MEXICO CITY – COVID-19 has sharpened the focus on many challenges with which the world has long been grappling, including rising inequality, insufficient access to adequate health care and education, and climate change.
Long before the pandemic, people had begun to ask hard questions about globalization and technological progress. Despite all the wealth creation and reductions in global poverty in recent decades, economic opportunity has remained elusive for many people, irrespective of their abilities. The resulting fracturing of society poses a grave threat to the long-term health of businesses, citizens, and economies.
For many, the pandemic feels like a watershed moment in global policymaking. It is a rare opening to think big. In the crisis lies an opportunity to establish new foundations for a more sustainable, resilient, and inclusive economy. But what would such an economy – and a resilient society – look like?
What principles should guide the difficult choices we must make? How do we ensure that everyone is on board?
Business for Inclusive Growth (B4IG), a strategic partnership between the OECD and 35 major global companies, is one major initiative seeking to change how business is done.
Founded in 2019 at the G7 Leaders’ Summit, it brings together private- and public-sector entities to support the development of more inclusive business models, which are in turn the building blocks of a more sustainable long-term economic model.
Here, inclusion means providing more equal access to good jobs and training opportunities. It means committing to diversity, gender balance, and human rights.
These commitments can all lead to more trust and engagement vis-à-vis employees, customers, and other stakeholders, and to greater long-term value creation.
A key priority for B4IG is to rethink how company performance is measured. Together with the OECD’s Centre on Well-being, Inclusion, Sustainability, and Equal Opportunity (WISE), the coalition is exploring how non-financial performance indicators – such as stakeholder well-being and environmental footprints – can be incorporated into business models.
These indicators touch on everything from housing and health to knowledge and skills, and they apply to not only employees and consumers, but also suppliers and society.
The rapid growth of sustainable finance in recent years attests to the broader effort to go beyond pure financial metrics and GDP. More than $30 trillion of assets worldwide now meet some level of environmental, social, and governance criteria, representing an increase of more than 30% from 2016.
The rise of ESG-driven investing underscores the vital role that finance must play in incorporating non-financial metrics in the allocation of capital across the global economy.
This is how, for example, a corporate borrower’s cost of capital can be linked to its success in reducing carbon emissions or meeting diversity goals.
Public-private partnerships are essential for a strong, inclusive recovery and tackling the intersecting challenges that we face. Today’s global problems demand fresh thinking about the roles of businesses, governments, and civil society, and about how they can best work together.
It is not sufficient for governments simply to referee the marketplace and otherwise “stay out of the way.” Governments are needed to shape and create markets, by incentivizing and de-risking certain investments, and by establishing targeted support and regulatory frameworks.
Private-sector innovation in technology, health care, and other sectors often could not have happened without public backing. We can thank governments for the basic research that led to the internet, clean energy, and vaccines.
Managing the green and digital transitions – including the trend toward more labor-replacing automation – will require a vast effort to reskill and upskill workers.
In the European Union, 75% of firms with more than ten employees already provide, and partially fund, training for their workers. But more companies and governments must follow suit to extend training access to those who need it the most, particularly adults with low basic skills and those with low incomes.
Employers, on the other hand, have a crucial role to play in ensuring maximum effectiveness across our education and training systems.
Governments and employers need to come together to help students benefit from work-based learning – for example, by creating more flexible arrangements and developing local school-business partnerships.
Employers must also engage more actively in career guidance to prepare today’s youth for the world of work. And companies must play their part in tackling gender inequality, by offering paid parental leave and childcare, instituting pay-transparency rules, and engaging in unbiased job advertising.
It is on these bedrocks that we can start building new foundations for long-term economic prosperity beyond COVID-19. The scale and the breadth of challenges we face are unprecedented.
We must discuss and solve them through global fora such as the Paris Peace Forum. Many have adopted the slogan of “building back better.” But we cannot solve today’s problems by going back to yesterday’s solutions. We need to build forward better.
Angel Gurría is a former secretary-general of the OECD.
Copyright: Project Syndicate, 2021.