Business

How businesses can help avert a recession while furthering decarbonization

We must not accept recession as a given. We must lead the way toward a better and more sustainable future.

We must not accept recession as a given. We must lead the way toward a better and more sustainable future. Image: Siemens

Jim Hagemann Snabe
Chairman, Siemens
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This article is part of: World Economic Forum Annual Meeting
  • Just as the inflection of the automobile was a historic inflection point, so too is the coming decarbonization and green transition.
  • To ensure this is as smooth as possible — especially given the turbulent times we live in — businesses should be ready to reinvent themselves.
  • The best way to counter the fears of recession is to invest in the future.

Throughout history, dramatic changes in competitive forces resulted in innovations that fundamentally changed the way businesses and societies operate. Often, these were responses to major challenges — but also opportunities.

The power loom, the steam engine, the discovery of electricity and the internal combustion engine, and later telecommunications and information technology: all of these and other innovations disrupted business as usual. In each of these inflection points, businesses were faced with a choice: optimize what they already had or reinvent themselves to be relevant in future.

One of the most well-known inflection points in history was the proliferation of the automobile. Henry Ford once said: “If I had asked people what they wanted, they would have said faster horses.” Horse-drawn carriages and railways were still the primary forms of transportation for most people. It was difficult to see a future where everyone drives cars. But Ford, who coined the term “assembly line,” made the automobile affordable and available to the masses. When it comes to the automobile industry, the rest was history.

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Sustainable products: the next revolution

Today, we face another inflection point. Climate change, inflation, supply-chain disruptions, labour shortages and increasing geopolitical tensions: The list of challenges the world faces is extensive and is causing many leaders to speak of recession. Added to that is the rapid proliferation of intelligent digital technologies, such as AI, which like the technologies of the past are disrupting business and society once again.

These technologies may hold the answers to counter the risk of recession: intelligent products that allow businesses to achieve more while using fewer resources and ultimately to reduce their own carbon footprints. We are already seeing a rise in demand for such products. There couldn’t be a clearer sign that sustainability is no longer an afterthought, a report or a cost. Sustainability is becoming an opportunity — perhaps the greatest in a generation.

One sector that’s seen significant growth in recent years has been electric vehicles. As the world shifts away from fossil fuels, there will be much more demand for e-vehicles and the batteries that power them. However, the environmental impact of battery production can be significant, especially if they’re manufactured in linear value-chains and powered with the use of conventional energy means. That’s why the demand for greener batteries is set to grow.

Companies like Northvolt, which has become a pioneer in the green batteries sector, know this and recognize the business potential of sustainable products based on circular value chains. And because they’ve risen to the challenge, they’ve seen great business growth.

Merging physical and digital for a green future

It’s not just the car industry set to transition, though. For Artificial Intelligence, 2023 was a breakthrough year. Now, we must focus on how can we use AI and other digital technologies to improve society in the real world.

If we look at Siemens, combining the real and digital worlds is a cornerstone of the company’s business, and for good reason. If businesses can simulate the real world in a virtual environment, such as through a digital twin, they can optimize and test products before they’re built or manufactured; they can reduce waste; they can monitor a host of processes to prevent malfunctions or delays; and they can save and reuse resources while improving their environmental footprint. And now with AI, businesses will be able increase their productivity.

Digital technologies allow us to make products and processes more efficient, sustainable and economically viable. That’s significant, especially against the backdrop of inflation and rising prices, but also for decarbonization. They can even help us track and manage carbon footprints throughout entire supply chains, as Siemens has proven possible through its SiGREEN emissions-tracking tool. Imagine if every product were to carry an environmental passport, allowing us to track, prioritize and reduce emissions across entire value chains. When people have access to data, they can make smarter decisions, and they can take more deliberate steps toward greater sustainability.

We have yet to see where digital technologies will take us in the future. But one thing is clear: We’re at the dawn of a new technological age. And this transition is really only beginning.

Making the transition through reinvention

Going forward, there will be much more demand for businesses that can transform physical infrastructures and products to become decarbonized and intelligent. Businesses that cling to the old ways of doing things will feel the effects of recession to a greater extent than those capable of reinventing themselves to offer the sustainable and intelligent products; the solutions of tomorrow.

The best way to counter the fears of recession is to invest in the future. Though challenging — especially in times of uncertainty — leaders must have the courage to imagine a better future and act on it. They must be bold and work toward achieving the seemingly impossible. They must invest in the critical innovations that will define the future. They must empower and inspire their people to master the details that make the impossible possible. And they must work more closely together with customers, partners, innovators and policy makers to accelerate the transition of the entire value chain.

With all the challenges we face in today’s world, this is not a time to accept recession as a given. It is time to accelerate a better and more sustainable future — by embracing it and leading the way there.

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BusinessEconomic ProgressDavos AgendaEnergy Transition
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