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LONGITUDES

The new climate for business

The new climate for business

The French refer to the 30 years after the end of World War II as “Les Trente Glorieuses,” or “The Glorious 30 Years,” when prosperity flowered, culture was dynamic and peaceful conditions prevailed after two devastating wars.

For business, the three decades following the fall of the Berlin Wall in 1989 is similar. During that time, the market economy has been the world’s dominant organizing principle, business has largely thrived (notwithstanding the global financial crisis), innovation has flowered and huge numbers of people have enjoyed improved living conditions, especially in the Global South.

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As we enter the 2020s, we are at a new hinge point in history. Every business today is facing three strategic challenges:

  • First, there is the need to redefine the role of business in society, in sync with changing expectations, and establish clear business purpose that goes beyond short-term profits.
  • Second, we face the urgent objective to shift the economy to a path delivering truly shared prosperity that respects the natural boundaries of our planet, not least the climate crisis.
  • Third, every company must craft a strategy that navigates an unprecedented set of disruptions — and in some cases existential questions — that are rapidly reshaping the competitive environment.

Major paradigm shifts

These strategic challenges come as a result of major paradigm shifts that have taken place in recent years. Changes in policy, politics, public perception and the natural world are creating profound impacts for business.

Our natural resources are also under threat, with considerable impacts for public health and stable, thriving economies. Simply put, we cannot take for granted the commodities on which we rely for sustenance and enjoyment.

There are signs that many people are seeking satisfaction in new and different ways that do not involve consumption of products. All of this adds up to a new climate for business. The framework conditions that have shaped our world, and the world of business, have changed.

The decisive decade ahead

These changes come as we enter the decisive decade of the 2020s. The next 10 years will be decisive for business — and for all of us.

We will either deliver on the Sustainable Development Goals (SDGs), or we won’t. We will peak emissions in line with the Paris Agreement, or we won’t. Business will regain public trust, or it won’t. We will reestablish social mobility and reduce income inequality, or we won’t.

Here is what we know for certain: The diverse and powerful assets of business are essential if we are to build a resilient, fair and sustainable economy.

It is impossible to imagine achieving the promise of the decade ahead without business. And it is equally impossible to imagine that outcome with business as usual. This is a time when the scale of change and challenge requires big vision, high levels of ambition and a strong sense of urgency.

The inescapable implication of this is that sustainable business as we have known it is not enough. So, standalone sustainability projects will have their place, but incremental improvements won’t deliver the SDGs.

The fundamental changes reshaping our energy systems, our food supply and water availability demand comprehensive systemic solutions. Sustainability disconnected from investors, policymakers and communities will have no credibility.

Measurement and reporting that fails to embrace all forms of value misleads markets and leads to bad outcomes. And, in an era of profound change, risk-averse leadership only creates more ... risk.

The new climate for business demands a radically new approach to business and markets. As we enter the 2020s, businesses will be judged by their purpose, their ambition, their urgency, their openness and their innovation.

The only businesses that will thrive in the decade to come, and quite possibly the only businesses that will survive for the long run, are the ones who will master these challenges.

How will business meet the moment?

At this critical time for business leadership, how do we define it?

This starts with purpose. As the Financial Times wrote in September, “Businesses that combine profit with a wider purpose will benefit from the reinforced commitment of employees and customers. Those that fail to do so will not survive to become the companies of the future.”

For all the talk these days about purpose, this hits the right note: It is only those companies with a clear and motivating purpose that will make it through the fundamental changes reshaping our world and the world of business.

And more and more, businesses are defining their purpose in terms that make important contributions to the achievement of the SDGs: through nutrition, clean transportation, financial independence and healthcare, for example.

The businesses that will thrive in the decade to come will be the ones with the most ambitious plans. Business is traditionally reticent about expressing big goals without being sure it can achieve them. Big questions require big solutions, and it is exciting to see companies and business leaders shed their timidity about what is possible.

We’ll define business leadership by a company’s commitment to and facility for collaboration. The vision of leadership as a solitary exercise by a singular visionary leader must be retired.

The leaders we need today know the limits of what they can accomplish on their own, know how to partner effectively and understand that achieving their goals with respect to sustainability can only happen through systemic change.

We are facing systemic challenges: an economy that has exacerbated inequality, an energy system that must shift to net zero, food systems under threat and a social contract failing to meet 21st-century realities.

It is only with a commitment to large-scale collaboration that we can shift these systems in a more positive direction.

Photo credits: Matt HowardFey Marin and Alex Wong via unsplash.com.

Republished with permission, this excerpted article first appeared on BSR. You can read the full article here

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Longitudes explores and navigates the trends reshaping the global economy and the way we’ll live in the world of tomorrow: logistics, technology, e-commerce, trade and sustainability. Which path will you take?

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