by Dan Vermeer, executive director, EDGE
In Thomas Homer-Dixon’s book The Ingenuity Gap, he describes a growing chasm between the world’s knotty problems and its lagging ability to develop robust and integrated solutions. An “ingenuity gap” emerges when a society’s ability to solve problems is outpaced by the scale, complexity, speed of change, and unpredictability of new challenges.
In the next half-century, as the world population surges to nine billion, we are entering a new reality. Securing the resources to feed, clothe, shelter, and transport human populations is placing unprecedented stress on our societies and ecosystems. Finding creative solutions to the problems of energy, climate change, economic development, water sustainability, and food security will require massive ingenuity, both technological and social – are we up to the task?
There is no doubt that the complexity and urgency of the challenge is growing fast. For example, in the last month, officials battling the raging floods of the Mississippi River have had to make tough choices about whether to preserve farms or cities, power plants or infrastructure. Multi-dimensional emergencies are taxing not only our physical systems, but also the planning and decision-making processes we rely on to operate our systems.
One promising recent trend is the growing discussion of the “Energy /Water /Agriculture (EWA) nexus.” The nexus refers to the insight that energy, water, and agriculture systems are deeply inter-connected in the real world, but are often isolated in our public policies and business strategies. Our culture of specialization has led us to develop piecemeal approaches to problems that often fail to deliver lasting improvements. This siloed mentality leads us to optimize solutions in one dimension while sometimes creating a cascade of negative consequences in another.
The food vs. fuel crisis of 2008 is a classic example. In the U.S., government policy and its associated subsidies promoted increased ethanol production, primarily to address energy security concerns and to shift more of our energy sources toward domestic sources. From an environmental perspective, ethanol provided limited benefit, since its production requires almost as much energy input (and associated emissions) as the fuel provides. Additionally, the land and water resources required to grow corn placed additional demands on the environment. Perhaps most importantly, the increased demand for corn-based fuel inadvertently may have contributed to higher food prices, resulting in the global poor struggling to feed themselves and their families.
As the ethanol example demonstrates, managing the EWA nexus requires a new approach. In a world of abundant resources, it may have been possible to optimize outcomes for each system – more food output, more energy production, more water use – without explicitly considering the cascade of effects on the other systems. For example, in places with adequate water resources, a power company could assume that there would be adequate water resources available to build and operate a new power plant.
However, over the half-century lifespan of the power plant, areas that once had adequate renewable water supply may be squeezed by increasing demand, decaying infrastructure, and climate impacts. In a world where all systems are stretched, there are small margins for trading off benefits in one area for costs in another. Therefore, the potential for negative impacts escalates, and the risk of getting blind-sided grows.
Managing EWA nexus issues is not only a policy priority, but also an imperative for business. Large companies rely on global supply chains to secure reliable access to raw materials, but they have only recently begun to measure the broader impact of their procurement practices. For every company, their required material inputs rely either directly or indirectly on energy, water, and agricultural products. The next step of this journey will be to rigorously assess EWA interdependencies, and their implications for a business’ operations, supply chains, cost structure, investment, and business model.
For the last several decades, the agriculture/water/energy nexus has been relatively stable, providing businesses with consistent access to high quality, low cost inputs. Energy production expanded, water use increased, and food output expanded to meet demand. However, we are already seeing increased volatility and the risks resulting from these interactions. For example, the World Economic Forum recently published its 2011 Global Risks report, citing the energy/water/food nexus as one of the most important challenges facing global businesses.
To better understand EWA nexus risks, we need better science that connects the dots between linked trends. We also need better analytical tools to consider the dynamic relationships between complex variables, and to be able to play out scenarios and anticipate challenges. In contrast to the prevailing pattern of managing supply chain, energy, and water issues independently, companies must think more systemically about their enterprise – how the nexus is evolving in their company and throughout their global supply chains.
Of course, there are also significant opportunities for companies that understand the dynamics of the EWA nexus – by framing challenges in broader, more integrated terms, we can design solutions that solve multiple problems simultaneously. An interesting example is the recent Imagine H2O competition that sought to identify breakthrough business ideas addressing the water-energy nexus. Approaching these challenges in a more holistic way can spur a new wave of innovation and entrepreneurship, especially in regions with rapid infrastructure development.
This kind of thinking is also evident in the sustainability strategies of industry leaders like IBM and Unilever. IBM’s Smarter Planet approach recognizes the inherent connections between energy, water, and other resources that power urban environments. Just as EWA nexus issues cannot be understood in isolation, IBM attempts to close the ingenuity gap by integrating technologies and designing integrated processes and institutions needed to support those technologies.
In Unilever’s new Sustainable Living Plan, the company commits to a compelling vision of an enterprise that doubles the size of their business while reducing environmental impact by 50% over the next ten years. They also aspire to grow their portfolio of sustainable products, committing to source 100% of their agricultural inputs from sustainable sources. Given Unilever’s central position in the EWA nexus, this goal cannot be accomplished through “business as usual” approaches to environmental stewardship. It will require a radically new kind of business model and operational approach. By re-inventing themselves now to face the nexus challenges of the future, Unilever provides a new model of business resilience.
The world faces complex problems – and the inter-connected issues of agriculture, water, and energy are central to that challenge. But now, we also have truly unprecedented technological capabilities and knowledge at our disposal. The story of the 21st century will be about whether we have the ingenuity to harness our new tools to rise to this challenge.