Helping customers develop the capacity for sustainable
management could be the best way for primary-industry companies — and countries — to differentiate themselves. (An excerpt form an article by Mary Staecy, Marilyn Taylor & David Legge @Strategy+Business).
Around the world, natural resources companies — producers of agricultural staples, oil and gas, lumber and wood products, basic chemicals, and many minerals — are facing unprecedented volatility in supply and demand. The global population is poised to reach 9 billion by 2050, and much of the growth will be in emerging markets. Millions of people in China, India, Latin America, and Southeast Asia are entering the middle class for the first time, increasing their demand for energy, housing, and transportation. At the same time, because of economic turbulence, rapid technological change, and the ever-present dynamics of gluts and shortages in most resource industries, there is no guarantee that the price of raw materials will continue to rise. Adding to this uncertainty are concerns about the impact this growing demand will have on the environment.
These challenges suggest that we need a new way to think about natural resources — a shift in mind-set from simply managing resources to practicing resource leadership. Resource producers have always been constrained by their view that the primary goods they sell are commodities with which they compete on the basis of price alone; their customers determine how they should be used. That approach, however, has led producers to the status quo: a largely reactive position with a short time horizon, and little opportunity to differentiate themselves from competitors.
Resource leadership, in contrast, entails thinking strategically about natural resources from the moment they are pulled from the earth through to their end use. This form of leadership is rare in all too many industries. It involves the ability to see the complex interdependencies of the natural resources system; to engage key stakeholders upstream, downstream, and across sectors; and to promote innovation with economic and ecological benefits within the resource system. Resource leadership thus represents a shift from short-term thinking to stewarding resources for the long term.
To succeed, resource leadership requires a partnership-oriented model, in which the producers and consumers of raw materials have a mutual interest in process and product innovation. The producer helps the consumer identify cost savings and access technological innovations throughout the value chain, and as a result can charge slightly higher prices without feeling vulnerable to lower-priced competitors. A business model with a mutual commitment to the stewardship of resources could work, but only when there is a high enough level of trust between these two groups.
Business leaders have often tried to adopt this way of thinking, but they have largely found they cannot do it alone. A resource leadership approach can be implemented only through intensive attention not just throughout a company, but throughout its network of producers, suppliers, regulators, and customers. Such a consortium vastly increases the margin for creative alternatives and innovation, and it distributes the costs of research and development. This is where the importance of government policymakers comes into play.
The leaders of resource-producing nations — such as Canada, the U.S., Australia, and Brazil — have tremendous opportunities to promote resource leadership. These leaders can provide their national resource producers with opportunities for shared research, distribution, and even marketing (imagine an ad campaign, similar to “Intel Inside,” along the lines of “This product contains Canadian resources developed with cradle-to-cradle care”). They can also generate tax and trade incentives for cross-sector collaboration in industry clusters committed to improving stewardship of resources. Canada already provides tax incentives for renewable energy enterprises. Resource leadership initiatives could be included as part of these policies.
Recent headlines only reinforce resource leadership’s game-changing potential. A greater awareness of the big picture would enable policymakers and resource-producing and -consuming companies to engage with other key stakeholders: local communities and the grassroots politicians that represent them. Collaboration is as complex, time-consuming, and costly as the science and engineering of pipeline technology. This is where resource leadership can shine: It builds shared responsibility for jobs, oil security, and environmental protection across all sectors.
By embracing this responsibility for the way resources are used, natural resource producers can help the rest of the world learn to employ raw materials wisely, and can safeguard their industries from competition. They can also discover a new source of resilience: their own distinctive knowledge and capability, which is one resource that is practically guaranteed to increase in value.