The World Economic Forum is convening again in Davos, facilitating big picture discussion on the direction of the world’s economics, governments and businesses. Having lived in the Swiss Romande during a couple of these, I know first-hand that it is a big deal! At Davos this year, a couple of interesting reports came out about priorities for business with respect to global sustainable development issues. This article looks at the differing views on the most important sustainability issues facing business: climate change and geopolitical uncertainty.
Climate change most important again
A report by UK thinktank Influence Map found a “Paris effect” in the private sector on climate change action. It analysed the promotional information, third-party information, government disclosures and other external data from the top 100 companies in the Forbes Global 2000 index, excluding state-owned or financial firms. All to understand their support for specific policy action on climate change. BusinessGreen’s summary explained that a noticeable improvement on carbon management strategy and policy was found. One of the reasons for this being the outstanding campaigns such as We Mean Business to bring corporations together. Moreover, the examples of electric vehicles and renewable energy provide a clear picture of success and opportunity from long term carbon management. Surely, China and US’ political moves in this space have helped too.
Another publication, the WEF commissioned Global Risks 2016 Report, found climate change to be the greatest risk to the global economy in 2016. It was the first time the report rated it first, a rating involving over 750 experts and produced by Marsh & McLennan and Zurich Insurance Group. Important risks included forced migration, water and food shortages, constrained economic growth, weaker societal cohesion and increased security risks. Zurich’s Chief Risk Officer, Cecilia Reyes, made the connection between climate change and geopolitical uncertainty (quoted from The Guardian):
“Meanwhile, geopolitical instability is exposing businesses to cancelled projects, revoked licences, interrupted production, damaged assets and restricted movement of funds across borders. These political conflicts are in turn making the challenge of climate change all the more insurmountable – reducing the potential for political cooperation, as well as diverting resource, innovation and time away from climate change resilience and prevention.”
Contrasting views: the PwC report says it is all about geopolitical uncertainty
Turning from academics to practitioners flipped the script. PwC’s report surveyed global CEO’s about the major sustainable development business threats. It was launched at Davos to a surprise reaction, especially from The Guardian, which wrote about how low climate change was ranked after Paris:
“… over-regulation was listed as the biggest threat to business (by 79% of CEOs), followed by geopolitical uncertainty (74%) and other key threats including cyber attacks (61%).
In contrast, climate change and environmental damage was mentioned as a threat to business growth by just 50% of CEOs.”
It seems Zurich’s Reyes was very smart to loop geopolitical instability into her climate change comments.
While geopolitics is a matter for governments, organisations occasionally meddle, in a good way. Corporate boycotts of South Africa were common during Apartheid and Northern Island, and Myanmar and China have also faced controls in recent memory. Two recent examples of business taking their own responsibility for geopolitical unrest concentrate on Israel-Palestine conflict region, and the conflict minerals area in Africa.
Cisco, Corning, GE and Intel: the Holy Land Principles
In late October last year, Cisco joined GE, Corning and Intel in signing the Holy Land Principles, a corporate code of conduct for American companies doing business in Israel-Palestine. The CSRWire press release promoted these principles as mainly about fair employment across the Jewish and Palestinian cultures, whilst also being “pro-company”.
Intel (again): a conflict mineral free supply chain
While this is a more passive approach, other companies are taking a proactive approach to managing geopolitical uncertainty. Intel announced this year that its entire supply chain will be conflict free this year. This story was explained in detail in Fast Co.Exist.
Intel boldly set this goal in 2009 without any plan or idea of how to achieve it, quite different to many companies that only set goal they know they can reach. Fundamental to the strategy had to be tracking, and after several early pilots an approach to doing this was figured out. Now, non-governmental organisations support Intel with the audit work to ensure these tracked resources check out OK.
From the reports tabled at Davos there is a difference of opinion between the academics and the professionals. The academics score climate change as the most serious business threat, the professionals score rate geopolitical instability. There are a few reasons why this might be:
- Non-professionals are still out of touch with the realities of the private sector and they hype up climate change.
- CEO’s still do not really get it, and the great external communications on corporate climate action is more comms than strategy.
- The private sector is right on board with carbon management, it is just poorly understood by the CEO.
What do you think?