McKinsey, WEF ‘resilience agenda’
Sustainability is one of the key issues being addressed by the Resilience Consortium –a catalyst for coordinating public- and private-sector efforts
Amid severe climate events, a still-smouldering pandemic and a tragic war in Europe, consulting firm McKinsey has launched the Resilience Consortium, a catalyst for coordinating public- and private-sector efforts to build and strengthen business resilience. Leading organisations have joined the consortium steering committee, which is supported by the World Economic Forum and McKinsey.The cost of not acting on this agenda could be as high as losing 5% of global GDP. The agenda covers six key themes – geopolitical, climate-food-energy, trade & supply chain, people-education-organisational, healthcare, digital & technological.
New capital needed to achieve net-zero
Sustainability is one of the key issues being addressed by the consortium with specific focus on energy independency, and alternative energy strategy. The consortium recognises the need to develop new sources of capital to invest in net-zero opportunities. Both public and private sector organisations should invest in a diversified portfolio of promising opportunities in an approach to the green energy transition akin to a private-equity firm. A recent SwissRe report found that the investment gap has been closing, but slowly. At the current pace of investments, net zero would be attainable only by 2069 – almost 20 years behind target.Capital deployment towards net zero will require investments in new minerals and materials, equipment and processes, technology, more adaptive supply chains, and green business opportunities. Leaders should invest now as the untapped net-zero opportunity could become a market worth trillions by 2030.
Energy independency to build resilience
A World Economic Forum (WEF) whitepaper emphasises that actions must be taken on multiple fronts, including climate, food and energy, education, healthcare, economic development, trade and supply chains, technology and finance. Attaining energy independence and availability requires diversifying energy sources and accelerating the use of renewables and clean power. Organisations should invest in grid electrification and acquire needed new minerals and materials while improving the diversity of sources and supply chains.
The colossal cost of no-action
The paper puts forward the “resilience agenda”, consisting of frameworks for the private and public sectors to continuously evaluate and improve their resilience strategies.The cost of inaction is high: research shows that in specific sectors or countries, the consequences of action or inaction can be plus or minus 15% in GDP performance, making it a crucial effort for leaders to align and act on in the face of ongoing disruption.
Facing a world of continuous, overlapping disruptions, leaders are recognising resilience as the imperative condition for securing a sustainable, inclusive future. At the World Economic Forum Annual Meeting in Davos in May 2022, government, business, and non-profit leaders came together rallied around this theme.
Public-private participation
The Resilience Consortium emphasises that resilience building must be accomplished jointly and in a coordinated effort by the public and private sectors. The coordination must extend as well across the resilience areas. These have become deeply interconnected in ways that are not always apparent until crisis strikes. One must therefore explore the interconnections and the vulnerabilities they might hide to ensure that efforts in one resilience area are aligned with the goals in the others and accelerate progress towards them.
Cost of failure is 1%-5% of GDP
The resilience agenda identifies necessary actions and proposes deeper collaboration across the strategic resilience areas. It also discusses how organisations can build resilience “muscle”—the enablers needed to endure crises and pivot into growth. In a previous paper, McKinsey estimated that the cost of failure to build resilience is between 1 and 5 percent of annual global gross domestic product (GDP). Leading research shows that in the coming decades, action or inaction on these resilience areas will affect GDP growth by plus or minus percentages that translate into trillions of dollars. When measured in terms of the quality of human life—or its very preservation—the values are much higher.
Orderly energy transition
The paper underscores net-zero as a key driver to for a sustainable model that is also resilient. To ensure sustainable and inclusive growth, organisations need a mindset towards the power of “and”; that squares resilience and net-zero commitments. This will mean relying on existing energy assets for a time, though to a diminishing extent, as they are repurposed and increase the share of renewables. Measures need to be taken to reduce uncertainty and enable an orderly, affordable and secure transition to a net-zero economy and food security.
Attaining energy independence and availability requires diversifying energy sources and accelerating the use of renewables and clean power the paper emphasises. It calls for organisations to invest in grid electrification and acquire needed new minerals and materials while improving the diversity of sources and supply chains.
The consortium focuses on a minerals transition as an important factor in the energy transition play. It points out that energy transition is also, by definition, a materials and minerals transition. Among other things, this means reliance on certain scarce minerals produced in only a few countries will have greater importance: demand for some rare earth minerals is already greater than the known supply. Addressing such challenges requires R&D investment to find substitute minerals, accelerate materials recycling and rethinking of supply chains.
The First Movers Coalition
The First Movers Coalition, a WEF initiative, harnesses the purchasing power of companies to decarbonise industrial sectors and to send a powerful market signal to commercialise zero-carbon technologies. Over 50 companies that make up The First Movers Coalition, attempts to harnesses the purchasing power of companies to decarbonise industrial sectors and to send a powerful market signal to commercialise zero-carbon technologies.
To jump-start the market, the coalition’s members commit in advance to purchasing a proportion of the industrial materials and long-distance transportation they need from suppliers using near-zero or zero-carbon solutions, despite the premium cost.
In addition to the advance purchase commitments that our members have made, our members also pledge to work together to address roadblocks towards securing supply of required low-carbon technologies by 2030. The Coalition will connect members with financial players, suppliers, and other value chain partners. In doing so, the FMC will further ensure the development of key technologies and power our net-zero future for years to come.
The confluence of crises and disruptions that have been experienced, however, demands nothing less, the paper concludes with a call to action. The world must act now on this agenda, building on the collective momentum of recent ongoing work by many organisations to repair and improve societies and economies.
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