Dematerialisation: Doing more with less
The world is seeing a decoupling of resource consumption from economic growth
Throughout history, our consumption of resources has been innately linked to economic growth. The industrial era created an unprecedented improvement in quality of life and, as economies expanded, the natural world was stripped to satiate our growing desire for stuff. Between 1970 and 2010, the annual global use of materials grew from 26.7 billion tonnes to 75.6 billion tonnes1.
While this trend is worrisome, over recent years resource consumption has been decoupling from economic growth with the help of advances in technology2.
The rent revolution
Innovations in cloud computing and mobile connected devices are enabling more efficient use of resources, as the modern consumer moves towards an asset-light rental way of life. Music streaming services, such as Spotify, have displaced CDs. Netflix has displaced DVDs. News apps are displacing traditional print, while ride-hailing services such as Uber mean many people no longer own cars. Owning a car, which sits on a driveway for over 90% of its life while incurring road tax, insurance, fuel and upkeep costs, is increasingly inefficient in a world that’s moving decisively towards electric automation in the coming years.
Perhaps the clearest example of dematerialisation can be seen in the iPhone. By owning just one iPhone, you also own a camera, a torch, a map of the whole world, a calendar, a calculator, a clock, a tape measure, a voice recorder, a radio, an MP3 player, a TV, a computer, a GPS, a wallet and an endless number of games. Consequently, these are all goods that we now own less of.
The effects of digitalisation, automisation and system efficiency can be seen across the aggregate usage of several resources in the developed world. US 2019 energy consumption was flat compared to 2007 data, despite a +42% increase in GDP3. Total US water consumption has shrunk by 25% since 1980, while the population is up over 40%, in part thanks to advancements in agriculture and manufacturing.
While eCommerce has become a larger part of our lives, and the packaging accompanying it, the amount of paper and cardboard produced in the US each year is down by 8% from 19904. This is because companies such as Amazon don’t receive value from using cardboard. Instead, they focus on reducing the amount they use to cut costs and increase profit. Besides, cardboard today uses far less paper pulp than it used to.
Ecolab: Portfolio case study
Ecolab is one company reducing consumption across a wide range of industries. Its solutions and insights help customers to produce safe food, maintain clean environments, reduce water and energy use and improve operational efficiency.
In 2018, Ecolab helped its customers save more than 188 billion gallons5 of water – enough drinking water for 650 million people. Its solutions cut customers’ energy consumption by 19 trillion British thermal units and avoided 2.4 billion pounds of greenhouse gas emissions. This is achieved through innovations. For example, its ‘EHT dishwasher’ cleans dishes in a commercial kitchen in 60 seconds, using 50% less energy and water than previous models – saving two swimming pools of water a year.
Seven of Ecolab’s products are also included on the ‘List of disinfectants to protect against coronavirus’ issued by the US Environmental Protection Agency. Today, hygiene is a fragmented and less penetrated market. But, in the wake of Covid-19, it seems inevitable that higher standards will be required across all industry verticals in the future.
Decoupling profits from material consumption
Dematerialisation represents a critical turning point in economic history, where significant
alignment has begun to occur between productivity and sustainability. This is essential if we’re to support a growing global population without destroying the planet.
Unsubsidised renewable energy is now often the cheapest source of energy generation6. While the installation and maintenance costs of renewable energy have previously hindered mass adoption, these costs continue to decrease. As a result, 2019 was the first year in which renewable energy delivered more of Britain’s electricity than that generated by fossil fuels7. This separation of output growth from resource consumption allows us to get more, while taking less from the planet.
While the focus on increasing profits by using less can be seen most evidently in the developed world, emerging economies are expected to quickly follow, benefitting from the innovation and advancements of those that preceded them. The emergence of technology that supports dematerialisation can be found across industries that traditionally extract materials from the earth.
Manufacturing efficiencies are being created using computer aided design, such as producing fuel-efficient engines and creating lighter cars. Employing machine learning in data centres, known for using plenty of energy, allows the facilities to be run far more efficiently. Wide-spread adoption of data-enabled precision agriculture allows farmers to increase crop tonnage while using less land, water and fertiliser.
The technological advancements of recent years have positioned us well as a society to grow within the finite constraints of our world. In the years ahead, continued dematerialisation of the physical world should allow for a better quality of life for us all – and the planet.
Broadridge Financial Solutions: Portfolio case study
Despite the global economy’s digitalisation, many businesses still mainly communicate by post due to its convenience. In the US, 70% of businesses still deliver bills and statements on paper, with only 12% of utilities and 7% of insurance companies actively engaging digitally.
One of the firms offering a solution to this is Broadridge. It helps companies to send their communications digitally at a lower cost and more efficiently than most clients can do in-house. It currently processes US$7trn of equity and bond trades a day and shareholder voting in 90 countries. Broadridge also digitally sends over 90% of broker regulatory communications, reaching 80% of US households.
The company does this through its ‘Communications Cloud’ – a paperless network that can send communications straight to popular consumer channels, such as Google Cloud, Amazon, Dropbox and Evernote. It then sends corporate clients data analytics. Over five billion communications are now processed via the network every year, saving over US$15bn in post costs in the past decade alone.
Read the previous article
Sources and references
- Assessing global resource use, UN environment programme, 2017 [PDF, 3.73MB]
- Andrew McAfee’s ‘More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next’, October 2019
- How the United States uses energy, US EIA, 2018
- USGS Water Use Data for the Nation, 2018
- US Environmental Protection Agency, 2017
- Ecolab, 2018
- Renewable Power Generation Costs in 2018, IRENA, May 2019
- More power came from renewable energy than fossil fuels in UK in 2019, Sky News, January 2020
Investments can fall as well as rise in value. Your capital or the income generated from your investment may be at risk.
You could get back less than you invest. Adding leverage to your portfolio may amplify returns in a rising market, but will amplify losses in a falling market
- Has been prepared by Barclays Bank PLC (Barclays) and is provided for information purposes only and is subject to change. It is indicative only and not binding. References to Barclays means any entity within the Barclays Group of companies, where “Barclays Group” means Barclays and its affiliates, subsidiaries and undertakings.
- Is not research nor a product of the Barclays Research department. Any views expressed in this communication may differ from those of the Barclays Research department. All opinions and estimates are given as of the date of this communication and are subject to change. Barclays is not obliged to inform recipients of this communication of any change to such opinions or estimates.
- Is general in nature and does not take into account any specific investment objectives, financial situation or particular needs of any particular person.
- Does not constitute an offer, an invitation or a recommendation to enter into any product or service and does not constitute investment advice, solicitation to buy or sell securities and/or a personal recommendation. Any entry into any product or service requires Barclays’ subsequent formal agreement which will be subject to internal approvals and execution of binding documents.
- Is confidential and is for the benefit of the recipient. No part of it may be reproduced, distributed or transmitted without the prior written permission of Barclays.
- Has not been reviewed or approved by any regulatory authority.
Any past or simulated past performance including back-testing, modelling or scenario analysis, or future projections contained in this communication is no indication as to future performance. No representation is made as to the accuracy of the assumptions made in this communication, or completeness of, any modelling, scenario analysis or back-testing. The value of any investment may also fluctuate as a result of market changes.
Barclays is a full service bank. In the normal course of offering products and services, Barclays may act in several capacities and simultaneously, giving rise to potential conflicts of interest which may impact the performance of the products.
Where information in this communication has been obtained from third party sources, we believe those sources to be reliable but we do not guarantee the information’s accuracy and you should note that it may be incomplete or condensed.
Neither Barclays nor any of its directors, officers, employees, representatives or agents, accepts any liability whatsoever for any direct, indirect or consequential losses (in contract, tort or otherwise) arising from the use of this communication or its contents or reliance on the information contained herein, except to the extent this would be prohibited by law or regulation. Law or regulation in certain countries may restrict the manner of distribution of this communication and the availability of the products and services, and persons who come into possession of this publication are required to inform themselves of and observe such restrictions.
The value of any investment may also fluctuate as a result of market changes.
You have sole responsibility for the management of your tax and legal affairs including making any applicable filings and payments and complying with any applicable laws and regulations. We have not and will not provide you with tax or legal advice and recommend that you obtain independent tax and legal advice tailored to your individual circumstances.
This report contains certain information (the "Information") sourced from MSCI ESG Research LLC, or its affiliates or information providers (the "ESG Parties"). The Information may only be used for your internal or personal use, may not be reproduced or disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices.
Although they obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness, of any data herein and expressly disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose.
None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such, nor should it be taken as an indication or guarantee of any future performance, analysis. forecast or prediction. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein, or any liability for any direct, indirect, special. punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.