Insight

Opinion: Wanted — a new mindset for CEOs

By Frederic Sicre, Managing Director, The Abraaj Group

Change is hard. It’s easy to stick with the status quo if you don’t see a reason to adapt. But this approach becomes dangerous if it blinds you to the very real need for change. History is littered with examples of those who failed to see the sand shifting and paid a heavy price. Just ask Marie Antoinette, perhaps the most famous example of ambivalence in the face of necessary reform.

Comparisons with the French Revolution are undoubtedly an embellishment of the situation. However, if you lead a business, we recommend you pay attention to a new report released by The Business and Sustainable Development Commission. The writing has been on the wall for a while, and now it is on paper, clear for all to see.

First, the bad news: The world’s current economic model is deeply flawed, globalization is once again under heavy scrutiny, societies have lost trust in their leadership and we are entering an era of unpredictability like never before. Our world is fragile rather than resilient, inequalities are growing rather than narrowing. One percent of the richest own more than the remaining 99 percent, according to a 2016 Oxfam report. Conflict and unemployment are still rampant in too many corners of the world and more and more young people are coming into the job market. According to the International Finance Corp., 600 million new jobs need to be created over the next 15 years to match this growth in the global workforce.

The commission’s report makes the point that we have created a legacy of negative social, environmental and economic impacts, placing significant constraints on the world’s future growth prospects.

Of course we should not paint the entire world with the same brushstroke. Global growth markets will soon account for 75 percent of global gross domestic product and have a dynamic of their own, as seen by the consumption trends in Africa and Asia. New markets are generating considerable activity and growth. By 2020, growth markets will account for 850 million middle-class consumers and a staggering $12.3 trillion in consumer expenditure. By 2030 over half a billion Africans are projected to be in the middle class. For all the talk of decline in the West, growth markets are continuing to offer opportunities in abundance.

In order to deal with this paradigm shift we need to come up with a new operating system for our world. We have not cracked that code yet, but business can be a driving force in defining a new economic and social order. Some CEOs are working in this direction but there are many who still need to be convinced.

On to the good news. The Business Commission’s report describes the 17 Sustainable Development Goals, which can redress this balance, and they require private sector engagement in three key areas.

First, markets need to operate within safe planetary and social boundaries. The Business Commission endorses the SDGs as a compelling framework to articulate new business approaches. Four sectors are highlighted as examples: energy, health care, cities, and food and agriculture. Together, these four represent $12 trillion of value to businesses over the next 13 years, according to the report.

Let’s take just a couple of these sectors. For energy, 1.5 billion people are expected to join the higher energy consuming income brackets by 2030. These in addition to existing customers will need to access sustainable sources of clean energy as new economies industrialize and move up the value chain. We need to rethink traditional models of energy delivery and storage and invest in innovative technologies and systems to be able to meet this energy demand. Lack of access to power is one of the biggest threats to global economic growth. The report puts a $4.3 trillion price tag on achieving this. Here, there is an economic imperative, a social need and therefore a business opportunity for people to grasp.

Health care offers a similar story. The Business Commission suggests there is a $1.8 trillion opportunity to develop new health care systems to offer a continuum of care in rural and urban communities. Integrated health care systems that deliver sustainable, affordable and high-quality preventative and curative services are largely inexistent, especially when it comes to tackling the rising prominence of noncommunicable diseases such as diabetes and cancer or mother and child health. The World Health Organization estimates that over half of all deaths under the age of 70 will be due to NCDs, and by 2030, over 70 percent of NCD-related deaths will be in low- and middle-income countries.

The second shift concerns the global finance system. Current financing models have incentivized a race to the bottom line, rooted in short-term thinking. That is not a sustainable approach. Put bluntly, we need to become much better at deploying the current $290 trillion worth of global assets (growing at 5 percent per year) into long-term value-creating investments.

One way to achieve this is by sharing expertise capital and risks between public and private investors. We must work closer together to create a win-win-win solution — wins for investors, wins for governments, and wins for citizens. We call this “partnership capital.” Rather than a race to the bottom, we must create a race to the top, where private capital is embraced by development finance and domestic resources and can create asset classes for the development of hard and soft infrastructure, positively impacting the lives of millions.

Finally, CEOs and companies need to develop a new social contract to redefine our relationship with society. There is a growing crisis of trust between society and business. Implementing the U.N.’s Guiding Principles on Human Rights throughout our supply chains and engaging with our communities and stakeholders can contribute massively to rebuilding this trust.

This requires a mindset change from the top. CEOs need to face up to the reality that addressing the true cost of doing business will drive greater stability, protect society and the environment and hence create a better world for all. We need to convince our senior managers, our shareholders and, importantly, our boards that sustainable models open new business opportunities, efficiency gains, encourage innovation, attract investors, bring in customers and will ultimately make our businesses more relevant to the emerging new world order.

The Business Commission is a platform from which 36 commissioners are reaching out to the “SDG skeptics,” humbly suggesting they spend a few minutes to consider the arguments we put forth in our report. Using the 17 SDGs as a framework to shape corporate strategy will increase the success of your business and help create a more stable and prosperous planet. Many of us are already seeing the social and economic benefits of doing just that. So join us — or risk being remembered as the 21st century equivalents of Marie Antoinette.

The op-ed was published by Devex on 24 January 2017. Read here.

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