- The COVID-19 pandemic has shown the importance of ensuring that Europe's societies and economies are inclusive, sustainable and resilient.
- Here are five key agents of change to help with that transformation.
The COVID-19 pandemic has uncovered strengths and resilience in European societies and economies in the response to a public health crisis that continues to impact global stability. The full extent of its bearing on the global economy has yet to be seen. McKinsey estimates that as many as 59 million jobs in the EU-27 could be at risk. The pandemic has also shed light on gaps and significant tasks for the future – according to the World Economic Forum’s Global Risks Report 2021, we are far from having turned the corner: infectious diseases and livelihood risks are the top two short-term global concerns.
Despite the challenges, the disruption that we are experiencing offers an opportunity to reset priorities for the recovery, and to reinforce positive trends that can help make Europe’s societies and economies more inclusive, sustainable, and resilient to future shocks.
Five agents of change will help the region on its path out of the crisis and achieve a more long-term oriented and equitable growth.
The COVID-19 pandemic has led to a massive acceleration of digitalization in all aspects of society and economy, which increases productivity and represents a key component to future success and growth. More than 90% of firms have increased remote work, and 60% have increased their online purchasing and/or services. Many executives reported that they moved 20 to 25 times faster than they thought possible before the crisis on things including building supply-chain redundancies, improving data security, and increasing the use of advanced technologies in operations.
To what extent this “digital boost” will result in long-term productivity improvements will not be known until the data for several more quarters are available. But it is clear that many companies and employees will not return to the pre-pandemic way of working.
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Building up resilience in global supply chains
The pandemic has made the vulnerability of global supply chains painfully obvious: 73% of supply chain leaders encountered problems in their supplier base, and 75% faced problems with production and distribution.
Industries with truly global supply chains such as aerospace and apparel are evaluating a more resilient setup as part of their recovery efforts. Advanced companies from the World Economic Forum’s Global Lighthouse Network are demonstrating how digitally infused operations go beyond productivity improvements to create sustainable, profitable growth. They have engaged scalable technology that supports business goals, which is now a requirement to become an industry-leading digital organization. Their reimagination of operations is leading to a return on their investment in resilience as they find themselves capable of matching supply to demand amid continued system shocks.
The private sector’s role in enabling a climate-neutral economy
The Risks report shows environmental risks, including extreme weather, climate action failure and human environmental damage, among the top risks in terms of likelihood and impact, showing the need for action. In Europe, the crisis has helped governments to embrace the green transition as a recovery and growth strategy. The EU’s recovery package incentivizes member states to dedicate at least 37% of the available funds to the green transition, a significant contribution to investments required for decarbonizing the economy.
A McKinsey & Company analysis suggests that cost savings could offset the investments required, and a net-zero emissions economy could yield a net gain of 5 million jobs across Europe. The transformation towards a sustainable economy thus seems possible, but still requires massive commitments and action from all stakeholders.
As major economies, regions and companies across all industries are embracing green transition targets and are setting new strategic priorities, the private sector becomes a central agent of change. Over time, this commitment will not only reduce emissions in industrial production but eventually affect consumers’ behaviors by giving them new choices.
New skills for the jobs of the future
The pandemic has both revealed and deepened social inequality in areas such as health and education, with millions of the most vulnerable at risk of being left behind. In response to the economic consequences of the pandemic, governments across Europe and Eurasia have announced unprecedented fiscal packages as a reaction to the COVID-19 crisis. They are exceeding 1,350 billion EUR, which is a sum that dwarfs the support during the financial crisis.
These interventions have significantly reduced the economic impact of the pandemic on individuals, proactively fighting the trend towards rising inequality across Europe. As public finances come under more pressure, these investments must be preserved.
In addition, there must be a widespread effort to up- and reskill people to enable generations of workers and employees to benefit adequately from growth areas in sustainability and digital. According to the Forum’s Future of Jobs Report 2020, an accelerated pace of automation could disrupt 85 million jobs by 2025, yet 97 million “jobs of the future” could emerge with a new division of labor between humans, machines and algorithms.
Global partnerships and cooperation
COVID-19 has created a moment that could either increase fractures or reinforce multilateral collaboration. The crisis management over the past 11 months has made the challenges of uncoordinated local and national approaches obvious.
Europe has championed multilateral collaboration in the COVID-19 response and demonstrated in the same vein that global cooperation is another important agent of change. With vaccines becoming available at scale, it is up to the leaders in government and the private sector across Europe to take the leap of faith and move even more from “managing a crisis” to “shaping the new normal” in order to become more resilient to future global shocks.