- COVID-19 has had a severe impact on the global economy, and the business community is most concerned about the impact of a prolonged recession.
- By focusing on the direction and speed of economic growth – and the impact on people and the planet – we have an opportunity to build back better.
- The World Economic Forum's International Business Council, in collaboration with the "Big Four" accounting firms, released a set of core metrics for measuring stakeholder capitalism.
The shock inflicted by the pandemic on the global economy has been more severe and has occurred much faster than any other in recorded economic history.
“The economic fallout from COVID-19 dominates companies’ risks perceptions,” according to the World Economic Forum’s survey of nearly 350 senior risk professionals taken at the height of the pandemic.
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“Prolonged recession of the global economy” topped the list of respondents’ concerns, with two-thirds saying it was the most worrisome for their company. It was closely followed by other economic risks, including a surge in bankruptcies (big firms and SMEs) and wave of industry consolidation, high levels of structural unemployment and failure of industries or sectors to properly recover.
These fears aren’t unwarranted. Unemployment has soared even in some of the most advanced economies – and many jobs may never come back. The pandemic “has impacted over 75% of the world’s global manufacturing outputs,” found another recent Forum report. And by some estimates, “most economies will not return to their previous performance peaks until late 2022,” said Stanford University’s Michael J. Boskin.
However, the pandemic provides a chance to “build entirely new foundations for our economic and social systems,” said Forum Founder and Executive Chairman Klaus Schwab.
“The COVID-19 crisis is affecting every facet of people’s lives in every corner of the world. But tragedy need not be its only legacy,” he continued. “On the contrary, the pandemic represents a rare but narrow window of opportunity to reflect, reimagine and reset our world to create a healthier, more equitable and more prosperous future.”
How to reset the economy
“The only acceptable response to such a crisis is to pursue a ‘Great Reset’ of our economies, politics and societies,” Schwab recently wrote.
“Specifically, we will need to reconsider our collective commitment to ‘capitalism’ as we have known it. Obviously, we should not do away with the basic engines of growth. We owe most of the social progress of the past to entrepreneurship and to the capacity to create wealth by taking risks and pursuing innovative new business models. We need markets to allocate resources and the production of goods and services efficiently, particularly when it comes to confronting problems like climate change,” he continued.
“But we must rethink what we mean by ‘capital’ in its many iterations, whether financial, environmental, social, or human.”
This new era calls for focusing on economic growth, yes – but, at the same time, the direction and speed of growth and its impact on people and the planet.
What is the World Economic Forum doing to manage emerging risks from COVID-19?
The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.
As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.
To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications - a companion for decision-makers, building on the Forum’s annual Global Risks Report.
Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.
On the people side, as Thales Panza de Paula, the Forum's Partner Engagement Lead for the Financial Services Industry, wrote, "Instead of focusing on saving jobs by subsidizing and bailing out inefficient organizations, governments should spend on social protection systems that support individuals and alleviate the economic and social consequences of recessions."
And on the planet side, six "nature-positive" transitions combined could lead to a grand total of $3.6 trillion in annual business opportunities and 191 million jobs by 2030, says the Forum's New Nature Economy Report II on “The Future of Nature and Business. This includes transitions like sustainable management of forests ($230 billion and 16 million jobs) and creating transparent and sustainable supply chains ($515 billion and 18 million jobs).
What are the World Economic Forum and its partners doing?
- Developed by the Forum's International Business Council (IBC) in collaboration with Deloitte, EY, KPMG and PwC and supported by 140 CEOs, Measuring Stakeholder Capitalism Towards Common Metrics and Consistent Reporting of Sustainable Value Creation recommends a set of core ESG metrics and disclosures for companies under four pillars:
- The Forum’s COVID Action Platform – the first platform of its kind – is galvanizing the global business community to take collective action, protect livelihoods and facilitate business continuity, while mobilizing cooperation and business support for the global COVID-19 response.
- Financing the Transition to a Net-Zero Future coordinates businesses and the financial sector to support carbon-neutral financing opportunities. Phase I commenced in April and will conclude 30 June 2021.