pressure is likely to grow impacts are doubling every
of their external as governments address the effects of
14 years
environmental sustainability megaforces.
Data provided by Trucostand analyzed
costs. Possible futures include the removal of
for this report suggests that the
subsidies on input commodities (such
external environmental costs of 11 key
as fossil fuels and water) and the wider
industry sectors (including upstream
introduction of mechanisms to increase
supply chain) rose by 50percent
the cost of environmentally damaging
between 2002 and 2010, from
outputs.
US$566billion to US$854 billion.10
It is therefore prudent for companies
to expect to pay in the future a
rising proportion of their external
10
For the purposes of this report, Trucost, an independent environmental research agency, has provided a data
set based on the operations of over 800 companies between 2002 and 2010 (2010 being the most recent
available data) and representing 11 sectors. In this analysis Trucost converts 22 environmental impacts
into financial value, drawing upon current environmental-economic research. They include greenhouse
gases, water abstraction and waste generation. Together these 22 indicators represent the bulk of the
environmental footprint for most companies. The physical totals of these inputs and outputs are converted
into financial values and aggregated to achieve a total environmental cost value. These costs, which for the
most part do not appear on corporate financial statements, are known as external environmental costs.
EBITDA data come from independent financial data providers and are checked by Trucost analysts against
company financial statements.
The conversion of environmental impacts into dollar sums of external environmental cost is a relatively new
practice but one that is gaining momentum. The data is not yet 100 percent exact and for this reason the
analyses should be taken as indicative rather than absolute.
The sectors analyzed were: Airlines; Value at stake: sectors could

Automobiles; Beverages; Chemicals; see profits lost
Electricity; Food Producers;
Industrial Metals & Mining; Mining; External environmental costs
Marine Transportation; Oil & Gas; could account for a considerable
Telecommunications & Internet proportion of earnings (EBITDA)
(defined in line with the Industry and thus represent significant
Classification Benchmark system).11 business value potentially at stake:
across the 11 sectors, the average
The data suggests that the external external environmental costs per
environmental costs of business dollar of earnings would have been
operations are doubling every approximately 41 cents in 2010.
14years: a rate that is unlikely to be
sustainable even in the medium-term.
Figure 4: 2010 EBITDA vs external environmental costs
800
700 670
600
482
500
In USD, Billions
400
300
223
87% 224%
200 153 23%
134
100 89 97
84 64%
100 71%
22% 42% 43%
22 26 59%
52% 2.5%
0
Airlines Automobiles Beverages Chemicals Electricity Food Industrial Marine Mining Oil & Gas Tele-
Producers Metals Transportation Producers communications
& Internet
2010 EBITDA (billion USD) 2010 Total environmental costs as percentage of EBITDA
Source: Trucost 2012
11
See http://www.icbenchmark.com/
According to the data, Food Producers Exposure reduced but driven

had the largest external environmental mostly by rise in earnings
cost footprint of the11sectors in
2010 at US$200billion, followed by For most sectors covered in this
Electricity at US$195 billion and Oil & report, earnings rose far more steeply
Gas at US$152 billion. than external environmental costs
over the period 2002-2010, thereby
External environmental costs of the reducing the proportion of EBITDA at
Food Producers could outweigh the risk (average external environmental
sectors entire earnings. For five other costs across the 11sectors would
sectors (Electricity, Industrial Metals, have accounted for 91 cents for
Mining, Marine Transportation and every US dollar of earnings in 2002
Airlines) environmental costs could vs41cents in 2010).
account for more than half of earnings.
Figure 5: Growth in EBITDA vs growth in external environmental costs, 20022010
1000% 907%
800% 679%
596%
526%
600%
373%
400%
165%
140%
133%
126%
118%
200%
107%
102%
93%
84%
58%
56%
52%
49%
22%
16%
-14%
2.5%
0%
Airlines Automobiles Beverages Chemicals Electricity Food Industrial Marine Mining Oil & Gas Tele-
Producers Metals Transportation Producers communications
& Internet
-200%
EBITDA % Growth Environmental Cost % Growth
The only sector of the 11 to Environmental intensity:

demonstrate an absolute reduction in a clearer picture
its external environmental costs over
the eight-year period was Automobiles, Relative performance of sectors was
which achieved a drop of 14 percent explored by calculating how their
against an earnings increase of environmental intensity (external
22percent over the period. environmental costs per US dollar of
earnings) has changed between 2002
Chemicals recorded a minimal rise in and 2010.
environmental costs of 2.5 percent.
Electricity was the third lowest in Industrial Metals has achieved the
terms of growth in environmental greatest improvement of the 11sectors
costs over the period, with an in terms of its environmental intensity,
increase of 16 percent. however the sectors significant growth
in earnings over the period helped it to
gain this position.
Figure 6: Total external environmental cost 2010 vs growth in external environmental cost since
2002 vs enviromental intensity improvement
Size of circle indicates the sectors total external environmental costs in 2010 in USD
120%
100%
% Improvement in Environmental Intensity 20022010
Industrial Metals
Telecommunications+Internet
80%
Oil & Gas Marine
Producers Transportation
Mining
60%
Chemicals Electricity
40% Airlines
Automobiles
20%
Beverages
-40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160%
-20%
-40%
Food Producers
-60%
-80%
Growth in external environmental costs 20022010
Mining has achieved a similar faced by individual sectors and the

Mining has achieved a improvement in its environmental readiness of businesses to deal with
similar improvement in its intensity but has also recorded the those risks.12 Given the methodology
environmental intensity largest increase of all 11 sectors in its used, the risk exposure and readiness
external environmental costs. levels presented here are perceived,
but has also recorded rather than actual and so findings
A cluster of sectors Automobiles,
the largest increase of all should be taken as indicative not
Chemicals and Electricity have
11 sectors in its external improved their environmental
absolute.
environmental costs. intensity while also achieving The two sectors perceived as being
negative or low growth in the external at highest risk from sustainability
environmental costs they incur. This megaforces, but least ready are
suggests that these three sectors Food Producers and Beverages.
are coming the closest to decoupling This supports the findings of the
their economic growth from environmental intensity analysis
environmental impact. which shows they have made the
least progress in reducing their
Food Producers and Beverages
environmental intensity while their
have shown the lowest rates
exposure to environmental cost is
of environmental intensity
growing rapidly.
improvement. Food Producers
is the only one of the 11 sectors The Automobiles and
that, according to the data, has not Telecommunications & Internet
improved its environmental intensity sectors are perceived as being the least
at all over the last eight years. at risk and the most ready.
The cluster of sectors in the center
Perceptions of sectoral risks of the risk-readiness matrix indicates
and readiness to deal with that perceived sustainability risk
them remains high for Oil & Gas, Electricity,
Mining & Metals and Airlines.
KPMG has analyzed more than 60
Electricity is seen as the most ready
sector reports and aggregated their
among these.
findings on the sustainability risks
12
The risk types assessed were: Physical; Competitive; Regulatory; Reputational; Litigation; and Social.
Physical Risks include the risk of damage to physical assets and supply chains from climate change-related
weather events and exposure to long-term environmental trends, such as variations in water availability or
rising sea levels. Competitive Risks include the risk of exposure to cost increases or cost volatility of key
input commodities such as energy, fuel, water and agricultural products as well as exposure to shifts in
market dynamics. Regulatory Risks include the risk of increased costs and complexity for business from
policies and regulations designed to limit the long-term effects of sustainability megaforces. Examples
include carbon taxes, emissions trading systems and fuel tariffs. Reputational Risks include the risk of
damage to corporate reputation and brand value among stakeholders when a company is perceived as failing
to act appropriately in response to sustainability challenges. Litigation Risks include the risk of litigation over
environmental damage or insufficient corporate disclosure on sustainability. Social Risks include the risk
of serious disruption to business operations and supply chains due to the societal effects of sustainability
megaforces. Examples include mass migration as climate refugees try to escape the worst impacts of
climate change; conflicts over scarce resources such as water; and civil unrest driven by population growth
and wealth inequality. The level of sector readiness was also assessed using data gathered for the KPMG
International Survey of Corporate Responsibility Reporting 2011.
Figure 7: Risk and readiness matrix

Low
Food Producers
Oil & Gas
Chemicals Beverages
Telecommunications
Readiness
& Internet Airlines

Marine Transportation
Automobiles
Mining & Metals

Electricity
High
Low Risk High
Call to action: Business

strategies & policy formation
With potentially far reaching impacts the involvement of the business
Without action and on the horizon as a result of global management and should encompass a
planning for the complex sustainability megaforces, businesses wide range of corporate functions.
future that lies ahead, and policymakers together must take
Turn strategic plans into ambitious
strategic decisions now and promote
risks will multiply changes in long term thinking. Without
targets and actions for energy and
resource efficiency, sustainable
andopportunities will action and planning for the complex
supply chain management, innovation
be lost. future that lies ahead, risks will multiply
and access to new markets for
and opportunities will be lost.
greener products and services.
Sustainable growth requires action Explore tax incentives tailored
from both economic sides: supply to alternative energy, energy
and demand. The supply side must efficiency and other areas related to
make more with less, increasing sustainability.13
resource efficiency and minimizing the
Measure and report on
environmental footprint of processes
sustainability. Sustainability
and operations. The demand side must
reporting, although largely still
make less do more, managing growing
unregulated, will become increasingly
demand for goods and services, while
important in the future. Integrated
addressing pressure on dwindling
reporting, where sustainability
natural resources.
information is included in the full
picture of the companys business
Recommendations: the performance, is a growing trend. For
essentials of business action integrated reporting companies need
Global sustainability megaforces will to build a framework for sustainability
mean constraints, complexity and risks reporting processes, stronger
for business. But business leaders can information systems and appropriate
do much more than simply survive the governance and control mechanisms
risks. With foresight and planning they on a par with those currently used in
can turn risks into new opportunities financial reporting.
and pioneer actions to prepare for an Seek collaboration with business
uncertain future: partners on sustainability issues.
Understand and assess risks. This will be critical to increase
Businesses are advised to use leverage and improve the cost-benefit
Enterprise Risk Management tools ratio of action.
and sustainability systems thinking to Build strategic partnerships:
a) assess and understand future risks seek opportunities for genuine
from sustainability megaforces and b) dialogue with the governments and
define responses to deal with them demonstrate new and innovative
through efficiency, substitution or approaches to Public-Private
adaptation. Partnerships. Improved dialogue
Use integrated strategic planning could focus on economic instruments
and strategy development. Strategic and market barriers that could
planning for sustainability requires be reduced to make sustainable
business operation easier.
13
KPMG (2011). KPMG International Survey of Corporate Responsibility Reporting 2011.
Figure 8: Global sustainability megaforces Addressing the risks while realizing the opportunities
Global Sustainability Megaforces
Material Resource
Climate Change Wealth Ecosystem Decline Food Security
Scarcity
Energy & Fuel Population Growth Urbanization Water Scarcity Deforestation
Impacts on business
Price increases Physical and Changes in consumer Resource constraints

New regulations
and volatility weather changes preferences on production
Emerging risks Emerging opportunities

The global sustainability
New products, services and

megaforces result in both risks
Innovation and learning

Reputation and brand
and opportunities. Businesses
Access to capital
Cost reduction
Reputational
can design effective strategies

Regulatory
Litigation
Physical
markets
to address the risk while
Market
Social
simultaneously taking
advantage of the opportunities.
Interventions by business
Energy and resource efficient operations
Sustainable supply chain management
Strategic sector partnerships
Invest into innovation: sustainable product/services
Reporting and disclosure
Recommendations: the incentives and legal frameworks,

essentials of government as well as international market,
legal infrastructure, trade protocols
action towards sustainability and development aid measures. In
The global sustainability megaforces creating an enabling environment,
of the coming decades will bring governments must seek to use a
shocks and surprises. As governments variety of policy tools including
in all regions will be called upon to taxation.
take more steps to limit or reverse
Increased collaboration with
negative environmental and social
private sector through Public
impacts, businesses will be confronted
Private Partnerships (PPPs):
with an ever more complex web of
If properly designed, PPPs can
sustainability-related fiscal instruments
provide an effective architecture for
and legislation. Policymakers are urged
promoting sustainability in a way
to deliver the overarching policy goals
that mobilizes private sector finance,
that will be crucial for business to make
rather than relying on public funding
a timely transition towards a sustainable
alone.
society.
Continuity and coherence in Business and government
policy: Clear, well planned and working together: Public-
secure government policies are
crucial for scaling-up investment and
Private Partnerships as a tool
facilitating the transition to green for green growth
economy. Strong collaboration across To achieve their strategies, governments
governmental bodies and ministries need corporations to provide low-carbon
on sustainability issues will be key. and green technology, the skills to
Reducing complexity in policy: deploy and operate it, and the funds of
Reducing regulatory complexity and financiers to invest in delivering it. Given
improving transparency is another that many national budgets remain
key area for action, as businesses stretched as a result of the global
frequently cite regulatory complexity financial crisis, the conditions seem
as one of the main sources of risk and ripe for the wider introduction of PPP
uncertainty surrounding sustainability. structures using private finance.14
Coordinated international KPMG has engaged in many PPPs

collaboration: Multilateral over the past 15 years. Based on
coordination across countries and this experience, the key points for
regions, particularly for carbon developing successful PPPs are:15
markets and any future climate The PPP process cannot be rushed
treaty, is needed to reduce regulatory ittakes time to develop properly;
complexity.
Policymakers are urged PPPs sometimes require significant
to deliver the overarching Creation of enabling green upfront costs, but meeting these
investment environment: costs will make it much more
policy goals that will be Policymakers need to remove attractive, particularly if investors can
crucial for business to barriers to green investment and see that the right resources have
make a timely transition establish the essential enabling been applied;
conditions in all areas: national-level
towards a sustainable regulations, policies, subsidies,
society.
14
United Nations Framework Convention on Climate Change Secretariat (2007). Investment and Financial
Flows to Address Climate Change. Bonn.
15
KPMG (2011). Insight Urbanisation: The massive challenge facing cities and innovative ways its being
addressed
Governments must play an active Imperatives for achieving The transition to a

role in monitoring and regulating the sustainable growth
project; sustainable economy is
The transition to a sustainable economy
PPP structures must be designed possible, but it requires
is possible, but it requires widespread
to include clear and formal global support from businesses, widespread global
methodologies for reviewing governments and civil society. This support from businesses,
contracts over the term of the transition requires solutions that
project(particularly those that last governments and civil
address both how and which goods and
10to 30 years or more); services are produced. Both the public society.
A single-minded focus is essential and private sectors have a vital role to
for developing transparent and play and a coordinated approach holds
competitive procurement procedures. the key to success.
Figure 9: Imperatives for concerted action on sustainability
Effective transition involves both supply and demand interventions

Supply side Demand side
Objective: Reduce the Objective: Shift demand from
enviromental impact resource intensive to sustainable
of production goods and services
Energy and Strategic Innovation

sector Sustainable
effective policy to suport the transition to a green economy.
resource efficient
Business operations partnerships product/services
Business and government must work together to design
Sustainable New markets

supply chain
Public private Infrastructure

financing investment /
Public Sustainable cities
Consumer
Private Government education
Partnership funded R&D
Government
procurement
Subsidies for
Fossil fuel specific products
Subsidies
Process
Government standards
Pricing of Tax incentives Product
negative for specific standards
externalities products
Contacts
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Publication name: Expect the Unexpected: Building business value in a changing world: Executive Summary
Publication number: 111274A
Publication date: February 2012

Expect The Unexpected Executive Summary Eng

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Expect The Unexpected Executive Summary Eng

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Expect the

challenges. Growth could be Growth over the next 30 years

Figure 1: The Footprint Nexus

The Erosion Nexus the interactions between sustainability

Figure 2: The Erosion Nexus

Energy Forest Energy Forest

The Innovation Nexus suggests that sustainable lifestyles,

Figure 3: The Innovation Nexus

Climate s/o Climate o

Renewable Ecological Renewable Ecological

s Smart Cities Smart Cities

The sectors analyzed were: Airlines; Value at stake: sectors could

Figure 4: 2010 EBITDA vs external environmental costs

Source: Trucost 2012

According to the data, Food Producers Exposure reduced but driven

Figure 5: Growth in EBITDA vs growth in external environmental costs, 20022010

Source: Trucost 2012

The only sector of the 11 to Environmental intensity:

Source: Trucost 2012

Mining has achieved a similar faced by individual sectors and the

Figure 7: Risk and readiness matrix

& Internet Airlines

Mining & Metals

Low Risk High

Call to action: Business

Global Sustainability Megaforces

Energy & Fuel Population Growth Urbanization Water Scarcity Deforestation

Price increases Physical and Changes in consumer Resource constraints

Emerging risks Emerging opportunities

New products, services and

Innovation and learning

can design effective strategies

Energy and resource efficient operations

Sustainable supply chain management

Strategic sector partnerships

Invest into innovation: sustainable product/services

Reporting and disclosure

Recommendations: the incentives and legal frameworks,

Coordinated international KPMG has engaged in many PPPs

Governments must play an active Imperatives for achieving The transition to a

Figure 9: Imperatives for concerted action on sustainability

Effective transition involves both supply and demand interventions

Energy and Strategic Innovation

Sustainable New markets

Public private Infrastructure

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