To build back better, we must reinvent capitalism. Here’s how

capitalism

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Peter Bakker, President and CEO, World Business Council for Sustainable Development & John Elkington, Executive Chairman and Co-Founder, Volans


  • The pandemic has brought into focus many of the vulnerabilities in our systems and institutions.
  • But it also offers us a chance to shape a more resilient and sustainable world.
  • Here’s how businesses and policy-makers can start building the green and inclusive future we need.

Thanks to the ongoing pandemic, the world is off-balance – and it will remain so for years to come. Far from settling into a ‘new normal’, we should expect a COVID-19 domino effect, triggering further disruptions – positive as well as negative ­– over the decade ahead.

The wave of civil unrest that spread across America and beyond recently may be one example; it seems likely that the pandemic contributed to the context in which anger and despair boiled over into outrage and unrest following the death of George Floyd. Other possible COVID-induced discontinuities ahead range from a full-blown financial crisis to a step change in the rate of the global energy transition: some analysts now reckon that fossil fuel demand may have peaked in 2019 – for good.

The virus has highlighted many vulnerabilities – within businesses, supply chains, economies, health systems and political institutions – that will need to be addressed in the post-crisis world. It has underscored the interconnectedness of our natural, social and economic systems, and provided a stark reminder of the scale of systemic risks that can build up when we allow weaknesses and negative impacts to accumulate over time.

 

An inclusive and green recovery is vital if we are to create more resilient economies and a world in which business can thrive, not just now but long into the future. There are positive signs that, in some countries, bailouts and stimulus packages have been designed with these criteria in mind, but this is by no means universal. It seems inevitable that some governments will repeat the mistakes made in the aftermath of the 2007-8 financial crisis when, in many cases, the policies adopted post-crisis exacerbated inequality and locked in unsustainable outcomes.

A true recovery from COVID-19 will not be about putting things back together the way they were: we need to ‘build back better’, to ‘reset’, if we are to address the deep systemic vulnerabilities the pandemic has exposed. For businesses, building back better is about much more than corporate social responsibility: it is about truly aligning markets with the natural, social and economic systems on which they depend. It is about building real resilience, driving equitable and sustainable growth, and reinventing capitalism itself.

Resilience

To ensure they are better prepared for the next shock when it comes, companies will need to establish a better balance between efficiency and resilience in everything from financial management to supply chain configuration. Complex supply chains may give way to simpler ones. “Just-in-time” may be superseded by “just-in-case” as the mantra of procurement and production teams.

Business will need to work with a wide range of partners to ensure that all risks – financial, environmental and social – are properly understood, priced and – wherever possible – mitigated. Increasingly, comprehensive and integrated risk assessments will be essential for companies to fulfil their fiduciary obligations and maintain their social license to operate.

Ultimately though, we are only as resilient as the systems on which we depend. Businesses must face up to their need for – and impact upon – systemic resilience. Post-COVID-19, this will require investment in regeneration (of weakened economies, shaken communities and over-exploited natural ecosystems) and adaptation (to increase our capacity to cope with future disruptions).

Future growth

The case for ‘green’ stimulus measures is clear: they are likely to deliver more jobs and higher (equitable) growth in the short-term, while reducing longer-term risks linked to climate change and biodiversity loss – crises that, if unaddressed, will cause a level of disruption to our economies and societies orders of magnitude greater than COVID-19.

After the Second World War, the need to physically rebuild Europe’s cities and industry meant there was ample demand for the capital provided through the Marshall Plan and it was put to productive use. COVID-19 has not wrought physical destruction, so a vital question for the economic recovery is where demand will come from – especially since it is likely to take years for consumer confidence and spending to recover to pre-crisis levels.

The challenge of decarbonizing entire economies can be the source of demand needed to kickstart economic recovery and create good jobs. Now, more than ever, integrating climate goals into business strategy can be a vital driver of long-term success.

Future-proofing capitalism

COVID-19 has exposed the fragility and societally negative outcomes of contemporary capitalist economies. It has strengthened the case for shifting to a more sustainable and inclusive model. The pandemic has temporarily weakened what Milton Friedman called ‘the tyranny of the status quo’ and created a context in which transformative change is at least possible. It is vital that we seize this opportunity to correct the broken incentives and information flows at the heart of our current model of capitalism.

Governments and regulators must intervene to ensure the costs of environmental and social damage are internalized by the companies responsible: profits cannot come at the expense of long-term societal resilience. Businesses must improve the quality and consistency of the information they disclose about risks, impacts and strategies – and integrate these factors into remuneration, management and governance structures.

Investors must, in turn, better integrate comprehensive environmental, social and governance (ESG) information into financial analysis and valuation models. The fact that many ESG funds have outperformed traditional funds since the start of 2020 should give investors and businesses the impetus to accelerate work in this area. For capitalism to deliver a sustainable and inclusive recovery, it is critical that companies’ cost of capital reflects the quality of their governance and their impact on society and the environment.

If we don’t seize this opportunity to build back better – to reset and reinvent rather than ‘return to normal’ – systemic risks and vulnerabilities will continue to accumulate, making future shocks both more likely and more dangerous. Despite the tragedy, we must leverage the COVID-19 pandemic, and make sure that it becomes the catalyst for a profoundly positive transformation of the global economy, taking us closer to a world in which everyone can live well, within planetary boundaries.

For more, see The consequences of COVID-19 for the decade ahead, a briefing developed by Volans and the World Business Council for Sustainable Development (WBCSD) as part of a refresh of WBCSD’s Vision 2050.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

The EU Diplomacy in North Korea promotes peace or war?

The Chinese retail revolution is heading west

UN health agency spotlights stalled effort to close health divide across Europe, in new report

State aid: Commission approves €520 million Italian scheme to compensate the trade fairs and congress sector for damages suffered due to the coronavirus outbreak

COVID-19 vaccines: EU must respond with unity and solidarity

Financial transactions tax gets go ahead

This company lets you set your own salary

The different ways of care: Is there a general rule to follow?

EU Trade Ministers come together in a desperate attempt to save TTIP

CLIMATE CHANGE FOCUS: Tunisia coastline in need of climate cash boost

Mental health in the context of a pandemic: social distance

Why is black plastic packaging so hard to recycle?

Logo Mania: A call to action to our crisis of connection

These 5 foods are under threat from climate change

EU economic governance: More exploitation for the weaker countries

The next talent opportunity for the digital workplace? Neurodiversity

An economist explains how to go carbon neutral in our lifetime

Deaths from far-right terrorism have more than tripled in the West

The cost of dying

What Europe’s SMEs need to do for a cyber-secure future

How long will people live in the future?

Insurer CEOs Reveal Marketing Strategies that Communicate the True Value of Insurance Products & Services to the Customer

UNESCO lists wrestling, reggae and raiho-shin rituals as global treasures to be preserved

In Mozambique, it’s ‘a matter of the heart’ says Guterres, lauding the cyclone-struck nation’s ‘undeniable moral authority’

China in My Suburbs

Coronavirus: Commission launches data sharing platform for researchers

Environment and health at increasing risk from growing weight of ‘e-waste’

Health spending set to outpace GDP growth to 2030

Aviation Strategy for Europe: Commission signs landmark aviation agreements with China

The impact of mobile and rapid digital adoption on how India consumes

Coronavirus: Commission adopts new exceptional support measures for the wine sector

Europe eyes to replace US as China’s prime foreign partner

Women in leadership: closing the gender gap in medicine

UN launches plan to promote peace, inclusive growth in Africa’s Sahel

Libya on verge of civil war, threatening ‘permanent division’, top UN official warns Security Council

Global public-private collaboration tackles cybersecurity skills gap

Finland is a world leader in clean energy. Here’s what’s driving its success

Iceland’s slowdown underlines the need to fix structural issues

The new era of Matriarchy?

UN political chief calls for dialogue to ease tensions in Venezuela; Security Council divided over path to end crisis

How to create a world where healthcare is a right, not a luxury

Accelerating a more sustainable industrial revolution with digital manufacturing

EU Budget 2021 deal: supporting the recovery

Blockchain is not a magic bullet for security. Can it be trusted?

6 ways data sharing can shape a better future

Millions of Afghans have ‘voted not just for a president, but also for democracy’, UN Assembly told

Doctors are humans too: the benefits of embracing your mental status

‘No shortcuts to a healthier world’: WHO chief sets out health priorities for the decade

G7 summit: Trump Vs. G6 leaders on trade and climate change

How China Mended My Heart

How AI can accelerate the search for treatments for emerging and intractable diseases

European Union disenchanted with Turkey

These are the biggest hurdles on the path to clean energy

UN chief welcomes possibility of resumed talks between US and North Korea

Global Trade Identity can be the cornerstone of paperless trade

Sahel and Central Africa: €210 million in EU humanitarian aid

Innovative finance tools could protect cities from climate change

The DNA of the future retail CEO

EU adopts new €100 million assistance package to benefit refugees and local communities in Lebanon, Jordan, and Iraq

Strict alcohol laws which cut intake more than 40 per cent in Russia, linked to historically high life expectancy

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s