No Match Found
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Good morning everyone. And Dennis and Marcus thank you very much for bringing us all together. As Dennis said, we met a number of years ago up in the hills at Davos at the World Economic Forum and talked about PwC's involvement with this institution. And, while the discussions articulated the many many challenges that all of us have been talking about over the last day and a half, we really focused on how do we actually enable progress?
And I do want to spend the time I have with you over the next 10 minutes or so talking a little bit about that from a business perspective. And for all the progress that the world has made building consensus around the major challenges: climate, which was discussed earlier today, technology and digital infrastructure, which was just discussed, diversity and inclusion, poverty, taxation and the like. Let me be very clear, from my eyes and PwC's eyes, we have not made progress on actions, results and implications.
Everyone here knows that, of course you do and that's a major major risk because we are starting to add another risk to the agenda, another worry, which is the lack of action. Results and the implications of those actions are becoming a bit of a new norm. It's tempting to tell this calming story.
Policy is advancing, maybe it's just not fast enough. Business is advancing, just not yet broadly enough. Technology is advancing maybe not at the scale and the speed that we need for the implications and the results that we're looking for. And then we draw, as a result
of that thinking, this comfortable conclusion that the direction of travel is good, the task is just acceleration and we'll get there.
And that can't be farther from the truth. And this, as a result, is just a dangerous myth that all of us in this room and in the hallways have to actually act upon to display and dissuade the thinking that exists today. Now don't take it just from me, as many of you have seen over the press over the last couple of months, we have this wonderful thing called AI that's evolving. Chat GPT, Google's Bart etc and you can ask lots of questions and get a human reaction. So in doing so here's the response to that question from Google's AI tools, Bart, in terms of, can we rely on just acceleration to move forward, and I quote from that artificial intelligence:
“The challenges the world faces are complex and interconnected and they will not be simply solved by accelerating progress. We need to be careful not to fall into the trap of thinking that we can simply solve our problems by throwing more money at them or developing new technologies. We need to address the root causes of our problems and we need to do so in a way that is sustainable and equitable.”
And I'm going to come back to some of those points in a moment but in order to bring this to life, let's use the case study of climate change. It's interesting to draw out the various perspectives that are embedded in the comments I made and yes even, the mindset that came out of the AI when asked that question.
Think about it, we're at 1.1 degrees of global warming already and every region of the world today. Today people are dying from extreme heat, flooding or drought and around half of the global population currently faces severe water scarcity for at least one month per year.
And those that are least able to cope are suffering the most. And this isn't just a problem to be solved through acceleration. It's a problem that has to be solved today by coming together, hence the dialogues that we're having.
Now I focus on climate change and I bring together the fact that people are dying, the human element to this, because I want to talk in terms that matter, that self evidently matter. The problem we have today is sometimes we're using scientific language to describe the challenge ahead of us, parts per million thinking and so on, and for all the accuracy and precision it doesn't truly bring the risks home to the citizens on the ground, the politicians that are responsible for those citizens in their respective countries and the business community that's part of the ecosystem to bring it to life. And as a result it's too easy to think of climate change as an issue that's over there or somewhere else but not my challenge.
Think about the phone in your pocket, the food in your refrigerator. Can we truly rely on the transportation networks that we have in the supply chain to bring the manufacturing and the suppliers to the stores and opening to your homes. Well, not with the implications of climate change. As you step back, insured losses from natural catastrophes hit 111 billion dollars this past year, money that could be well spent in other places. Dealing with the challenges that we just talked about. And this continues to rise at a rate of five to seven percent a year, my guess that number accelerates quite a bit. And folks that's only the amount that's insured. The worldwide estimates three quarters of the losses that we have are running at a loss.
Think about that for a moment in terms of where that money could be better spent, at a time where we have a slowing economy. The research for revenue rising debt crisis and the like in terms of the need for the money to be put in the right places in the right way to
cause for and create the right actions, results and implications.
The urgency of climate change is a message I take to the boardrooms as we discuss this with management teams, governance bodies, governments, community leaders and the like.
And even from the narrow, bottom line perspective or the net present value perspective, a business individual knows we have to act now, more aggressively, more coordinated and more with speed and scale. Acting fast is something that should be a message coming out of these meetings. We don't have time to talk anymore. We need talk to turn to action immediately - on a coordinated and a scaled basis. And some of the dialogue that was just in this room and the dialogue that was had yesterday and earlier today has to actually move to that action.
In climate change decarbonisation our analysis shows we've got to move 11 times faster than the global average that we've achieved since 2000 and we're not seeing any change in that direction right now, which is concerning itself.
And while everyone's focus on mitigation, adaptation is just as important because it's now abundantly clear the world is to prepare for the major impacts of climate change which are already locked in. And it's likely to continue and deteriorate over the next few years and
decades never mind what may happen in the next few months in terms of the implication to those citizens of the world.
We have to make every effort to accelerate every action to decarbonise at every level, and in parallel prepare at every level for the inevitability of climate change and where it may go. Every business, every community, every city, every country needs to be doing these things in parallel: mitigation and adaptation.One of the key themes that came out of this morning's earlier conversations:
But we must do this together.
Because climate risk is not a risk that can be managed at a level of individual business or individual countries. It is a scenario that impacts everybody in the ecosystem. If your factory is flooded from a business perspective, your roads are flooded, your houses are damaged or destroyed, your schools are not able to open, your children are not able to get educated and thereby not get the skills they need. The economic employability doesn't happen thereby taxes don't get created to be gathered and then applied to what has to happen. In terms of the implications on social policies that need to be in place.
Joint action is a must.
How do we drive change in our economic and business models to address the kind of challenges I've just created and described. This is where the Global Solution Summit and the discussions we had seven years ago, play such a big role. As you think about not necessarily the dialogue in this room but rather the dialogue that should be happening out of this room when we leave the conference. It is international across the sectors and crucially it was the central idea that Dennis and others had put at the heart of this community. The concept of recoupling not decoupling: rewiring the system.
The concepts of globalisation are not wrong, we're not moving away from them. We've got to talk about rewiring them and recoupling them in new and different ways. And the idea that we need systemic change that restores the alignment between incentives and marketing economies and positive outcomes for society and the planet overall is where the key to the solution lies. The power of recoupling marries the creativity, ingenuity and speed of markets with the authority, scale and legitimacy of governments working all together. Instead of trying to find point solutions to individual problems it's about rewiring the fundamental system that we have.
So let's talk actions.
If we want systemic change you need systemic policy. We need levers that will have cascading effects and create incentives that align economic interest for those of the society, the business community and the planet overall.
And it's time to move economies on from the current reductive emphasis of purely financial performance. Bottom line for corporates, GDP for governments. But still do so without moving away and throwing the baby out with a bath water. Growth is good but good growth, sustainable growth, growth that has connected implications to the planet at large and all of the citizens of it, is what is equally and perhaps even more so important.
For me this starts with the boundaries we place on our economic system. From a business perspective, the idea of boundaries or limitations sometimes upsets people. The market which, after all, has lifted millions and billions of people out of poverty. Extended life expectancy globally should be unfettered. When it comes to economic policy the best thing for society is to ignore society. Some would argue, I would disagree it's not a plausible view,
not the least because markets only work in the context of boundaries. But we don't perhaps think about it that way. We already have boundaries when it comes to competition policy, labour markets, food standards, energy plans and the like. Now for our economies to endure sustainability and the need for sustainable action in the world that we live in today, we need boundaries which also reflect planetary limitations and the transitional requirements for us to hear to those. That has to be the first step to move forward. And we need to set these by governments, market makers, regulators and the like. And when I talk to business leaders they do tell us, PwC, that they welcome well-designed regulation that frees them to act in according with, the needs of society at large, that yes we'll have benefit it's not an either or it's an end statement in terms of their opportunity for growth, return on investment alike. While at the same time serving the larger stakeholder needs.
But if you're going to serve these larger stakeholder needs, we need to empower the stakeholders and they do need the information necessary to make the decisions that they have to make. And it has to be information they can use. We've long supported the expansion of reporting by companies on their exposure to climate change, diversity and inclusion, labour and the like. And crucially all of the things become extremely important and useful. And the proliferation of granular reporting standards and requirements is dangerous. Dangerous if we don't do this better than we're planning on doing it today.
If I step back and make it personal: tell me a fact, a singular fact, I'll probably remember that. If it's important, not only will I remember it, I'll do something about it. But if you communicate that fact in a hundred different ways to me, I'm probably going to need a PhD to understand it, get confused by it, and not choose to act on it because I'm so overwhelmed. This is the reality of what's happening now with information overload. We've got to bring it back to the basics and some standardisation, some globalisation that equally apply to everybody so we can actually converge on high quality robust standards that require organisations to move, empower the stakeholders to have the impact that they can have, and ultimately strengthen
the system, the systemic system that I've talked about previously.
And last, but not least: relevant actions. We need to transform incentives. Carbon prices if I stick to the carbon, and climate agenda, public adaptations about net zero plans and the like are all specific things that can be looked at. But the reality is these are not happening today.
Earlier this year PwC worked with the London Business School to look at the link between the business community and executive pay with carbon reduction targets. It's a mixed picture at best. The good news, nearly four out of five of those organisations have some sort of link from the incentives, to the strategy of the business, to the larger objectives that we're trying to achieve relevant to climate change, sticking with that use case. Less good news, one company, one, actually had an implication on executive compensation because they didn't meet the standard. And the expectation that was set from them by the board and went public with it at like. Most of the expectations and the goals that were set were low weightings, were not properly disclosed. The links to the stated admission policy of the business was not clear.
But nonetheless in 2022, 86 percent of the incentive compensation was paid out. Causes you to think are the mechanisms and incentives too low? Are we not striving to move faster, more ambitious, more bolder? Or are they just confused and not aligned with the systemic change that we're looking to achieve. And are we not respectfully challenging one another to do more so, better, faster, bigger and bolder.
These are just three specific things that have to be tied together, and when they are, they can make a big difference. And I'm sure listening and looking in the audience each one of us have our own priorities that can make a big difference. The secret sauce, so to speak, is when we can actually stitch them together. The key is that this change needs to drive that recoupling that I mentioned earlier, that Dennis and GSS is focused so much on.
Influence every decision to connect those dots. Not this, the ones that actually put in a small little box, that have small little impact.
It's important that business and government make progress on these agendas voluntarily. It's equally important that it's backed by good government policy and regulation to speed up that
voluntary action, to scale up the consistency and to ensure a level playing field to discriminate against those that are doing good things and well, versus those that are saying good things and not delivering on the promises that are met. An overarching responsibility here, is to harness market economies to deliver sustainable outcomes for the planet and for our people.To recouple economic and societal prosperity. All of the stakeholders who are participating in this conference. All of the stakeholders in the community that leads up to G7 G20 meetings and the meetings prior. They have to actually be willing to listen to learn to work together to address these existential challenges and drive the systemic change that's needed, not the point change that each one of us talk about on every panel or in our sidebar conversations in the hallway.
As to whether or not we can get there, I have no doubt we can. Challenge is how can we speed up getting there faster before we put ourselves in harm's way.
A couple of months ago I was reminded by Prince, now King Charles's comment, that said as he looks at the various issues around the world, we see equal devastation from what we
saw in previous wars. And the reality is when you ask yourself the question: are we putting together the effort consistent with combating wars, one would argue we are not.
So do I remain confident, the answer still is a yes - even with that in mind, but the reason I'm equally as confident, humanity has no alternative. There is no choice for us other to work
together more, so come together and solve the challenges that exist. And I go back to the conversation that we had seven years ago, Dennis, with a huge thanks, to say let's bring this together and try to make the impact we can by using this forum. But this forum can't rest on just the two days that we are here together. This forum and all of us participants have to actually cascade that and turn others into equal believers around the systemic change that is needed. And I look forward to the dialogues hereafter and ongoing and for everyone's contribution in this regard. Thank you very much for the time today.
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Global Corporate Sustainability Leader, PricewaterhouseCoopers International Limited
Managing Director, Global Corporate Sustainability, PricewaterhouseCoopers International Limited