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Sustainability blog is all about growing demands on stakeholders for more information, increases in regulation and the impact of long-term trends mean all organisations should focus on the sustainability of their operations, products and services.
National productivity has steadily declined since the late 1990s, and at its peak, productivity growth has averaged at 2.5 per cent. However, in the past decade this growth has decelerated to an average of just 1.25 per cent, even dipping into negative growth during the mid-2000s – to what has been described as “the nothing era”.
As the Productivity Commission highlights, there is other compelling evidence that Australian productivity is hindered by poor management practices. Australian businesses in particular, lag significantly behind the global frontiers of good management. More recently, the Treasury’s Economic Roundup identified an optimistic growth in productivity over the last year. Though, authors Simon Campbell and Harry Withers warn that “there would need to be a sustained lift in average annual productivity growth…to allow living standards to continue to improve at the long-run historical rate.”
What if that silver bullet everyone seeks to lift productivity and performance is through leaders actively leading wellbeing in their organisation with connection and care, rather than flu shots and fruit bowls for individuals?
Peggy O Neill, president at Richmond Football Club, was recently presenting at a business breakfast I attended. When I asked what underpinning factor contributed to the success of the club, one powerful word resonated with me – “connection”.
Peggy described the multiple ways they focused on connection as building connectivity between coaches and players, players with players and having the right people on the bus just to name a few.
They built a focussed strategy together and executed it. Peggy described the strategy as being built on “what we did have” and not on “what we didn’t have”. Game time was about focusing on unselfish play, and about rewarding and recognising those players.
A powerful way of connecting as described in the new book Yellow and Black: A season with Richmond by Konrad Marshall, was through authentic leadership shown by the players. Brandon Ellis was the first player to open up and share a personal story with his team mates about his hero, a hardship and a highlight in his life. Ellis described the challenge of baring his soul, the reward through the personal connection he built with his team members and the care that they shared between each other. Known as the “Triple H” method, authentic leadership was a part of how they related to each other by getting to know each other as people. This created the possibility of relating to each other differently and brought out the best in what they had together. Quoted in The Age Sunday 28 October Ellis said, “We don’t want to be fake. We want you to know who… I am. We’ve taken a massive step forward this year in how much we care. We’re connected now. I feel like we are forming a brotherhood”.
Richmond Football Club brought out the best in their people and won the Premiership of 2017. Productivity was a part of their DNA.
Interestingly, when thinking turns to organisations and productivity, productivity and wellbeing of people are often thought of as two separate entities. Wellbeing is about individuals, and productivity is about organisations and GDP.
So what can organisations learn from the Richmond Football Club taking better care of their people?
What if it was about leaders actively caring for their people and working together on creating a workplace where people are connected together?
What might building a culture of care and connection do to enable workplaces to boost productivity?
Leaders can create well workplaces by creating opportunities for people to connect – connect with the purpose of their organisation and their own, with each other, between leaders themselves and also with their teams as people.
Five simple ways for leaders to boost productivity and create a well workplace are:
Find ways to connect your senior leadership and your people, and get to know each other as people. Try the “Triple H” culture technique in a supportive environment – share a story about a hardship, hero and highlight.
Build trust by working on a challenge together that everyone cares about, like safety or wellbeing.
Ask for and really listen to your people’s ideas and views – innovation can happen organically if you let it.
Build a strategy that is focused on what you want to achieve and then have the discipline to execute it.
Reward unselfish team play to drive genuine collaboration. Set KPIs that reward this rather than individual achievement, and celebrate success.
Have you heard about the pioneering media giant who left her hugely successful news website to focus on sleep? No? Well – it’s not actually as strange as it sounds.
Ariana Huffington’s decision last week to step down from the Huffington Post, a media empire that she has grown from her basement to being one of the most visited news sites in the world with a presence in 16 countries, came as a surprise. Especially because Huffington had just recently signed a new contract to remain with the company til 2019.
She has explained that her decision is down to her desire to focus 100% of her time on her new start up – Thrive Global.
Thrive Global will be a non-profit group focused on health and wellness that will work with organisations to help them improve staff wellbeing. Elaborating on the mission of the company, Huffington stated ‘As all of you know, since publishing Thrive, I’ve become more and more passionate – okay, obsessed – with burnout and stress and how we can reduce their impact on our lives. Thrive Global’s mission is to change the way we work and live by ending the collective delusion that burnout is a necessary price for success.’
Australia’s safety journey
Huffington started to explore the concept of wellbeing after a collapse eight years ago brought about by exhaustion and sleep deprivation. It’s inspiring and exciting to hear one of the most influential women in the world talk openly about what is an increasingly serious problem in workplaces – locally and globally.
In Australia, we have been on an evolving journey with safety in our workplaces. It’s not that long ago since workplace accidents, particularly on challenging locations like mines, oil platforms and building sites were not only frequent, but were accepted by employees and leaders as an unavoidable consequence of working in these roles.
We have worked hard to change culture, practices and attitudes to safety in workplaces, to get to a point where people have the expectation that they can come to work, regardless of the type of work they do, and know that there are procedures in place to guarantee their safety and wellbeing. For anyone to have a workplace accident is considered unacceptable, and serious injuries and deaths are thankfully a much rarer occurrence.
Mental health in the workplace
As what we produce in Australia changes from the outputs of physical work – manufacturing, mining, agriculture, to outputs from mental work – our thoughts and ideas, we need to change how we think about what it means to make the workplaces of today safe, productive and supportive. We need to safeguard the psychological wellbeing of our employees as well as the physical.
For anyone in doubt that mental wellbeing of employees is an issue that needs to be addressed, take a look at some statistics: three million working Australians are affected by mental health issues; 20% of the working age population suffer from mental health problems; 16% of mental stress claims result in the employee being absent for one year or more. Loss of productivity due to mental health issues is an $11bn cost to Australian businesses every year.
Culture is key
Having successfully achieved this change in mindset around physical safety, leaders should focus their attention on bringing the same culture to bear around our mental safety and wellbeing. We need to embed a culture where it is as unacceptable that a worker would suffer any mental ill effects from the requirements of their role as it is that they would be injured physically. Good organisations and leaders have the opportunity to move beyond the mindset that stops at simply preventing safety incidents in the workplace and look at how to create a workplace where their employees can be healthy, be productive, and thrive.
Our aim in helping organisations to develop mentally healthy workplaces is to assist them to create a positive working environment that builds individual skills and resilience, reduces workplace risks to mental health challenges and supports staff with mental health conditions.
Ariana is right, the culture and conversation around success and what you need to sacrifice to achieve our traditional definition of it needs to change. It will be interesting to see what she can do with Thrive Global with her full focus devoted to it. My hope is that her profile will draw much needed attention to creating better working conditions for all employees.
Having worked in the climate change, energy and reporting space for many, many years we have seen the evolution from ad-hoc and inconsistent focus and reporting to a more nuanced appreciation of the complexity and impact of climate change issues.
Some organisations are further ahead than others and the leaders are integrating their climate change response through the alignment of their sustainability strategy with their business strategy and looking at current decisions based on the future. However not everyone is on the same page.
The increased appreciation of the complexity of climate change issues, coupled with the lack of consistent reporting and global transparency led the Financial Stability Board to establish the Taskforce on Climate-related Financial Disclosures (TCFD) in November 2015 to look at the risks, opportunities and financial impacts of climate change and establish a disclosure framework to assist organisations better understand the issues and report them to their stakeholders, particularly investors.
The Final TCFD Recommendation Report  released on 29 June 2017 is recognition of the multi-faceted and pervasive impact of climate change on all organisations. It reflects the fact that climate change presents risks and opportunities for companies and that these can (and most likely will) have financial impacts.
Risks AND Opportunities
The TCFD Report defines climate-related risks as Physical Risks and Transition Risks. Physical Risks include both short-term and longer impacts such as increased incidence of adverse weather as well as impacts from sustained increases in temperatures; and Transition Risks relate to the policy & legal framework, technology impacts; market and reputation issues. For example, transition risks may manifest themselves through stranded assets or impact the ability to go-ahead with planned projects, thereby jeopardising growth plans. The risks can be significant for organisations and will impact different sectors and organisations differently depending on the location of your assets and business strategy.
While much of the external commentary and focus has been on dealing with the risks of climate change, the TCFD importantly highlights the opportunities that can present themselves from responding to climate change. This can include development of new products or services; adopting new technologies or business practices to save energy (and costs) as well as opportunities in new markets or in ways to improve resilience.
It is therefore vitally important that organisations view climate change through a risk and opportunity lens in order assess the true financial and non-financial impacts.
The bottom line: stakeholders are expecting it
Assessing the impact of climate change risks and opportunities is becoming non-negotiable as investors and other stakeholders expect Boards and Executives to actively assess and respond. Back in February 2017, Geoff Summerhayes of APRA stated that climate risks need to be considered as part of prudential risk management in the financial sector and calls like this from regulators are expected to continue. And in May 2017, a shareholder resolution at Exxon Mobil calling on management to produce a report detailing the implications of a 2 degree scenario received 62% support. The TCFD recommendations are clearly aligned to the increased expectations of stakeholders and provide the framework for organisations to get on the front foot and explain how they are assessing and managing climate-change risks and opportunities.
The key objective of the TCFD is to bring consistency and transparency to the disclosure of climate-related impacts. The principal recommendations of the Taskforce provide a disclosure framework that covers:
Disclosure of the governance framework around climate-related risks and opportunities
Disclosure of actual and potential material risks and opportunities on the organisation’s business, strategy and financial plans
Disclosure of how the organisation identifies, assesses and manages climate related risks
Metrics & targets
Disclosure of the metrics and targets are used to manage the material climate-related risks and opportunities
Source: TCFD final report
Within the report, companies are strongly encouraged to take into account different climate-related scenarios including a 2 degree or lower scenario as part of assessing the resilience of the organisation’s strategy to climate related risks and opportunities.
Importantly, the focus on governance indicates that responsibility for TCFD disclosure rests with the Board and Executive, particularly the CFO and Audit Committee given the finance-related aspects of the disclosures and the continuous disclosure obligations that listed companies operate under.
So what now?
The TCFD has been developed as a multi-stakeholder taskforce and it is expected that adoption of the recommendations will be market-led and major companies are already leading the charge with over 100 CEO’s signing a public commitment of support for the voluntary recommendations. Adoption is expected to grow such that climate-related financial disclosures become normal business practice. As adoption grows and companies become more sophisticated there is the opportunity to leverage big data in this area to identify new opportunities and responses.
Following the release of the recommendations companies should:
Review the Final TCFD Report recommendations against your current practice and disclosure to identify gaps
Review your governance, strategy and risk management processes to assess how well climate-related risks and opportunities are considered
Develop and assess (to the extent not already done so) the impact of a 2 degree scenario on your organisation
Engage with your key stakeholders including investors to understand their perspectives
Determine your external reporting strategy and the potential linkage or integration with the Annual Report, Sustainability Reports or alignment of the TCFD disclosures with Integrated Reporting
As you develop your disclosures consider an independent assessment of assurance of the information
Consider the application of big data and data science as part of your response to unlock opportunities (see here for some global ideas)
For a detailed review of the TCFD recommendations please also see the Deloitte global publication here.
Stakeholder expectations are increasing and the challenges are more complex – but in an increasingly polarised world, there seems to be less focus on what we all know to be true – that no one can get all their expectations met and trade-offs and compromise are necessary.
To be successful and sustainable in the long run, all organisations be they private sector or government, need to take a balanced perspective and that is what sustainability is all about: taking a balanced and longer-term perspective in order succeed.
Issues and expectations are converging
Take climate change and energy. A few years ago the focus was on reducing emissions and moving from coal to gas as an intermediate solution on the path to a renewable future. Now in 2017, climate change policy and energy policy are twinned and the challenges of energy security coupled with affordability are front and centre. Renewables and new technologies are coming to the forefront and gas is being seen as a way to support energy security and not necessarily an intermediate solution. Organisations are having to re-think and will need to be agile as they transition to a low carbon future with a diversified energy portfolio. The transition needs to be considered from the corporate and asset level with different challenges arising on this journey.
Multi-faceted social dimensions
The affordability challenges highlighted through the energy debate are extremely important but there are also a myriad of other social challenges (and opportunities) that organisations need to manage. These include engaging with local communities impacted through economic or technological changes; ensuring the continued safety and mental health and wellbeing of your workforce as disruption occurs in certain industries and standing up for human rights.
As we have seen through recent high-profile cases, human rights challenges are not someone else’s problem. They can occur here at home in Australia as well as in any organisational supply chain. Increased expectations by consumers, investors and activists of transparency in supply chains means business can take a leading role in responding. Possible legislative responses in the areas of modern slavery mean that these issues need to be integrated into everyone’s procurement processes.
Telling your story, transparently
Organisations need to tell their story – how they create value and what the challenges are in doing so. To do that, organisations need to have robust processes in place to understand their key stakeholder issues and then ensure their actions are aligned. Through transparent and meaningful reporting, organisations can help stakeholders better understand the organisation and its impacts. International reporting frameworks can be used to demonstrate integration of actions and strategy and the UN Sustainable Development Goals can be leveraged to demonstrate that the actions of organisations support the achievement of global priorities. But for it to be effective, it has to be driven from the top – an organisation has to want to engage with its diverse stakeholders on the issues that really matter to them in a transparent way.
Anticipating the future
Issues are constantly evolving and things don’t stand still and therefore you need to anticipate things in order to plan your next moves. But let’s not forget that all sustainability challenges involve people so the human analysis, nuance and understanding is essential to navigating these challenges now and into the future. Through harnessing technology, advanced analytics and human insight together, opportunities and risks can be identified, analysed and responded to in a more agile manner than ever before.
Things to consider
Organisations need to focus more on managing competing challenges and taking a longer-term view through a multi-stakeholder lens. This can be done through connecting the issues across stakeholder groups and leverage a shared perspective so the benefits can be gained and any costs shared together to move forward.
Specifically organisations should:
Identify the most material issues for your stakeholders and integrate them with your business strategy;
Start the planning now to navigate the complex challenges in energy and climate change strategy and response while linking in the social dimensions;
Better demonstrate and maximise your social impact and return on investment through measurement and monitoring techniques;
Communicate better with your stakeholders through better reporting that focuses on what really matters, tells how you create value and how you are really performing and;
Anticipate future sustainability challenges through leveraging technology and human analysis to give you the insights you need to respond in this agile world.
Have you heard Prince Harry’s recent admissions on the effect losing his mum has had on his mental health? His decision to publicly share the challenges he has experienced is helping to lift the lid on stigma about mental health issues.
Prince Harry said in his recent interview with the Daily Telegraph “I can safely say that losing my mum at the age of 12, and therefore shutting down all of my emotions for the last 20 years has had a quite serious effect on not only my personal life but my work as well.” Prince Harry’s decision to open up and also show his public support for the mental health charity Heads Together, along with his brother Prince William and Duchess Catherine, is leading the way for change. He is laying the foundation for making it ok to talk about mental health problems that will affect one in four of us during a lifetime. This is good news for those who suffer from mental health issues, and also for business.
Australia’s workplace health and safety journey
In Australian workplaces, it is not ok to physically injure people at work and organisations have actively worked to reduce physical harm to their workers. It is now a business imperative to put the health focus back in to health and safety and target mental health. A recent report by Beyond Blue on the State of Workplace Mental Health in Australia indicates that mentally healthy workplaces are as important to Australian employees as physically safe workplaces, however workplaces are not meeting their expectations. 91% believe mental health in the workplace is important (88% believe physical safety is important). Despite this, only 52% of employees believe their workplace is mentally healthy compared to 76% for physical safety. Particularly concerning is that only half (56%) believe their most senior leader values mental health.
Mental health in the workplace – actively tackling stigma
We know that loss of productivity due to mental health issues results in 12 million days of reduced productivity in Australian businesses each year according to a return on investment analysis commissioned by the Mentally Healthy Workplace Alliance and at the same time mental illness continues to be one of the most stigmatised groups of disorders experienced by people at work.
One study (Manning C, 1995) reported 50% of people would ‘never’ or ‘rarely’ employ someone if they knew they had a psychiatric disorder. Stigma surrounding mental illness may also affect colleagues’ impressions of person’s capability to be effective at work (Stuart., 2006). Australian businesses are investing in mental health services in the workplace, but employees are underutilising these resources. A primary reason employees aren’t accessing mental health resources may be due to the significant stigma which surrounds mental illness.
Culture is key
It is the mindsets, beliefs and attitudes that underpin how we behave that create a culture that actively works to prevent the harmful aspects of work, protect and promotes mental health and at the same time supports those who need help. Like with safety, while supporting mental health at work is everyone’s responsibility, it begins with leaders. If as leaders we believe that it is not ok to admit to experiencing challenges that impact our mental health then we will continue to propagate a business world that drives this underground.
We need to build cultures at work that genuinely care for people. We need to generate mindsets in senior leadership that profoundly value their people and build business communities that expand to include people who are experiencing mental health challenges. Stigma around mental health needs to stop.
Leaders need to step up to the challenge and create workplaces that foster “good work”. This begins by examining our own mindset about mental health at work and asking ourselves “what environment am I creating through my beliefs, attitudes and behaviours?” Three ways leaders can begin today in reducing stigma about mental health is by:
Beginning to have unvarnished conversations about depression, anxiety and mental health.
Increasing the help seeking options for people and effectively communicating these.
Supporting people and caregivers facing mental health challenges by actively building communities at work that support people.
It is only through a critical mass of people actively showing they care about this that change will begin. Prince Harry is leading change by breaking through the traditional ranks of royal conservatism and has begun to make it ok through his admissions. As leaders, we can continue to open up the conversation in organisations.
Most work places do not understand their mental health and wellbeing risks nor what to do about it. We can help you move from information to targeted practical action. Learn more about our services.
What will Australia be like if global mean temperatures rise by 2˚C or more? Evidence suggests that there will be increases in extreme weather events, sea-level rises and more extreme bush-fire seasons to name just a few increased challenges.
There may also be opportunities from changes in weather and rainfall patterns for some areas. Ultimately all organisations will need to assess the impacts of these changes on their business or operations. What impact will it have on your customers? What will they need and want, and how will you respond? Where and how will you generate sales and deliver service? What does it mean for your assets now and in the future? Your costs, your profitability and returns to shareholders? And will your need for capital increase?
This all means that organisations will need to view the world through this 2˚C lens. The Paris COP21 Agreement is ratified and countries are starting to implement irrespective of any changes in the US stance. The agreement focuses signatories on keeping the global mean temperature rise below 2˚C, and that includes Australia – and doing this will be a challenge
Global and local disclosure requirements
The global Financial Stability Board’s Taskforce on Climate-related Financial Disclosure (TCFD) recently published recommendations for the disclosure of this information. Companies will need to think through and disclose the systemic effects of climate change on their finances and operations so that they can answer the question of what their business will look like financially under a 2˚C world or other scenarios.
The two main risks are physical and transitional which APRA describes thus:
Physical risks stem from the direct impact of climate change on our physical environment – through, for example, resource availability, supply chain disruptions, or damage to assets from severe weather.
Transition risks stem from the much wider set of changes in policy, law, markets, technology and prices that are part of the now agreed transition to a low-carbon economy.
At Deloitte we assist clients assess these impacts including modelling and developing scenarios to consider impacts on their organisations of 2˚C world taking into account exposure to both physical and transition risks.
For physical risk we can assess companies’ exposure to weather related events, such as coastal erosion or flood, on property portfolios – both those owned directly and indirectly, e.g. by a bank through its home loan portfolios. There are of course a number of challenges, including access to the right data and models of climate change and physical damage.
For the first time significant improvements in geospatial modelling using cloud computing, improved climate data, and property data have made these types of stress tests feasible.
While insurers have been looking at this issue for many years, their models only extend to the next 12 months. We have had to go back to the drawing board to redesign models from the ground-up to look at longer time horizons like 10 years and more.
While that may seem a long time out, banks have already written home loans up to 30 years so are exposed to potential climate related losses. Banks will also need to think through how this new information impacts responsible lending, and how best to engage with their customers over this.
For transition risks, companies need to drill down into their investment portfolios to assess their exposure to investments in high carbon intensity industries. Widespread adoption of the Financial Stability Board’s TCFD recommendations, will make this process a lot easier for investors. But in the early stages understanding the supply chain and the exposure to climate risk is a complex challenge, as well as how to communicate the results to all stakeholders.
As the regulator APRA begins to look through this 2˚C lens, the world changes in sometimes unexpected ways, bringing new challenges for banks and insurers.
It’s 6.30am. You shower, dress and open the fridge to get some breakfast. You grab the yogurt, realise it has passed its use-by date and throw it out.
Glancing at your watch, you quickly prepare the kids lunchboxes, knowing most of its content will return uneaten. Rushing out the door, you avoid an overflowing street bin and catch a glimpse of an advertisement reminding you of the millions of starving people who need the food you have just seen wasted. Sound familiar?
Often food waste is thought of in the context of world hunger, but it is much bigger than that. It is an economic, environmental and social challenge. Not only does throwing away perfectly good food mean the food itself is wasted (including the nutritional and societal opportunity costs of not providing the food to those in need) there is a second and often overlooked problem; the wastage of resources that have gone into making the food. This includes water, fuels, fertilisers, transport and packaging along the entirety of the value chain of a food product. It’s an exponential problem.
At present, we waste a shocking 1.3 billion tonnes of food globally each year. Most of it is avoidable.
Addressing waste effectively requires insights into the stages of the food cycle where wastage occurs and this is directly linked to the economic maturity of a market.
In the developing world, food wastage primarily occurs during production, handling and storage. Poor infrastructure and disjointed distribution networks cause the most food wastage in developing countries; often due to poor harvesting and processing techniques and spoiled food due to a lack of transport infrastructure. The proportion (40%) of total food production wasted in the developing world could be addressed through access to temperature controlled supply chain technology and reliable energy sources for crop production, and investment in infrastructure and transport facilities to improve time-to-market and quality control of produce in these areas. Notable current initiatives such as the World Food Programme Innovation Accelerator (WFP) whose successful and scalable projects include introducing easy-assembly silos for farmers and Promethean Power Systems, an Indian company which has developed a sustainable and affordable refrigeration technology. Government incentives and participation of consumer product companies in these type of initiatives are much needed.
More mature economic markets like Australia see wastage levels peak during distribution and consumption. A combination of poor supply chain practices and consumer behaviour underpins the high levels of food waste. Here, stringent aesthetic standards mean ‘undesirable’ produce rots at farm-gate, produce with sub-optimal shelf life is abandoned on retail shelves, and large pack sizes drive the excess produce languishing in our fridges, pantries and rubbish bins.
To counter this, governments and retailers have launched public awareness campaigns such as Harris Farm and Woolworths’ ‘ugly produce’, OzHarvest’s and SecondBite’s food rescue and the UK initiative ‘Love Food Hate Waste’ which successfully reduced UK food waste by 18% in five years. The French government has gone as far as adopting a law to crack down on food waste and has banned supermarkets from throwing away or destroying unsold food, which they must instead donate to charities or for animal feed.
Whilst great work is being done in this area, there is still a long way to go to reduce food waste. Consumers, retailers, consumer product companies and governments can all contribute and collectively address the epidemic of wasted food and bridge the divide.
Our choices – through action or inaction – will determine our path.
Note: The Deloitte and WEF study, Shaping the Future of Global Food Systems: A Scenarios Analysis, explored various likely scenarios based on consumption and market connectedness. It looks into ‘what’, ‘how’ and ‘where’ food will be produced and consumed including the possible implications on economic development, sector configuration, network risks, inequality, hunger, poverty and climate change. This blog is part of a series on the Future of Food.
Deloitte and WEF, 2017, Shaping the Future of Global Food Systems, A Scenarios Analysis; http://www3.weforum.org/docs/IP/2016/NVA/WEF_FSA_FutureofGlobalFoodSystems.pdf
Food and Agricultural Organisation of the United Nations, 2011, Global Food Losses and Food Waste; http://www.fao.org/fileadmin/user_upload/suistainability/pdf/Global_Food_Losses_and_Food_Waste.pdf
Harris Farm Markets, 2017, Imperfect Picks; https://www.harrisfarm.com.au/collections/imperfect-picks-1
Woolworths, 2017, The Odd Bunch; https://www.woolworths.com.au/Shop/Discover/our-brands/the-odd-bunch
OzHarvest, 2017, What we do; http://www.ozharvest.org/what-we-do/
SecondBite, 2017, SecondBite food for people in need; Food for People in Need
Waste and Resources Action Program, 2017, Love Food Hate Waste; http://www.wrap.org.uk/content/love-food-hate-waste
Waste and Resources Action Program, 2011, Estimates for household food and drink waste; http://www.wrap.org.uk/content/estimates-household-food-and-drink-waste-uk-2011
Picture this: The world has ran out of water, quality agricultural soil and therefore food. We apologise for the inconvenience caused.
It sounds like an unrealistic scenario, however there are early signs that signal a shift to this alarming reality.
The food industry is faced with a challenge to feed a rapidly increasing population. In 2030 8.5 billion people will be in need of food. That is an impressive 1.1 billion people more than today. And rightly focusses our attention to increasing yield.
However, a higher yield, could have undesirable consequences for the world if the production is unsustainable.
The food sector currently accounts for 70% of water withdrawal – the total volume removed from a water source such as a lake or river. These extraction volumes have increased threefold over the past 50 years and demand is expected to rise by a further 40% over the next decade. On top of that, about one third of arable land is degraded – a figure that continues to grow and is related to farming intensity and expansion into marginal production areas. Unfortunately for us, water and land are a finite set of resources on which we are currently wholly dependent for our next meal. Resources we as consumers, businesses and government must protect.
So what do we suggest we do to create a sustainable future of food?
Carefully set adjusted prices on carbon and water
Stimulate on-farm diversity and rebalance the “food baskets” regions of the world
Facilitate market connectivity such that innovation in sustainable farming is able to scale
Continued public investment in R&D and sustainable advisory services especially for priority themes such as enhancing water use efficiency
Avoid deprioritisation of environmental agendas in view of immediate economic concerns such as job creation.
Invest in water efficiency innovation, smart farming and reuse of watering solutions
Increase collaboration with other businesses and universities to boost innovation
Educate the consumer such that sustainable effort is valued and costs can be recovered
Minimise food waste and/or repurpose produced food
Ensure short-term gains do not distract from long term economic principles.
Society, including media
Educate consumers and promote sustainable products
Empower and mandate global organisations, such as the World Trade Organisation and World Health Organisation, to broker global solutions to the food systems challenges we face.
The future of our global food systems holds risks for sustainability, and solutions will require a whole of system approach.
Our choices as consumers, businesses and governments – through action or inaction – will determine our path.
Note: The Deloitte and WEF study, Shaping the Future of Global Food Systems: A Scenarios Analysis, explored various likely scenarios based on consumption and market connectedness. It looks into ‘what’, ‘how’ and ‘where’ food will be produced and consumed including the possible implications on economic development, sector configuration, network risks, inequality, hunger, poverty and climate change. This is the second in a series of blogs on the Future of Food, the first was: Overweight and obese – the choice is ours as consumers, or is it?
Open up any newspaper these days and the commentary around the property market reads: “housing bubble”, “apartment oversupply” and “housing market collapse”. You may well think that one of the biggest sources of wealth in this country is about to come tumbling down like the proverbial house of cards. Sensationalist or an accurate prediction?
Days of the past
Within the last 10 years, developers have been able to secure a development site at a purchase price that would start with a profit margin of 20%. By the time the site was completed, developers achieved super profits of 30% to 40% as they surfed the market’s growth wave, benefiting even those paying above market price to secure development sites.
What has changed in property development?
The current property development environment is more challenging and it looks as though this will continue to be for some time.
The days of easy money where anyone can undertake development are over. Development financing has changed. The Big 4 banks have introduced new hurdles to overcome, and if developers are not well-positioned with their bank, they may need to source funds from non-traditional providers. Funding is constrained even though interest rates are low; land prices are increasing; and apartment buyers have become more cautious.
Developers need to recalibrate their feasibilities for new projects to incorporate higher developer equity contributions, slower sale rates, higher development finance costs, conservative revenues, and higher construction costs. Developers ignoring these fundamental market changes and pressing ahead with a project will be proceeding at their own peril.
Opportunities are emerging for astute buyers to step in where inexperienced or over-ambitious developers are struggling to make financial returns on projects. In fact, the outlook for these experienced developers is quite strong as the compass shifts back towards the key attributes of good property development – site selection, design and marketing to customers, and well-controlled quality construction.
Developers cannot rely on sale price escalations to make their projects profitable – the focus needs to be more strategic. Product differentiation targeted to geographical areas that are delivering ‘game-changing’ localised benefits of accessibility and amenity will need to be sought.
Growth in Western Sydney
Western Sydney is one of these game-changing areas. It is undergoing an unprecedented level of investment in infrastructure projects including WestConnex, Sydney Metro Northwest (formerly the North West Rail Link), Parramatta Light Rail, the metro line to Sydney Olympic Park, the Parramatta Square redevelopment, Badgerys Creek airport, and multiple health and education precinct developments such as Westmead.
All of these projects are expected to deliver increased connectivity, accessibility and employment opportunities, which contribute to higher-than-average price growth in geographical areas that are adjacent or near such projects.
There is much commentary on the ‘approvals’ for new housing and apartments being at a record level, with an impending deluge of apartments coming on to the market. It is well understood in the property sector that just because apartments have been approved doesn’t mean they will be built. The ‘building commencements’ statistic is more relevant and accurate in measuring apartment supply.
Look at Parramatta for example – it is experiencing unprecedented levels of apartment construction, as a result of the many infrastructure projects driving investment. While sales activity may have slowed in-line with the general market and some investors are exiting the market due to regulator-led slowdown and new lending parameters, there are no signs of distressed developers discounting apartment prices. In most cases actually, if a residential development is being bank funded, then typically 50% of the apartments in the project would have been presold before construction has commenced, so the risk transfers to the settlement stage upon completion of the project.
So what’s ahead?
Mirvac, one of Australia’s largest developers, revealed a rise in the default rate for the settlement of off-the-plan residential sales in the general market, as foreign and local buyers struggle to finalise payments on time. This is an indicator of what the Western Sydney market needs to be aware of as settlement risk needs to be properly managed. However, we expect settlement risk to temper as potential buyers of off-plan units become conditioned to the new bank lending parameters and foreign buyers also become aware of the additional costs.
With anticipated population growth and strong market fundamentals on the back of game-changing activities in the region, Western Sydney is well-positioned and the medium-term outlook for residential developers is promising.
The Western Sydney residential apartment market probably did boil over for a while, but the heat came off without too much being burned and it’s now simmering at a manageable level.
Have more questions about Western Sydney’s residential apartment development market? Read another blog piece by David and Fred.
The last two to three years has seen a ground swell of opinion build, which we believe can’t be ignored. The way advanced nations have been managing work health and safety (WHS) for decades (by looking for and measuring what can go wrong) appears to have reached saturation point with respect to its growing usefulness.
It may have served us well for decades, but it’s no longer providing us with the insights and improvements we require, expect and need in order to improve health and safety in the more complex and ever changing world that we now live and work. Too many people continue to die or are seriously injured at work despite the significant investment in WHS systems and management over the years. The ground swell of opinion from leading thinkers is health and safety management needs to move from ensuring that ‘as few things as possible go wrong’ to ensuring that ‘as many things as possible go right’. This different and new way of thinking has been referred to as ‘Safety-II’ in a white paper published by the European Organisation for the Safety of Air Navigation.
What does it mean to say ‘ensure as many things as possible go right’?
To help explain the new way of thinking, we have provided some key themes. It’s about making the management systems ‘real rather than ideal’. People need to be seen as the answer, not a liability, since people are flexible and adaptive as opposed to systems being perfectly thought out and designed. So ‘Safety-II’ is all about the system’s ability to succeed under varying conditions, so that the number of intended and acceptable outcomes (everyday activities) is as high as possible… that is: understanding of why things go right, which means an understanding of everyday activities’.
Changing the Australian mindset
But looking for how things go right is inconsistent with the current and traditional focus on the failures in our systems and therefore, the movement has struggled to receive support from management and executives who have relied on the traditional approach of management and boards which is focused primarily on risk and stopping things going wrong. Why does this matter? It creates a problem since we cannot guarantee things go right by measuring and monitoring only what goes wrong. We need to know, understand and measure how they go right. And the boardroom is key to unlocking this mindset.
Courage in the boardroom
Concurrent with this different way of thinking for health and safety at work, we have also noticed a movement with courage building in the boardroom. Partnering with more than 50 of Australia’s most senior and experienced company directors through a series of workshops, Deloitte has published seven key themes that will drive the big winners in this world of uncertainty. The report identified that ‘…there were strong views that effective Directors and board must move beyond just working through the simple and compliance-based risks and create the space necessary to deal with more complex, strategic decisions’.
Let’s not throw the baby out with the bath water
It’s not suggested organisations throw away their WHS management systems they have carefully designed and invested in over the last few decades, although we expect further simplification of some systems is likely. Rather, Safety II is a complimentary way of thinking, measuring and managing health and safety with some new practices and which we believe will bring about improvements we have not witnessed in decades.
A WHS management system needs to allocate some time, costs and resources to look at what goes right in their operations, particularly with respect to medium or higher risk operations, learn from them and invest wisely, in our people.
Get in touch with us
We’d like to hear your thoughts on this blog, particularly those organisation and professionals who have commenced their ‘Safety II’ journey and are looking for and measuring what and how things go right.