How will we satisfy the food and water needs of the 9.8 billion people expected to live on earth by 2050? To what extent will demand for energy increase in the coming decades? How will the world make the transition to cleaner energy and curb the effects of climate change? And what will be the impact of the megacities that are expected to emerge in developing countries in the not-too-distant future?
While no one has a crystal ball to give definitive answers to these questions, we do have analytical tools that can help us think about these issues now and map out actions to deal with them both today and in the future. One of these instruments is called scenario planning.
According to the APICS Dictionary, scenario planning is “a process that identifies critical events before they occur and uses this knowledge to determine effective alternatives.” In other words, the objective is to identify a range of possibilities based on actual data and reasonable assumptions. Many supply chain management professionals use scenario planning to test existing strategies; brainstorm new ideas; and, in some cases, bring different parties into the discussion in order to learn from new perspectives.
The oil and gas industry has used scenario planning for more than 40 years. For instance, Royal Dutch Shell worked with the Development Research Center of China’s State Council to determine how natural gas could become a mainstream energy source. As a result, China is expected to increase its use of natural gas from 5.8 percent to 10 percent by 2020 and by 15 percent by 2030. These goals align with the 2016 Paris Agreement on Climate Change.
Despite decades of profiting from fossil fuels, every one of the biggest oil and gas players today is investing in the development of renewable energy sources. This is scenario planning that points to a major change in the world’s energy usage. The entire industry seems to recognize that, in order to stay competitive, it’s necessary to develop less-carbon-intensive energy sources.
In its report “2017 Outlook for Energy: A View to 2040,” ExxonMobil — a business that annually adjusts its long-term supply-and-demand assumptions — has developed a scenario that forecasts a 25 percent rise in energy demand by 2040. Nearly half of that increase will come from India and China. In addition to its own commitment to produce cleaner energy, ExxonMobil is calling for more energy-efficient buildings, improvements in transportation fuel economy, and the incorporation of advances in manufacturing and power plant efficiencies. Interestingly, the company also forecasts that the combination of nuclear and renewable energy will account for 25 percent of global energy output by 2040.
Meanwhile, oil giant BP has identified mega-trends that could shape the future of energy. For instance, the use of natural gas is growing more quickly than any other fossil fuel, and renewables are expanding faster still. Other shifts include the change in energy needs due to the demographics of emerging economies and the demands of millennials.
A sense of urgency is emerging — one that calls to mind the brilliant observation of 19th century German philosopher Arthur Schopenhauer. He wrote that every truth must pass through long periods of condemnation and ridicule before it is eventually accepted as self-evident. Indeed, even the world’s foremost producers of carbon-based energy now recognize that yesterday’s status quo is no longer sustainable.
Antonio Galvao, CSCP, CLTD, is the vice president of global logistics — building efficiencies at Johnson Controls. He may be contacted at firstname.lastname@example.org.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Johnson Controls.
Mike Dries is a retired business journalist and corporate communications executive now working as a freelance writer. He may be contacted at email@example.com.