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Envisioning the Opportunities Presented by the Resource Revolution

September 19, 2014 • Climate Change, Emerging Ideas, INNOVATION, Social Impact, SUSTAINABILITY & ETHICS

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http://www.europeanbusinessreview.com/envisioning-the-opportunities-presented-by-the-resource-revolution/
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By Stefan Heck and Matt Rogers

Conventional wisdom predicts stagnating economic growth, extreme resource depletion, accelerating commodity price inflation, and increasing pollution as consuming classes in emerging markets grow. Below, Stefan Heck and Matt Rogers argue that this growth will create an opportunity that will reframe the world’s economy and create opportunities for trillions of dollars in profits.

The challenges facing the world today as 2.5 billion people join the consuming classes in emerging markets are formidable. Conventional wisdom predicts stagnating economic growth, extreme resource depletion, accelerating commodity price inflation, and increasing pollution. We disagree.  Rather than facing a crisis because of resource scarcity, we confront an opportunity that will reframe the world’s economy and create opportunities for trillions of dollars in profits.

Often, when people think about what they see as the coming resource crisis, they focus on the need for conservation. When companies enter the conversation, it’s frequently because they face a threat. For instance, as newspaper readership moves online and use of paper generally declines, the traditional model for pulp and paper companies is threatened: no longer will companies plant forests, cut them down, and turn them into paper with water and chemical intensive processes. But some companies are making lots of money on paper. One such company is Nine Dragons, founded by Yan Cheung.  

Yan is the eldest of eight children of an army officer, and grew up in China during the Cultural Revolution. She began her career in a textile mill and then worked in a paper trading company in Shenzhen. She moved to Hong Kong in 1985 to set up her own paper trading company, Nine Dragons, and then to Los Angeles in 1990 to open the U.S. subsidiary.

Her insight? China was critically short of paper and didn’t have trees to cut down to make more. All this in a country that was on the cusp of becoming the manufacturing hub of the world, and nearly everything people buy from China involves paper in some form—wrapping, packaging and instructions. Her business model: buy waste paper in the United States for less than $100 a ton (compared with more than $500 a ton for virgin paper from trees), then buy capacity in shipping containers, which would otherwise have returned empty to China after having unloaded goods in the United States and which were available for pennies on the dollar. She then reprocessed the pulp into packaging material and sold it in a market where paper is chronically in short supply.



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