They are powerful trajectories of change occurring at the intersection of geopolitical, socioeconomic, environmental and technological trends. CSIRO’s Stefan Hajkowicz examines the megatrends that have withstood the pressures of the global pandemic and might well remodel the way we do business.
Megatrends can build momentum slowly or suddenly appear with dramatic events that reshape the business landscape. Understanding megatrend causes and impacts helps directors make better decisions and guide their executives through the prevailing operational context. The CSIRO has pioneered a data- driven megatrends analysis methodology, which is now widely used by Australian organisations.
In November 2020, the CSIRO prepared a megatrends report for Austrade. This identified the likelihood of sudden significant trade shocks and a restructuring of the global trade landscape with heightened interest in onshoring (or nearshoring) to reduce supply chain risks. Since the publication of this report, we can see the accuracy of CSIRO predictions. This is a snapshot of the latest thinking on the megatrends impacting Australia over the coming 10–20 years.
More from less
The early stages of COVID-19 saw a slowdown in demand for some natural resources, such as food and energy associated with decreased transportation and trade. However, the world is on a longer-term trajectory of demand growth. This is driven by exponential population growth and rapid economic growth, especially in the Indo-Pacific. Rocketing demand and finite agricultural, water, energy and mineral resource availability is creating an efficiency crunch. We need more from less. With scientific and technological innovation — and the adoption of new technologies — supply can meet demand and improve efficiency in all areas. This megatrend is about technological innovations allowing current and future generations to meet their needs within the envelope of the Earth’s natural resources.
1.3 billion people are currently experiencing food insecurity
Up to 98% increase in food demand predicted by 2050 Source: World Bank, World Health Organization, Agricultural Economics
US$13.8b in investment funds flowed into AI-based drug design and discovery in 2020 (4.5 times higher than in 2019)
65% of North American AI PhD graduates going into industry in 2019 (44% in 2010) Source: Stanford University AI Report
2% higher (60 million tonnes) global CO2 emissions in December 2020 than in previous year
Source: Bureau of Meteorology
The global food and agriculture system has come under intense pressure during COVID-19 and urgently needs better governance. UN figures show the world loses 75 billion tonnes of fertile soil and 12 million hectares of productive agricultural land to desertification each year. COVID-19 impacts have led to widespread increases in food insecurity.
Synthetic biology (merging engineering and biology) will help solve this challenge. It allows for food production with less water, energy and land inputs. Recent years have seen an explosion of scientific capability alongside an influx of venture capital funds.
In Australia, CSIRO spin-off V2 Food supplies plant-based burgers to Hungry Jacks and Burger King. Its mince and burger products are based on CSIRO science that uses protein from legumes to create meat texture and taste. A paper published in research journal Trends in Food Science & Technology finds that the broader plant-based meats global industry will be worth $181b by 2030.
The International Energy Agency forecasts global electricity demand will grow at 2.1 per cent a year to 2040; double the rate of energy growth. The energy mix also changes as solar will surpass coal and gas to become the largest source of installed electric supply capacity by 2035. Renewables will make up two- thirds of electricity generation by 2040.
Much of this change is being fuelled by battery technology advances. Researchers from the Massachusetts Institute of Technology found the costs of lithium-ion batteries have fallen 97 per cent since being introduced in 1991. Research published in science journal Nature finds that electric vehicles will reach price parity with conventional liquid fuel cars soon after 2025. Car makers such as Jaguar and General Motors have signalled partial or complete transitions to electric vehicles within the next five to 15 years.
Altered global and microbial ecosystems
From global to microbial scales, humans have changed how the Earth’s ecosystems operate and we’re now having to manage the consequences.
Despite a brief reprieve during COVID-19 — where CO2 emissions declined by 17–25 per cent due to decreased transportation, trade and the slowdown of global manufacturing — greenhouse gases and other air pollutants have rebounded sharply. The world is moving back to its longer-term trajectory of escalating emissions and worsening impacts of global warming.
However, scientific and technological innovation is making carbon- neutral activity feasible across most industries. Architects, engineers and city planners are developing buildings and city designs resilient to extreme heat, floods and high-intensity cyclones.
The aptly titled Mission Possible report by the Energy Transitions Commission describes how the world can become carbon neutral by 2050 within the envelope of current technology. This is considered an urgent and feasible objective by UN Secretary- General António Guterres. Furthermore, when current capability is enhanced with emerging technologies (such as geo-engineering for carbon sequestration and emerging low-emissions technologies for agriculture, construction, mining, energy and transport) a carbon neutral world by 2050 becomes highly achievable.
Humanity is faced with an escalating infectious disease risk from zoonotic (animal sources) viruses and antibiotic-resistant bacteria. This is due to rising jet travel (likely to resume its growth trajectory post-pandemic), urbanisation associated with high population density, increased livestock production and handling, and increased antibiotic use. In the past 20 years, the world has endured swine flu, avian flu, SARS, Ebola and COVID-19. Even more dangerous pathogens within animal populations pose an ongoing risk. Scientific and technological innovation in the areas of vaccine production, treatment and societal response has improved vastly and we are likely to see continued innovation tackling antibiotic resistance.
Future generations will live in a world where the bulk of global GDP comes from the Asia/Indo-Pacific region. This shift is creating an enormous new marketplace on Australia’s doorstep for our goods and services exports — and changing how the world economy works. The rise in wealth across Asia is accompanied by increased investment into research and development, as well as highly visible trade pattern shifts. The regional’s geopolitical status is also in flux, with the 2020 Australian government defence white paper arguing the “Indo-Pacific region is in the midst of the most consequential strategic realignment since World War II”.
But the longer-term trajectory is towards a more peaceful, stable world. The RAND Corporation recently conducted a statistical analysis of past global conflict and forecast scenarios for the coming 25 years. Its analysis concludes that “violent conflict is likely to return to long-standing trends of gradual decline in most regions of the world in most plausible futures”.
This megatrend has significant implications for Australian business. Coming years will see urgent restructuring of supply chains and development of new export markets to achieve improved stability and reliability. Sovereign capability in the manufacturing and technology sectors will be of increasing importance.
6.5% per year — average rate passenger air travel grew in the past 10 years per year 25,000 new passenger and freight jet planes ordered over the next 20 years. Source: Boeing
10% of Australian GDP spent on health in 2018
13% of GDP — forecast Australian health spending rise by 2030 20% of GDP — forecast US health spending rise by 2030 Sources: AIHW, OECD
Science and technology, combined with intelligent human services, can do much to help people achieve improved physical and mental health, plus find retirement options that deliver quality of life in later years. It’s critical we continue to innovate in these spaces because future challenges are considerable.
From 1999–2019, the portion of Australians aged over 65 years increased from 12.3 per cent to 15.9 per cent according to the Australian Bureau of Statistics (ABS). By 2056, up to 25 per cent of our population will be more than 65 years old.
The prevalence of chronic illness associated with unhealthy diets, physical inactivity and poor sleep patterns continues to rise. According to the Obesity Evidence Hub, two thirds of Australian adults are overweight (35.6 per cent) or obese (31.3 per cent). The percentage of overweight or obese Australians rose from 57 per cent in 1995 to 66 per cent in 2018. Diet is a major driver, in addition to physical inactivity.
The prevalence of mental health is also covered under this megatrend. According to the Australian Institute of Health and Welfare, 46 per cent of Australians have experienced a diagnosable mental disorder in their lifetime and 20 per cent in the past 12 months.
On the move
Mobility almost ground to a halt during COVID-19. Our streets emptied and rows of passenger planes sat idle on the tarmac. There are important questions about what mobility will look like post- pandemic, but the longer-term trajectory is a more mobile world in practically every respect.
The first area of mobility we capture is the mass migration of humanity from rural areas to cities. The UN predicts the share of humanity living in cities will rise from 55 to 68 per cent in 2050. Australia’s population is forecast to rise to 91 per cent urban in 2050, according to the ABS — and Melbourne will be London-sized with a population of between 8.6–12.2 million people by mid-century. Air travel is highly resilient to global shocks and according to Boeing and the International Air Travel Association it will resume its pre-pandemic upward growth trajectory around 2025.
Our micro-movements are also rising along with the diversity of transport options. The past few years have seen small electric-powered personal transportation devices (scooters/bicycles/skateboards) create increasingly diverse options for travel.
There has also been long-term expansion in freight movements, especially road and rail freight, which is likely to continue over the coming decade fuelled by growth in e-commerce.
The rise of the digital economy and data-driven organisations was happening before COVID-19, but during the pandemic it received a major boost. The pandemic has seen telework, telehealth, online retail, online education and online entertainment boom. According to the NAB online retail index, in the 12 months leading up to February 2021 during the pandemic, Australians spent an estimated $46.9b on online retail —13.2 per cent of total retail trade — 48.4 per cent higher than in the 12 months leading up to February 2020.
The demand for online services is reflected in the share market. Digital companies comprising the S&P/ASX All Technology Index have outperformed the ASX 200 by 52 per cent, increasing market capitalisation from $100b to $170b since the index was launched in February 2020. Many of the companies comprising this index — such as Afterpay, Xero, REA Group, WiseTech and Seek — have experienced a better than usual business environment as demand for digital products and services boomed during the pandemic.
As our economy becomes more digitised, organisations are becoming increasingly data- driven. This means they acquire, store and protect data, know the value of their data, use it to develop new products and services, and automate business processes. Data-driven organisations also use it to make decisions. Many organisations aspire to become more data-driven and elevate their data science capability, but equally, many are overwhelmed by the data deluge and don’t yet have the tools and capabilities to cope.
The coming decade will see many organisations substantially upgrade data science capability as a survival necessity. The volume, variety and velocity of data are increasing exponentially along with challenges in veracity (the four Vs of big data). Fifteen years ago, data downloads in Australia could be measured in gigabytes. We then went to terabytes — and now petabytes are a better measure. IBM estimates all printed materials on Earth would equate to roughly 200 petabytes. To effectively manage the vast quantities of incoming data, the tools of data science are essential.
The past few years have seen huge expenditure on artificial intelligence (AI) by companies and governments worldwide. The May 2021 federal budget contained $124.1m in funding for AI, which includes a National Artificial Intelligence Centre led by CSIRO Data61. The past decade has also seen numerous scientific breakthroughs in fields such as machine learning, computer vision, natural language processing and robotics.
The ability of the machine to problem solve without explicit guidance from a human being will substantially improve over the next 10 years, with AI a critical enabler of most types of business. The development and adoption of AI will continue apace. The implication of this megatrend is that, if you haven’t already, you need to skill up your organisation in AI to achieve improved operations and better decision-making. Otherwise, the competition will.
Another aspect is the rapid ascendancy of China. There is no longer a big gap between the US and China on AI capability. Harvard Business Review reports China is now a world leader in AI research, producing more AI patents than any other country.
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