Dematerialization Is Critical For Lowering Environmental Impact
The material world is struggling to keep up with the human need for resource extraction. Since 1950, the world population has grown from around 2.5 billion to more than 8 billion, and the numbers keep rising. The planet is probably already exceeding its carrying capacity, meaning that humanity’s activities are unsustainable.
The world, therefore, is at a crossroads. If we follow the business-as-usual approach, the costs down the line will be far higher. The ecology will collapse , and the entire world will fall into dreadful poverty, the likes of which are unimaginable today.
The second option is to regress voluntarily. That is, go back to life as it was in the middle ages, where average incomes are around $1 per day across the planet. Nobody wants that.
The final option is to dematerialize the economy . That is, goods and services need to become digital or computerized and rely less on the physical world.
Achieving the goal of dematerialization seems challenging. After all, people have been trying to displace coal and oil for decades now. However, we’ve already witnessed the phenomenon in some industries.
Take books, for instance. Twenty years ago, you had to buy them from a store. Now you can just download them into your app.
The same is true of music. Nobody buys vinyl records anymore. Instead, they stream them on iTunes.
Even things like radios have disappeared . Modern smartphones often offer wireless technology that eliminates the need to invest in bulky equipment.
In some instances, total dematerialization isn’t possible. You’re never going to have a digital power plant. However, miniaturization is something that people can achieve and has been helping to reduce carbon impact. Computer components and accessories are getting smaller all the time, reducing resource reliance.
Researchers appear to agree that dematerialization is already occurring on a large scale. Academics, such as MIT’s Andrew McAfee , believe that the US economy is growing, despite actually using fewer materials and inputs. Companies are becoming more efficient in the way that they are converting natural products into goods that consumers can use and enjoy, with no impact on the standard of living.
The question, though, is how far and fast this process can develop. While it is certainly occurring and continues to accelerate, the trend is only slowly spreading to other parts of the globe. In McAfee’s opinion, it is not happening fast enough to stop climate change, but there is hope for environmental protection, he says, given the progress that’s been made so far.
What Does This Mean For Business?
The challenge for businesses, therefore, is to find ways to dematerialize their operations. Obvious solutions include things like going paperless or working remotely. But there are a host of other strategies, too.
Take payments, for instance. Businesses currently operate with cash, which has a profound impact on the environment. Cash is not impact-free. Just like everything else, it requires energy to produce and move around. It also depletes natural resources.
Therefore, businesses should strive to reduce the amount of cash they accept from customers and use alternative forms of payment instead. Cryptocurrencies, for instance, offer a way for firms to reduce the carbon impact of their operations quickly. And while there are pros and cons of using crypto wallets , there’s no doubt that customers want more opportunities to spend their tokens.
Companies can also preferentially work with suppliers who are moving towards dematerialization. This means that even if there are no opportunities for the firm itself to dematerialize, it can build networks that do. These network economies could then spread throughout all human activity, making resource use more efficient.
Where Will Technology Lead?
Of course, dematerialization isn’t guaranteed. However, recent events have shown just how easy it is for companies to eliminate the material component of their operations.
Consider the pandemic lockdowns. Governments around the world forbade many firms from allowing people to go to work. Instead of shutting down operations entirely, many simply used existing cloud technology to facilitate remote work.
While the debate over whether these types of working arrangements are good for firms is ongoing, there’s no doubt that they happened. They were an important precedent that showed that commercial offices are largely redundant. If people can work from home, what is the point of operating large skyscrapers?
Interesting, the concept actually goes further than that. Even where a physical plant is required for production, workers may not need to be present. For instance, consider a factory that requires workers to press a button once it meets certain conditions. Do they need to be on-site? Probably not. Instead, they can sit on a cloud-connected computer, pushing the button digitally, telling the machine what to do, based on a visual input feed.
There are other opportunities, too. Practically all service professionals now have experience of working from home. For many, the need to travel to visit clients no longer exists. This saves fuel and energy costs and slashes the requirement to own a car.
The question for businesses, though, is how far this technology can develop. Consider AI, for instance. General intelligence is decades away if it ever comes at all. Programmers simply don’t know how to make machines that rival people. However, intelligent systems could potentially reduce the need for inputs on a massive scale.
Take the current fertilizer crisis. Right now, there is a shortage because most farmers use the input inefficiently. Instead of targeting the crops in their fields in need of a boost, they spread it everywhere evenly.
With AI systems, though, this could change. Farmers could inspect crops individually using a variety of camera systems imbued with artificial intelligence. These could then tell robots whether to squirt fertilizer or nutrients in a particular location in a field or not.
There are other possibilities, too. Companies behind the metaverse could change how people conduct their private lives. Rather than going out and consuming resources, they could occupy digital worlds that meet their needs. Today’s metaverse offerings are somewhat laughable, given recent “teasers” from well-known tech moguls. But in the future, they could be considerably more compelling. Brain-computer interfaces could convince people that they are having real experiences, similar to the matrix. Yet these experiences would not require any natural resources.
To take an extreme example, you could have people living in tiny cubicle flats with an electricity connection to power their metaverse experience. Then, everything else they enjoy would be a part of the digital world. They would not need material possessions at all since they could simulate them in the computerized experience.
Naturally, this level of technology is still a long way off. However, firms, such as Elon Musk’s NeuraLink , are already laying the groundwork that could make it possible. Computers might be able to generate specific perceptions in users, taking virtual reality’s immersion to a whole new level.
Conclusion
How rapidly this happens and whether people accept it, will determine the environmental impact that it has. In the meantime, companies need to adopt circular economy thinking to reduce the number of Earth’s resources they use. Instead of just economizing around price, they should look for any opportunity to reduce reliance on materials.
In practice, this means adopting a range of strategies. Firms need to become more digital and view their digitalization efforts as a part of their green strategy. Modernization should also be treated as an environmental project. The more advanced technology becomes, the more likely it is to reduce resource inputs. Right now, this seems like the only way forwards.
