You may see this as a business or investor’s perspective. But it holds true for anybody, whether you run a household or a country.
Overshoot is becoming the defining context for our businesses
Earth Overshoot Day[1] reminds us that the persistence of overshoot, now for over half a century, has led to massive declines in biodiversity, excess greenhouse gases in the atmosphere, and heightened competition for food and energy. These symptoms are becoming more prominent with unusual heat waves, forest fires, droughts, and floods. The impact of overshoot is cumulative –not just delayed– and therefore accelerates.
With more climate change and resource decline, resource security is turning into an essential parameter of lasting prosperity. This is true for countries, cities, and companies. There is no advantage to any actor of waiting for international agreements.
Therefore, it is in the interest of every company to protect its own ability to operate in the future – even more so if others act sluggishly. The protection of a company’s ability to operate is becoming an essential feature for staying competitive, and as a side benefit this also effectively contributes to the stability and resilience of the global economy.
The growing value of businesses that reduce global overshoot
The future has never been more predictable. We know that the world population is growing and that all people want housing, food, health, safety, and education. We also know that we will live in a world with far more climate change, and fewer resources. In any imaginable scenario, whether the human economy decarbonizes rapidly or slowly. In the first extreme, there will be less increase in climate change, but less ability to take advantage of fossil fuels. In the latter extreme, there will be far more climate change with more compromised biological systems, and eventually also an end to fossil fuel use.
As noted, the most critical resources are the biological ones, as they also limit all other resources, whether fossil or mineral.
Perhaps even more importantly: This future is approaching more rapidly than companies, cities, and countries may be able to adapt – just reflect how different your city was 20 years ago, and how different it would need to be in order to operate without fossil fuels 20 years from now. The inertia in physical infrastructure, business models, markets, technological developments, and even in financing is significant.
The question therefore simply becomes: Which assets, including businesses, product/service lines within those businesses, urban developments, energy systems, etc., will hold its value in the predictable future of climate change and resource constraints?
This is my hypothesis: It is those assets and businesses which, when they expand, reduce global overshoot. Businesses that through their existence reduce global overshoot will avoid physical constraints, and they will be needed more.[2]
Companies that reduce global overshoot as they expand would truly be circular businesses. One could even call them “nature-positive”.
While this logic may seem rather basic, it results in sharper criteria for choosing investments, shaping strategies, or allocating budgets than conventional criteria, which typically ignore the context of ecological overshoot. Such a metric has therefore the potential to significantly strengthen ESG, climate, or SDG lenses[3] and to encourage economic development that builds a stronger, more resilient, and lasting economy.
[1] Earth Overshoot Day translates global overshoot assessments into a time measure. It simply means: From January 1st to the year’s Earth Overshoot Day, humanity demands as much from nature as Earth’s ecosystems can regenerate in the entire year. In 2023, it fell on August 2nd. See www.overshootday.org.
[2] Also, those who efficiently serve our growing world population are more likely to find further opportunities for their products and services.
[3] One challenge is that SDGs (or Sustainable Development Goals), as defined today, are far too weak to address overshoot. By setting the goal more clearly, it also helps to distinguish between drivers and outcomes. A more helpful guiding question that enables generating true value, and therefore advances the world towards aspects mentioned in the SDGs, would be: how to enable all to thrive within the regenerative capacity of planet Earth?