- COVID-19 has made the existing flaws in our social and economic systems even more apparent.
- It also offers us a chance to deliver fundamental reforms that put people at the heart of the global economy.
- With the right leadership and common purpose, we can do this. Here's a five point plan of action to get us on the right track.
In early June, Klaus Schwab – Chairman of the World Economic Forum – called for a ‘great reset’ following the pandemic. Pressing the case for rapid collective action, Schwab said the response to COVID-19 proved that a reset of our economic and social foundations is possible. He added that now is our best chance to achieve it.
I agree. It is becoming increasingly clear that the global economy is no longer delivering what is needed. While it remains the most powerful generator of social progress ever created, it has always depended on a system of rules and norms – and now these aren't working. The most obvious symptoms of this breakdown include climate change, inequality and populism. Social progress has become decoupled from economic progress. Put simply, we have a design problem. And now COVID-19 is making the flaws even more apparent.
How can we evolve our economic systems to deliver sustainable outcomes for society? We need fundamental reform that puts people at the heart of the economy. Civil society, employees and the business community all have a crucial role to play.
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For companies, this means embracing the concept of stakeholder capitalism by leading and managing profitable, sustainable businesses that deliver a positive impact for all of their stakeholders, including employees, customers, suppliers, local communities and broader society.
Five key actions
Turning that aspiration into reality in the midst of the deepest economic crisis many people have ever seen is a tremendous challenge. Unemployment, falling wages, strained supply chains and declining demand will present huge challenges. Government and corporate debt levels are likely to be high and will often have been incurred to fund day-to-day spending rather than investment. Without a robust recovery, trust in government, business and the institutions of society – which is already fragile – could fracture. Meanwhile, tensions between nations could well increase as the geopolitics of the pandemic play out.
In this context, we need to solve the ‘and’ problem. It cannot be a choice between long-term sustainability and short-term improvements in the economy. We need both.
To solve this problem, we need a framework that allows us to address multiple issues in parallel. Five actions will be key:
1. Repair. To fix the problems of tomorrow, we need to be around tomorrow. So the immediate priority is to mend the things that have been most damaged by the health crisis and the need to lockdown economies. Governments and businesses have been very radical in their approach to this. It will be important to continue with this willingness to think differently about how our economic systems work.
2. Rethink. The temptation in a time of disruption is to try and return to the way things were. That would be the wrong approach – both for businesses and governments. For businesses, it would be wrong to think the supply chains or the working practices or investment decisions of the past are the right ones for the future. For governments, COVID-19 has shone a light on the structural challenges our societies face and has created a unique point in time where fundamental change can occur. We need profound thinking about how our system can answer challenges ranging from climate change to automation. The same goes for multilateral organizations. By reinforcing the institutions that facilitate international cooperation, we will be better placed to deal with the next global threat.
3. Reconfigure. The biggest challenge is making change happen. Organizations of all kinds will need new structures and ways of working that reflect technological and societal change, economic pressure, and the need to be fundamentally accountable to stakeholders, not just shareholders. At a societal level, we will need to implement important changes in the way we make decisions, such as moving on from GDP to a more rounded metric of societal progress and delivering reform to systems ranging from education to healthcare to taxation.
4. Restart. Countless businesses that have not been able to repair what’s broken and have gone bankrupt amid the crisis will need to start completely new in a very different world. They’ll have to take the usual steps – creating a business plan, securing finance, hiring employees, building a brand, and so on. But there will be new complexities to address and further disruptions to manage. Some parts of the public sector, including portions of the healthcare system, face similar restart challenges.
5. Last but not least – report. The pandemic has seen people desperately seeking clarity on everything from how a company is implementing lockdown measures to how governments are managing the crisis. This demand for transparency will become permanent, and businesses and governments will need to show how they are performing against their wider stakeholder responsibilities. For business, this means reporting on a broader range of environmental, social and governance (ESG) metrics and disclosures – which is a move PwC welcomes and has been working with the World Economic Forum’s International Business Council to progress. Transparent and consistent reporting will help create the conditions for progress and increased trust. It creates the context for the market to work, by giving stakeholders more information to make choices such as where they buy, invest or choose employment; and it allows us all to see progress where it occurs.
Advancing to the world we want to have
The pandemic has made it clearer than ever that governments and organizations must change radically. That is not just about COVID-19, but also about the profound issues that were already present: global and generational inequality, low trust in institutions, climate change, and personal privacy in a digital world.
By working together, we can do all this. In fact, we must. And now is the time. COVID-19 has generated a shared global experience of a defining moment in human history. What is ensuing now is a period of reflection; one where people are not thinking about returning to the world they had, but creating and advancing to the world they want. Given the right leadership, and a new sense of purpose engendered by the pandemic, I believe that we can make the leap.
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