Davos 2020: lip service or catalyst?
The dust has settled, world leaders have been reunited with their families and Davos is returning to its beautiful state of calm. So what did the 50th edition of the annual gathering of world leaders bring us? A key conclusion was that climate change is real and swift action is a must. This may sound like a lightbulb moment from someone who has either been living under a rock or is an awakened Trump supporter, however, truth is that although many leaders have recognized climate change is an issue, still not enough is being done about it.
Why? Two main reasons: because they are (unwillingly) stuck in an outdated thought process that focusses on profits and continuous growth as a measure of success; and because they don’t feel the pain, or at least not enough. Don’t get me wrong, leaders are not the only ones to blame. You, me, the (wo)man in the street… we are no better. We are all slaves to the comfort and convenience we’ve grown accustomed to and the effects of climate disaster heading our way are simply too abstract to grasp. Besides, humans are creatures of habit, we are not able to change quickly – unless there is an immediate danger. Having said that, Davos has definitely brought us some hopeful results. Here are two Davos take-aways that stand out:
‘Stakeholders’ was the buzzword of the week at Davos. An updated Manifesto was released, fitting our new reality of climate change, automation and globalization, titled “The Universal Purpose of a Company in the Fourth Industrial Revolution.” In line with the declaration of the Business Roundtable, the Manifesto states that “the purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large.” A clear shift from shareholder to stakeholder capitalism.
Universal ESG metrics
In collaboration with Deloitte, EY, KPMG and PwC, the WEF International Business Council (IBC) launched a set of universal metrics and disclosures on the non-financial aspects of business performance such as greenhouse gas emissions and strategies, diversity, employee well-being and privacy, also referred to as ESG. The intent is for the metrics to be reflected in the mainstream annual reports of companies by 2021. Word on the street is that most CEO’s present at Davos expressed their support and intention to aligning these metrics and disclosures in their annual reports from now on. Universal ESG metrics, as opposed to the hundreds of metrics out there at the moment, will make it possible to compare how companies are performing on an ESG level and how prepared they are for the future. More importantly, it will make it easier to ban companies that are harming our planet and instead invest in companies that are actually working on solutions to our climate problems. As BlackRock CEO Larry Fink pointed out in his latest CEO letter: “Climate Crisis Will Reshape Finance”.
Although not all leaders at Davos agreed on how to tackle our climate crisis, with climate change as the central topic and corporate minds starting to shift from acknowledgement to much needed action, Davos may well proof to be a turning point this time.