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In a market economy the competitive position
held by any market participant determines his
or her share of overall value added. Macro trends
may change this framework as well as contribute
to competitors challenging a market participant's
competitive position. Sustainable companies embrace
this change by seizing the opportunities and by
managing the risks that the macroeconomic developments
impose on each industry. The first step of sustainability
research is thus to identify all shareholder value
relevant macro trends and the challenges they
present to each industry. Not all of the trends
are economic in nature. They stem from different
sources; some relate to market developments with
in the given framework, some relate to the framework
itself.
Demographics – Changes
in consumption and savings patterns will lead
to an increase in investments and potential growth
of income, thus changing the risk-return ratios
that can be earned.
Globalization and market liberalization
– Falling costs of information and transportation
services increase competition in product markets
and make market flexibility a competitive advantage.
Democracy spreads, spreading the value placed
on human rights and improving conditions for market-based
economies.
Environmental change –
Global climate change, whether man-made or not,
imposes market and legislative pressure on carbon
intense industries and suppliers of fuels, a challenge
intensified by the demographic developments in
emerging economies. Water scarcity increases in
sensitive areas globally, partly due to demographic
developments.
Mistrust in production along the food
chain – Linked partly to the transparency
trend, challenges along the food chain emerge
for the majority of food producers and food retailers.
Agriculture is the basis of many developing economies
but may threaten the ecosystems upon which it
depends.
Call for transparency –
Driven both by regulation and investor pressure
the degree of transparency demanded from companies
is increasing. The trend is aided by the steep
fall in the costs of transmitting information.
Human capital management –
Human capital is a key resource in an information
based society where innovation drives competition.
Reputation and brand management –
Preserving a monopoly niche requires management
of intangible assets, including the reputation
resting on adequate alignment of interests and
of checks and balances regarding management and
shareholders.
SAM interprets mega trends and global challenges
into industry trends and challenges. These trends
and challenges describe the context for each player
within an industry. They describe the current
situation and the likely future pattern of development,
thereby indicating the opportunities that must
be embraced and the risks that must be managed
in the creation of sustainable value.
Industry challenges can differ from industry to
industry, affect more than one industry, or affect
all industries and sectors alike. Examples for
challenges affecting all industries include the
need for a workable solution to the principal-agent
problem, i.e. incentives and checks and balances
needed to align management's interest with shareholder's
interest, and the need to find a way to manage
human capital effectively and efficiently. Best
practices are very similar across industries.
Industry specific challenges depend on the industry's
characteristics. The challenges will differ for
industry characteristics such as the degree of
regulation, supply and demand structures, and
barriers to entry. Example given, challenges for
the oil & gas industry are closely related
to a general perception of energy resource scarcity
and green house gas emissions. Innovations have
to be developed for the time when oil and gas
resources cease to meet rising demand. New technologies
need to be deployed to get the most out of existing
reserves.
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