Energy

View From Davos: European ESG Progress Looks Good On Paper But Business Must Fully Tap Technology To Thrive


It can take a crisis to consolidate a consensus, something that has become increasingly evident as we emerge from the COVID-19 pandemic.

Businesses are poised to navigate a fragile recovery against the backdrop of remarkable international agreement about the epochal forces now shaping global change.

While digital transformation defined the landscape in the 2010s – creating a new generation of winners out of companies that led this process at speed and scale – today change is being defined by the sustainability transition.

Crucially, however, in these uncertain times, the pursuit of sustainability to evade what is routinely portrayed as an existential risk demands that we “reset” our entire model of growth.

It is prescient, therefore, that this year the Davos Agenda will mark the launch of the World Economic Forum’s “Great Reset” initiative, a recognition of the multilateral consensus about the challenges we must overcome to create a more inclusive, cohesive and sustainable future.

Above all, there is growing interest in the notion that a “twin transformation” incorporating both the sustainability and digital revolutions, and fueled by talent, will be the principal vector of our success.

By this view, companies able to harness the most powerful dynamics of our era by finding new sources of value at the intersection of leading-edge technologies and green operations will gain a competitive edge.

With considerable foresight, the key themes of this year’s Davos Agenda amply reflect the need for us to accelerate this “twin transformation” in 2021 and power it with the talent of our people, in order to rebuild trust, drive a robust recovery – and reset our entire economy.

Sharpened focus

While it was underway before the pandemic, the sustainability transition must now be discussed in the context of COVID-19, which has sharpened our focus on the environmental harm, inequality, and exclusion associated with our existing model of growth.

The pandemic has exposed economic and social fault lines that confirm a sense among many people that they are being left behind, thereby reinforcing pressure on companies to adopt a broader social purpose above and beyond profit-making.

COVID-19 is redefining the “social contract” between business and society, throwing a spotlight on the behaviour of companies and holding them to new standards that have less to do with what they sell and more to do with how they respond to change.

Europe has been ahead of the curve in understanding this, nurturing ambitious collaborations across business, government and society to create a platform for sustainable change.

But Europe also highlights what is so often missing in this equation – a greater need to understand the business dimension of sustainability.

Evidence suggests that European companies, for example, are frequently motivated by personal convictions and societal pressures and less focused than regional rivals on the business opportunities presented by sustainability, such as launching new products and services. Also, too few European firms recognize the synergy between sustainability and technology that is becoming critical to market success.

Business strategies premised upon harnessing the “twin transformation” of digital and sustainable change can be likened to the evolution in nature of the double helix of DNA, which is the key to adaptation and survival.

This complex molecule can serve as a potent metaphor to illustrate that evolutionary success requires more than just improving either sustainability or innovation, but an understanding of how they interact – what geneticists call “crosstalk”.

Data suggest that companies which have decoded this interaction are far more likely to be tomorrow’s leaders whose resilience during the COVID-19 crisis will catapult them rapidly into a rebound.

Sustainability is good business

Companies have diverse motives for embracing sustainability, but often do so as a question of conscience or a “constraint” driven by regulatory and societal pressures.

At this critical post-pandemic juncture, it is essential for them to think of sustainability in terms of business opportunities that drive value and, hence, it is worth restating the commercial merits of a green agenda.

Companies that place sustainability at the heart of what they do face fewer hurdles to attracting long-term investors willing to wait for a return on their capital.

Secondly, sustainability itself is a guaranteed source of innovation, thereby boosting competitiveness, because global goals simply cannot be achieved without radical technology-led improvements to operations and processes.

Moreover, this shared “higher purpose” can galvanize the whole spectrum of stakeholders – business leaders, their workers, supply chains and customers to generate huge goodwill in markets that yields disproportionate reputational gains.

Put simply, when it comes to influence, greener companies punch above their weight.

But above all, sustainability is a talent magnet.

Green companies lure the brightest and best young people driven by values and commitment who are often at the forefront of society’s efforts to address the issues associated with climate change.

This explains why companies that have recognized the value of the “twin transformation” are pioneers when it comes to equipping their people for this conjoined transition.

Data suggest businesses most tuned in to the role that their own workforces can play in transformation believe that failing to nurture talent will hamper both their technological and sustainable progress.

These companies take real responsibility for the continued employability of their people in a radically changing labor market, sparing no effort in reskilling or upskilling workforces as they turn transformation driven by talent into business value.

European lessons

Nowhere are such potential advantages arguably more important than in Europe, whose regional competitive challenges have been underlined by the pandemic and whose executives remain nervous about the recovery.

Indeed, European businesses stand at the threshold of vitally important strategic choices.

The extent to which they embrace the “twin transformation” – by unlocking the potential that derives from the interaction of both strands of the double helix and powering it with the talent of their people – will determine their fate.

When considering the role of sustainability and its interaction with technological change Europe is an ideal case study because of advantages it would appear to enjoy on paper based on its traditional strengths.

Its companies score more highly in ESG ratings than rivals in North America and Asia, are prioritizing both technology adoption and sustainability in their post-pandemic rebound and mid-term strategies, and are attracting investors with their green commitments.

Yet at the same time, data suggest too few European companies are recognizing the values that resides in the “crosstalk” between technology and sustainability.

They are less motivated by sustainability business opportunities than regional rivals and less focused on the enabling power of technology.

This is surprising, not least because those European companies that have so far set the pace by combining the digital and sustainable transformations are household names – from Ørsted and Schneider Electric to Siemens, L’Oréal, and Deutsche Post DHL.

The lessons we can learn from Europe speak directly to the spirit motivating this year’s Davos Agenda.

While the region has forged a unique level of consensus on the need for sustainable change, that in itself is insufficient.

Only through a “twin transformation” that taps the power generated by the fusion of sustainability and leading-edge technology can European businesses unlock their true potential at this watershed in their evolution.



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