Taking a look ahead with André Schneider
The New Champions Meeting has now become as famous as the annual World Economic Forum meeting in Davos and is just as eagerly anticipated – especially by those who have been working to bring more Asian decision makers and business entrepreneurs to the global economic discussion platform.
As we approach this fourth meeting of the World Economic Forum– the so called Summer Davos – we take some time out to talk with André Schneider, Managing Director and COO at World Economic Forum and overall responsible for the New Champions, in order to help us put it all into context.
Continuing and building on the World Economic Forum general platform of “growth-based” solutions, this upcoming New Champions Meeting is planning to look in depth at world economy on the all important basis of sustainability.
But, since the object of the exercise is to find sustainable solutions, not quick fixes, the intention is to also integrate the topic of whether stimulus packages should be continued or not. Without growth we cannot address some of the major challenges of the world in general and the developing world in particular, but growth alone, as we have only too recently noted, is not sufficient – this growth needs to be sustainable.
“Last year we concentrated very much on the environmental aspects of sustainability and this year we want to look at sustainability as a whole,” says Schneider. “I think we have suffered very badly over the last two or three years due to what I would call really bad preparation which resulted, in some cases, in enormous risk-taking.”
Schneider confirms that because globalization means that economies are interconnected, business sustainability is an even more important issue, particularly given that, as we have recently seen, one player or a small group of players has the capability to damage or even ruin the whole economy through unsound or unsustainable business decisions.
“This raises two questions,” says Schneider. “One is the need for global cooperation and regulation. (A question WEF also addressed at its meeting in Quatar.) A good case in point is Switzerland and UBS – the problem becomes immediately evident simply by comparing the turnover of UBS to the Swiss GDP! The second question is the capacity of business management to integrate questions such as business sustainability and risks into their planning”.
A better way forward
In common with other global economists, Schneider thinks that many managers don’t fully comprehend where certain business decisions might lead them and the inherent risks they may be taking. To this end, the World Economic Forum is also building a project for their global agenda councils to look at risks and other issues in order to find ways to create a better understanding of and better management of risks, and to create systems to analyse the consequences of business decisions and emerging risks.
“To take a very simplistic but very revealing example,” says Schneider, “look at what has happened in the Gulf of Mexico – here we can see that the relationship between business actions and possible risks have taken on unseen and unexpected proportions. If BP look back to the moment when, just five or so years ago, when they took the deep-sea exploration decision, and then compared the expected positive outcome and the actual scenario, I think it would shed a different light on their original business decision.”
Improving the balance
The second issue relates to social sustainability – the need to improve the balance between economic development and social development. Humanity is constantly striving to achieve a better social context – a balance between a select elite, who enjoy a luxury lifestyle, and the large majority that struggles to survive. And as Schneider points out, “This is especially worrying when you look at the lifestyles of some of those who were involved in the business decisions that led to the recent crisis. Some have actually gained important salaries and other advantages, while the majority of the debts have been paid back by the public, government (taxpayers) and indeed everyone of us through a deteriorated economic situation which has led to layoffs and important spending cuts and now, in countries like Greece – austerity packages.”
Historically, social unrest has, in the long term, been the instigator of improvements, but, as Schneider points out, in Switzerland social unrest has been avoided by introducing sustainable state social improvements which have resulted in a smoothly run country – so perhaps there are lessons here that would be useful for other countries he suggests.
Globalization itself is another case in point, most of us remember the extreme anti globalization movements of some ten years or so ago, the result is that we are all now aware that it is important that to find the right balance between the good effects of globalization whilst keeping a steady eye on the negative impacts and continuously fixing these. “Sustainability is not just a moral concept, it’s actually based on the belief that only a sustainable approach will ensure sustainable growth and hence, I would say, sustainable success for the years to come,” says Schneider.
We are currently at a crossroads believes Schneider, a moment of change. The last ten years were about instant results (quarterly profits), but on reflection this risks losing the customer as the result of the extreme pressure of needing to make the sale, in fact, in such situations we force the sale, the result being that the business is not sustainable and we actually destroy the long-term commercial basis – creating a kind of schizophrenia between the need to build a customer base and the need to close the sale.
Pragmatism – the name of the game
Getting all these concepts together is not an easy task believes Schneider, as he points out, there are also those that believe that we need no growth, or even negative growth, because there are huge parts of the developing world which are still waiting to improve their social environment, but from a purely practical point of view, straightforward sharing of gains is politically impossible to implement.
“On the one hand,” says Schneider, “we have to recognize we are coming out of a very national, not to say regional, world where most of the decisions had
only a national impact. And we’re quickly moving into a globalized world where actually almost every single issue we’re facing is global and cannot be, by definition, solved by national or regional regulations. Consider climate change, if Switzerland said it was going to reduce CO2 emissions by 50% in ten years, while that would be nice for Switzerland, it would not even solve Swiss climate problems never mind anyone else’s.”
Pragmatism is the name of the game since governments are unlikely to change their approach overnight. The more immediate way to succeed he believes is through public/private partnerships. For example, as far as climate change is concerned, WEF has created an alliance of over 100 large, international business that have reduced CO2 emissions as part of their business achievements’ and “doing better business” plan.
“If we link that together with discussions such as those in Copenhagen or in Mexico at COP-17,” says Schneider, “we can say that we don’t actually need governmental promises (which they are worried about giving since they don’t know how they’re going to execute them). We could link them with existing contributions coming from business and create a public/private partnership without undermining some of the democratic fundamentals which are related to governments.”
Schneider believes that there is a real opportunity through public/private partnerships to better merge the capabilities of a globalized business world, and where they can actually address global issues on a global level while taking into account the need to maintain the democratic structure of states or governments. He warns that we should not let this pragmatism encourage us not to do the right thing, but to find better ways to do just that. “I think there the relationships between business and governments that we have built through our global re-design initiative in Quatar and will be building again in Tianjin this year, is going to be a crucial factor.”
Interestingly, if you look at the last four years of the Annual Meeting of New Champions, the global Fortune 500 companies have increased in importance – which would seem proof that they are more and more attuned globally – there is now a need to look at problems locally.
“I think the challenge we have is to demonstrate that the geopolitical global aspect is not the only aspect,” comment Schneider. The great thing of the Annual Meeting of New Champions is that we gather together the next generation of big companies. And it is true, in this group you find a lot of companies which you’ve probably never heard of before, similarly, many of our top 500 CEOs. This is actually quite important in the sense of understanding who is going to shape and what is going to be the shape of the future business environment.”
Two sides of the same coin
Sustainability and growth are two sides of the same coin, but the challenge will be to keep them in balance. Having chosen China, one of these global growth players, as the place to hold the meeting, we risk blurring the overall image and giving the impression that the Meeting could be about this region, when in fact it is not. Since China is about to replace Japan as the second biggest world economy – evidently China is a major global player, but it is not the only regional player who will be present at the Meeting, Malaysia, Indonesia, Vietnam, and Africa (already experiencing its own steady growth and development) will also be there.
“It is important to look at some of the fundamentals in growth which make these regions so active and successful,” Schneider comments, “hence, our participation also in global competitiveness in the annual meetings of New Champions, because we very much believe that governments can use these to set their framework for growth. There are very few comparative works which actually look at growth performance and the framework for conditions and compare the two. And I think that’s probably one of the important qualities of the work we’re doing as well as providing a historic database to allow governments to understand where we can help. We see more and more governments coming to us to seek advice on what kind of reforms or regulatory changes could actually improve their competitive standing.”
A bold and rewarding feat
On September 25, 2008 China sent three astronauts into space, registering another landmark in the country’s ambitious space programme part of which is the exploration of the moon’s helium for our planet’s energy needs. China is a nation that often takes the risk of challenging the unknown and that is committed to searching for optimal solutions for its population. If the country had a mission statement it would, perhaps, follow the lines of that of the World Economic Forum’s– the commitment to improving the state of the world, a feat as bold and rewarding as that of conquering outer space.
Article by Ita McCobb & John Béguin