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 / Summer 2012 / Issue 67(originally published by Booz & Company)


A New Role for Natural Resources Companies

To this end, the company has established a department focused on achieving fuel savings and carbon emissions reductions. Air Canada has recognized that alternative fuels (such as biofuels) can help the airline meet its energy requirements while reducing emissions. The airline’s leaders believe that partnering with alternative fuel producers or suppliers to create economic and environmental solutions could be financially advantageous and reduce the company’s exposure to fuel price volatility. A scenario in which the airline industry would be willing to pay a small premium and commit to a significant, steady demand for alternative fuels would promote the development of new technologies; reduce the financial burden of carbon taxes; and, in the long term, create a lower-cost, sustainable, and ecologically friendly solution to the airlines’ energy requirements.

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 within 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.

Here, 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 resources companies 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.

National projects like this can have global reach. Pioneering resource leaders, having realized economic and ecological advantages in the initial resource consortia within their own regions, can generate knowledge, technologies, and practices with significant export value. The Netherlands, for instance, has turned its experience with dikes and levees into a national industry. About 2,000 Dutch engineering companies exist, often exporting their expertise to customers in New Orleans, Dubai, and other waterfront areas.

It will take high-volume resource consumers in partnership with resource providers — and supported by policymakers — to create this new business model. Much of the intellectual, social, and commercial resource leadership momentum has stalled in the past because of narrow political and economic perspectives. But as the natural resource challenge reaches a critical state, it is time to move past the old way of thinking.

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. When we started writing this article in early 2012, U.S. President Barack Obama had recently put on hold the TransCanada Corporation’s proposed Keystone XL pipeline — which would carry primarily Canadian (and some U.S.) oil to refineries in Oklahoma and Texas — because of environmental-impact concerns. The resulting debate only intensified in March, when Obama supported the expedited construction of the southern portion of the pipeline, from Oklahoma to the Gulf of Mexico.

Battles are also shaping up over several El Paso–based Trans-Mountain Oil Company pipeline proposals aimed at sending Canadian oil to China. In all of these cases, closer engagement among the relevant parties would have brought concerns to the forefront earlier, and the groups could have worked together to come up with possible solutions. 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.

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