Megatrends

A megatrend is a large, social, economic, political, environmental or technological change that has a major impact on business and society as a whole, possibly for decades.

Of the key megatrends presenting significant challenges to government, industry and civil society over the coming years, four are particularly relevant to ERM’s work on behalf of our clients:

Climate change

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Until recently, most companies viewed climate change as a concern for governments and nongovernmental organizations only. Not anymore. Today, that laissez faire view is changing rapidly. Global political action, regional legislation, technology breakthroughs, market disruption, extreme weather events, investor priorities and consumer sentiment have turned climate risk into an investment fundamental that directly affects all of business. The way companies report on climate risk takes on new significance as investors look to accurately assess and measure the environment’s impact on their business models, assets and reputation, as well as the organizational preparedness to cope with these risks.

The 2015 United Nations COP21 agreement in Paris played a major role in elevating climate risk from an environmental to a financial issue. Two hundred countries pledged to cut carbon emissions and keep global warming to no more than 2 degrees Celsius above pre-industrial levels. Even though the pledges were non-binding, the commitments by so many world governments – and the specter of new greenhouse gas emissions (GHG) regulations – highlighted to business and investors the potential economic cost of climate risk.

For many companies climate risk is already very real, affecting supply chain vulnerabilities and consumer demand. For the investment community, the risks posed by a company’s GHG emissions or its dependency upon them somewhere in the supply chain, is of particular concern. Climate-related risk is becoming not just an environmental issue, but also one that has a direct impact on a company’s financial standing and reputation.

Learn more about how ERM is helping clients tackling climate change

Digital transformation

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Digital technology is accelerating the pace of change. It drives new - and often disruptive – ways of doing business in response to multi-faceted and increasingly complex challenges. Cloud computing, robotics, the Internet of Things and artificial intelligence are transforming customer expectations, product development, collaboration and organizational structures, while changing how citizens engage with companies, governments and civil society. This represents a significant opportunity for our clients - from how they engage with key stakeholders to how they optimize their operations.

Smarter products, better collaboration, faster processes and lower costs are just some of the drivers behind new technology adoption. Greater access to technology, particularly mobile devices, means greater access to education, work, financial services and information as well as new markets and buyers for goods. By enabling greater productivity and agility, digital technology enables companies to evolve and improve their operations, but not without risks.

All of this is reliant on the flow of accurate and timely data. Financial transactions, product launches, supply chains, customer services – nearly every business process is underpinned by data. As the Internet of Things gains momentum, it will account for a growing percentage of devices at home, work and in the community. From sensors and satellites to household appliances and wristwatches, smart devices will be capturing and transmitting data. While real-time access to accurate and granular data has become essential to maximizing efficiency and agility, the risks associated with data integrity, security and privacy are of increasing concern by companies, governments and the public.

Learn more about how ERM is helping clients tackling climate change

Population growth

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Between now and 2050, the world’s population is expected to increase by more than 30 percent to 9.7 billion. Providing food, energy, homes and transportation for these extra people will place an additional burden on the planet’s already strained resources. A large proportion of this growth will occur in the world’s less developed regions, including Africa, Asia and Latin America.

Lower rates of infant mortality and greater life expectancy thanks to improved standards of living, including greater access to clean drinking water, are key factors behind the continuing population growth in less developed regions. As a result, tomorrow’s population will not only be bigger but also older, which creates additional challenges, such as increased pressure on healthcare and pensions.

In 1950, one-third of people lived in urban settlements; by 2050, it is estimated that two-thirds of the world’s population will be urban. This growth is driven partly by large numbers of young people seeking employment or a better way of life. Urbanization brings its own challenges, including access to clean water, unhealthy air, waste disposal issues, and increased poverty.

With more people, the competition for vital and often scarce resources will grow. Prices may increase due to competition for limited resources, export constraints, consumption restrictions and stricter regulatory controls. Food, water and energy will come under the greatest pressure, which will have repercussions for the private sector, civil society and the environment.

Learn more about how ERM is helping clients tackling climate change

Emerging middle classes

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The world’s population is not only growing, it is evolving, with more people become middle class – an estimated 4.9 billion people by 2030, compared with 3 billion in 2015.

As incomes rise among the middle classes, so does access to information and education. Higher incomes and faster development rates mean that the emerging middle classes will have greater spending power and greater expectations. Women in particular will have greater access to education and employment, and they will play a bigger role in purchasing and other decisions. These shifts in human development and social balance of the power have major implications for consumption patterns and living standards, as well as for sustainable development.

Experience and data show that although the emerging middle classes often want to retain their culture and traditions, they are keen to adapt their diets and lifestyles as their income increases. Consumption of processed food, meat and dairy products rises along with sales of manufactured goods, such as phones and other technological devices, cars, household goods and appliances. The demand for better quality housing, infrastructure and public services rises as well.

The emerging middle classes will present companies with new opportunities and new revenue streams. For many, this demand will create opportunities to expand into new markets and to launch new products. However, this upsurge in demand will also increase some long-term risks. It is estimated that more than 3.5 planets Earth would be needed to sustain a global population enjoying the current lifestyle of the average European or North American. Food, water, housing and energy, which are already under pressure due to population growth and climate change, will be particularly affected.

Read how ERM's source vulnerability assessments help manage sustainable consumption

Addressing sustainable development through SDGs

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These four megatrends intersect with each other, and addressing them is essential to achieving the sustainable development goals (SDGs). Climate change will alter where, and which, crops farmers can grow to feed an expanding – and increasingly urbanized – global population. Meeting future energy needs, especially among the middle classes, will exacerbate efforts to reduce climate change emissions. Emerging technologies can greatly improve the quality of life and the environment, but not without serious potential risks.

Reaching the SDGs will take everyone's contribution, including government, civil society and business. We are working with our clients and leading organizations – with the SDGs as a framework – to address sustainable development. Among our clients, we see a growing appetite to contribute to the realization of the SDGs while achieving business value for their organizations.

Learn how ERM helps clients achieve sustainable development goals
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