This week, business leaders from the world’s major economies – both developed and developing – meet in Berlin to consider a new industrial revolution. The B20 summit – mirroring the better known G20 meetings – will discuss issues that will decide whether the world achieves universal prosperity while safeguarding the global commons on which it ultimately and intimately depends.
The issues include energy, climate and resource efficiency, financing growth and infrastructure, and responsible business conduct – all under the unifying theme: “Resilience, Responsibility, Responsiveness: Towards a Future-oriented, Sustainable World Economy”.
The common thread to achieving the B20’s ambitious and varied agenda lies in the sustainable development goals. Since these global goals were adopted in 2015 – the year which also produced the Paris agreement on climate change – there have been a succession of dramatic developments.
2016 shook our assumptions about the global economy, with many asking whether the costs of globalisation are greater than its benefits. And now, more than four months into 2017, the world arguably faces more uncertainty than in the past two years. There’s the increasing nuclear threat from North Korea, heightened political and economic turbulence in the UK following the triggering of article 50, and elsewhere, the uncertainty that comes with globally and regionally significant national elections in the UK, Germany, France, Italy and South Korea.
Yet the future is far from bleak. A growing wave of companies – including multinational, national and small ones – fundamentally believe that prosperity – whether global, national or for individuals – can only be achieved if it is founded on the principles of a more sustainable, inclusive model of economic growth.
Indeed, the Business and Sustainable Development Commission reported in January 2017 that putting the goals at the heart of economic strategy could unleash a step-change in growth and prosperity, and create an inclusive and sustainable world – if there is radical change in business and investment.
But these opportunities will not materialise on their own. Good disruption must take place. This will require breakthrough technology, such as digital platforms, as well as innovative financing tools. The private sector will not be able to accomplish this alone. Government must help to scale sustainable markets through smart regulation and forward-looking policies, in particular:
- Establishing the right prices for natural resources. Prices for carbon, water and energy do not reflect environmental or social externalities. Business leaders must work openly with regulators and civil society to shape policies that create a level playing field more in line with the global goals. This could involve fiscal systems becoming more progressive through taxing labour income less and pollution and under-priced resources more.
- Creating the right regulatory conditions to attract private investment into sustainable infrastructure. In all, $90tn (£70tn) will need to be spent on infrastructure worldwide over the next 15 years. Aligning financial regulations with the goals would encourage long-term investment and reduce systemic risk, contribute to growth-boosting and much-needed infrastructure, and provide better returns for individual investors all at the same time.
- Providing stronger incentives for long-term investing, including through blended finance instruments. Achieving the goals is likely to require additional investment of $2.4tn a year. This will depend on orienting the global financial system towards long-term sustainability, with public and private sectors sharing both the risks and returns. Enough capital is available: total private financial assets now stand at more than $290tn, and are growing by 5% a year.
We must take a fresh strategic look at how best to mobilise and deploy a smart mix of public and private capital to drive sustainable infrastructure investment. The commission is mobilising a taskforce of leading institutional investors, sovereign wealth funds, development finance institutions, investment banks and private companies to lay out a blended finance action plan for the goals.
- Encouraging businesses to step-up investment in developing their employees’ skills and productivity.Governments must deliver on much-needed shifts in labour and education policies to address underlying systemic weaknesses. This would enable business leaders to invest more to improve productivity, skills, resilience, access to credit – and as far as possible, ensure that no one is left behind. Such a task is becoming more important than ever, as new technologies create structural changes in labour markets across the world.
- Stamping out corruption. As the drive for greater transparency over beneficial ownership of anonymous companies is gaining momentum, regulators must tackle corruption more actively. The B20 has already publicly called for such increased transparency, estimating that corruption facilitated by the status quo adds 10% to the costs of doing business globally and inevitably hinders businesses’ ability to align their strategy with the goals.
Business leaders who are serious about the transition to a sustainable economy can help push public regulation in the right direction, and scale up cooperation between governments and the private sector to achieve the global goals.
The rewards are great. The commission’s report, Better Business, Better World, concludes that there would be an economic prize for business up to $12tn, which could reach $30tn through even broader global goal opportunities by 2030. By then, up to 380m jobs would be created.
The commission also identified 60 hotspots across four economic systems – food and agriculture, cities, energy and materials, and health and wellbeing – that could grow two to three times faster than the global economy, and generate business revenue and savings equal to 10% of forecast global GDP.
The next generation of purpose-driven economic growth is within our reach. So is the next era of purpose-driven competitive advantage. This week’s B20 summit could help bring them about.
by Jeremy Oppenheim, programme director, Business and Sustainable Development Commission