BCG Henderson Institute

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Ask executives about their company’s prospects for future sustainability, and you’ll hear considered strategies for net zero and nature-positive ways of doing business. It’s a remarkable shift in just a few years among investors, corporations, and policy makers, as well as in consumer expectations, and it has created demand for new energy sources, products, services, and processes. But if you press those same executives to name the most critical elements of their sustainability transition, you’re likely to get a questioning look.

Even though most businesses see the need for sustainability in their business plans, they aren’t wrestling seriously enough with the implications of that need. A prime example here involves what we call “sustainability scarcity”—instances of scarcity that emerge from and are deeply connected with the sustainability transition. Such scarcity is already emerging in certain areas and will only intensify as the transition to sustainable practices accelerates across a greater number of industries. Every business faces the threat of potential scarcity at different points along its value chains, whether it is aware of them or not.

For example, in April 2023 the Organization for Economic Cooperation and Development (OECD) raised the alarm on potential resource scarcity stemming from a surge in export taxes on raw materials that are critical to the green energy transition. The OECD reports that export controls imposed by extracting countries on resources such as lithium and cobalt have increased fivefold over the past decade, just as demand is exploding. That change in the economic landscape has prompted the US to try to incentivize domestic production of rare-earth magnets through tax credits to ensure that its companies have access to them.

Addressing these sustainability scarcity risks strategically, however, can enable forward-thinking businesses to flip them into a competitive advantage. Not only can such companies make better decisions about their transition pathway and mitigate the most critical risks they identify (for example, by securing their future supply needs earlier than competitors do), but also they can generate new revenue streams.

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