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A Special Report by
THE ESGT MEGATRENDS MANUAL A BLUEPRINT FOR NAVIGATING RISK AND OPPORTUNITY IN TECTONIC TIMES 2021-2022 EDITION
By Andrea Bonime-Blanc EDITOR ANA C. ROLD ART DIRECTOR MARC GARFIELD PUBLISHER DIPLOMATIC COURIER | MEDAURAS GLOBAL WASHINGTON, DC
IN PARTNERSHIP WITH GEC RISK ADVISORY NEW YORK CITY
ABOUT THE AUTHOR Andrea Bonime-Blanc, JD/PhD, Founder/CEO of GEC Risk Advisory, is a global strategic governance, ESG, ethics and cyber advisor to the private, public and nonprofit sectors worldwide. She serves on several boards and advisory boards (including Cyber Future Foundation, Crisp, Greenward Partners and Ethical Intelligence), is a start-up mentor, NYU professor, global keynote speaker and author. Her most recent book is “Gloom to Boom: How Leaders Transform Risk into Resilience and Value” (Routledge 2020). She can be followed on Twitter @GlobalEthicist. GEC RISK ADVISORY GEC Risk Advisory is a strategic advisory firm delivering governance, risk, ethics, ESG, cyber and crisis advisory services to business, nonprofits and governments around the world. For more information, please visit: www.GECRisk.com. DIPLOMATIC COURIER Diplomatic Courier is a global media affairs network spanning 180 countries and five continents, connecting global publics to leaders in international affairs, diplomacy, social good, technology, business, and more. Our think tank, the World in 2050, convenes multi-stakeholders in the private and public sectors through a series of global summits and forums, educational material, research papers and reports, and digital and print media.
CONTENTS 06 Introduction and Purpose 08 Organization of this Manual The Five ESGT Megatrends of 2021-2022 14 Megatrend #1 – Tech Disruption at the Speed of Light 26 Megatrend #2 – Leadership and Institutional Trust Plummeting 40 Megatrend #3 – Complex Interconnected Risk Intensifying 50 Megatrend #4 – Global Geopolitical Tectonics Shifting 58 Megatrend #5 – Stakeholder Capitalism Rising 66 Conclusion The Blueprint for 2021-2022 ESGT Megatrends
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INTRODUCTION AND PURPOSE
W
e live in tectonic times. We live in systemic times. We live at a time of deep interconnectedness. We live in times of fast, transformative, and even furious change. We live at a time of global systemic risk and opportunity. ESGT—environment, society, governance, and technology—issues, risks, and opportunities are more deeply (and more rapidly) interconnected and intertwined than ever before in human history, if even only because technology has become so intensely fast, disruptive, and life-changing—for both good and bad. Why “ESGT” and why “megatrends”? Well, it has to do with having situational awareness, the best possible 360-degree view into what is going on in the world around us if we were capable of looking at it with a deeper and broader perspective—as if we lived in a space station, with some detachment and objectivity about our challenged blue planet riddled with ESGT challenges that we don’t always see (or refuse to see). It’s about each of us as individuals, as workers, as students, as leaders—as global citizens—having a better sense and long-term understanding of where the trends that envelop us today came from and where they might be going (hence the nomenclature of “megatrends”). It is about leaders having a sense of scope and longitude, breadth and depth, in this otherwise seemingly chaotic but still magnificent world, if we only just worked better together to solve some of our deep challenges. This is our first annual edition of the “ESGT Megatrends Manual” and it is intended as an annual check-in on the most important multi-year global megatrends involving ESGT issues— systemic, strategic, and more tactical—that should be top of mind for all leaders—whether in business, nonprofits or government, as they lead and participate in strategic and tactical risk and opportunity planning and implementation. Each year, we will choose a handful of ESGT megatrends to analyze, citing some of the best and most useful data from 6 | ESGT MEGATRENDS MANUAL
premier global resources ranging from the World Economic Forum and major university research centers to the Edelman Trust Barometer, the Council on Foreign Relations, and other leading practical thought leadership resources. We will provide cases of both risk and opportunity, of downside and upside, that help illustrate these megatrends. Our publication will come out closer to the middle of each year for two principal reasons: (1) megatrends don’t begin and end in a given year or calendar cycle—they are multi-year phenomena by definition and, (2) by not piling on other superb annual publications that coincide with year-end/year-beginning (e.g., the WEF’s Global Risk Reports, Edelman Trust Barometer, CFR’s Preventative Crisis Survey, Allianz Risk Barometer, and others) we intend to fully benefit from their wisdom and findings and pass them along through our ESGT Megatrends lens as we select and design the handful of most relevant ESGT Megatrends in the coming year (in this case 2021-2022). We are grateful to have the ability to quote these valuable resources. Last, but not least, the ESGT Megatrends Manual is intended to be just that: a manual that any type of leader of any type of organization or sector can use and refer to, to provide context, critical situational awareness, and actionable ideas for strategy development and the creation of new and renovated services and products in the most resilient, sustainable, and pro-stakeholder way possible. Accordingly, each megatrend concludes with a section called “Leadership To-Do’s” and the Manual itself closes with a reprise of all such To-Do’s in what we are calling the Blueprint for 2021-2022 ESGT Megatrends.
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ORGANIZATION OF THE ESGT MEGATRENDS MANUAL
I
n this inaugural year of the ESGT Megatrends Manual, we will focus on these five megatrends:
• Megatrend • Megatrend • Megatrend • Megatrend • Megatrend
#1 Tech Disruption at the Speed of Light #2 Leadership & Institutional Trust Plummeting #3 Complex Interconnected Risk Intensifying #4 Global Geopolitical Tectonics Shifting #5 Stakeholder Capitalism Rising
Under each megatrend, we explore the following elements: • We describe and define the megatrend itself including tying it to one or more of the four categories of ESGT that are most relevant and that most closely intersect with it. • We illustrate the danger and the risk of the megatrend with cases and data. • We illustrate the promise and the opportunity of each megatrend with cases and data. • We conclude each segment with actionable leadership “todo’s” relating to that particular megatrend for the coming year. BUT FIRST, SOME DEFINITIONS. The idea of “megatrends” came to me as I was writing my 2020 book “Gloom to Boom: How Leaders Transform Risk into Resilience and Value.” I designed the first chapter called “The Ten Megatrends of our Turbulent Times” to provide situational context for the remainder of the book, which took the reader on a journey navigating through what I called the Scylla and Charybdis of ESGT, to reach the twin objectives of organizational resilience and sustainable value creation for all relevant stakeholders. Below were those initial 10 megatrends as identified in 2019-2020. THE TEN MEGATRENDS OF OUR TURBULENT TIMES 1. The Fourth Industrial Revolution: Hurtling Through Space at the Speed of Light. 2. Global Trust Collapsing: Recession or Depression? 8 | ESGT MEGATRENDS MANUAL
3. A World of Extremes: 21st Century Ethical Leadership Paradox. 4. Complex Interconnected Risk Rising: Beware “The Purple Techno-Swan.” 5. Ecological Apocalypse: A Decade to Oblivion or Salvation? 6. The New Geopolitical Abnormal: Rumblings or Tectonic Shift? 7. The Meteoric Rise of “ESG” and the Virtual Stakeholder: Mirage or Reality? 8. Business as the New Global Social/Moral Conscience: Fact or Fake? 9. From Hyper-Transparency to Super-Opacity: Reputation Risk on Steroids. 10. Future Fear: Utopia, Dystopia, Life on Mars? Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
In late 2020, as the world was enveloped by the COVID-19 pandemic and everything associated with it (hence our oft-repeated theme of interconnectedness), I made a variety of presentations to industry groups, associations, and clients in which I adapted and illustrated the “megatrends” more concretely for our specific times. While the megatrends are multi-year phenomena, they have different ways of manifesting themselves each year and there are new and exciting (or novel and disturbing) manifestations and transformations of them over time. So, that’s how the idea of publishing a recurring annual edition of ESGT megatrends came up and with the great publishing, content, and design of Diplomatic Courier and the trust and friendship of publisher and CEO Ana Rold and her team—here we are with our first of what we hope will be a long-term annual collaboration. We start with a couple of baseline definitions to guide our discussion and then plunge into the deep end of the pool by exploring the five megatrends of 2021 and providing data, cases, and back up, as well as leadership tips and to-do’s to successfully navigate your organization’s strategy and tactics in the coming year. WHAT ARE “MEGATRENDS”? Megatrends are developments that take place over multiple years. These are large-scale, multifaceted changes, and transformations that are taking place over larger increments of time, perhaps morphing in new and unpredictable ways, but whose trajectory and impacts are being felt every day, week, month, quarter, and year. These megatrends, while not universal or global necessarily, transcend national and international barriers and are developments that touch on major aspects of life on earth—whether people, planet, profit, or purpose. DIPLOMATIC COURIER | 9
Why should we be aware of them? Given the chaos and speed of change all around us, anything we can do to gain situational perspective and the tools and methodologies to adapt and conquer such changes or, in some cases, protect from or combat the worst manifestations of such changes, the better off we will be in defining and executing on our individual, community, corporate, social, national, and international pursuits. WHY “ESGT” INSTEAD OF ESG? I will quote myself here from a piece I wrote for the World Economic Forum in late 2020 called “It’s time we added a letter to ESG, especially in our pandemic times. Here’s why”: “So, why add ‘technology’—another layer of issues, risks and opportunities that are not directly, or just barely, addressed— to the still-evolving ESG discussion? It’s simple: technology issues—the good, the bad, and the ugly—suffuse everything we do, every minute and hour of every day. Environment: Climate change concerns have continued to accelerate and, in some cases, worsen dramatically this year, above and beyond what scientists had already feared. Scientists have pointed to the overlap between the destruction of biodiversity and human encroachment into natural habitats as facilitating the spread of novel viruses—COVID-19 is, of course, exhibit A. This will continue to be a problem in search of multiple global solutions. Society: Health, safety and security issues have exploded in the wake of the pandemic. Not only have those issues—which have been lurking for a long time—rushed to the surface, they have also spilled over into an array of related social issues, such as inequality (economic, racial and global); workforce displacement and job destruction; and workforce relocation from office to home, with its serious new social repercussions for privacy, child/eldercare and related matters as well as serious new opportunities for improving the future of work. Governance: Leaders, executives and boards of directors everywhere have been put on their back feet. They not only have to deploy immediate crisis management, but also longterm, multiple and multifaceted crises and business continuity management. Governance in all its aspects has been roundly affected by the multiple strategic ESGT risks the world confronts today. Companies and non-profits without agile boards and government agencies and international organizations without proactive governance will be severely affected and will potentially seriously damage the interests of their most important stakeholders.” 10 | ESGT MEGATRENDS MANUAL
The table below includes a listing of many of the E, S, G, and T topics we have become thoroughly familiar with over the past few years. The T column reveals how far behind we are in keeping up with and incorporating key technological issues, risks, and opportunities as part of a portfolio approach to strategy formulation.
Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
Indeed, if we take a subset of technological issues, risks, and opportunities—Artificial Intelligence (AI)—and apply it to other traditional ESG topics, we come up with the classification and examples set forth in the following table. Sample of AI Environmental, Social & Governance (ESG) Issues
Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
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MEGATREND #1
TECH DISRUPTION AT THE SPEED OF LIGHT
T
ech Disruption at the Speed of Light is what happens when the pace, depth, and breadth of technological innovation across the world in every sector—business, government, and society—happens at break-neck speed in practically all walks of life—whether in biology, ecology, AI, quantum, nanotech, etc. This gives rise to both the potential for highly constructive developments or hugely destructive ones depending on whether the tech capabilities are in good or bad, knowledgeable or ignorant, ethical or unethical hands. The speed at which technological change is happening is both a blessing and a curse for humanity—a blessing because it allows unprecedented developments such as the discovery of not one, two, or three but multiple COVID-19 vaccines in under one year. A curse because with the forced lockdowns taking place across the world and much movement of work from office to work from home (WFH), cybercriminal gangs and others have dramatically upped their cyber-attack game like never before. While mostly centered around the T in ESGT, this megatrend is also deeply interconnected with other ESG categories. For example, the governance of technology is at the center of whether new technologies are created in a thoughtful and ethical manner, with diversity, risk management, and stakeholder inclusiveness in mind or not. The proper governance of technology can mean the difference between whether a particular AI that has been deployed to a police department’s facial recognition capabilities is discriminatory or utilizes a more appropriate, diversity-sensitive data-set, for example. The Danger and the Risk of Tech Disruption at the Speed of Light Because of a multitude of social consequences from the pandemic in the past year (2020-2021), we have seen the overall rise in cyber-insecurity worldwide get turbocharged as the DIPLOMATIC COURIER | 15
profile on key COVID-19 cyberthreats from Interpol below demonstrates. According to Interpol, key COVID-19 related cyber threats in four areas have increased dramatically with phishing scams and fraud leading the way, malware and ransomware not far behind, followed by malicious domains and fake news, another scourge of our times.
Source: INTERPOL.
As the world locked down and many who could, worked from home, the WFH phenomenon opened the floodgates to criminal minds intent on stealing personal identities, penetrating company networks, and stealing crown jewels (such as IP and vaccination research). The annual Allianz Risk Barometer (ARB), which tracks the top business risks for each year had an unusual set of top risks for 2021. Typically (except for 2020 when “Cyber Incidents” became the #1 risk on the ARB for the first time), the category of “Business Interruption” is the top risk. In 2021, ARB identified the “Covid Trio” as an interconnected trio of top risks because 16 | ESGT MEGATRENDS MANUAL
of the pandemic: (1) Business Interruption; (2) Pandemic Outbreak; and (3) Cyber Incidents. As the chart below from the World Economic Forum Global Risks Report (WEF GRR) 2020 shows, from 2017 to 2020, technology and cyber related risks (in purple) showed up each year in the top five most likely risks—except for 2020 when all five were environmental (for the first time). But, as the third chart on page 18 shows, cyber risk shows up again visibly in WEFs 2021 GRR.
Source: World Economic Forum Global Risks Report 2020.
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Source: World Economic Forum Global Risks Report 2021.
Finally, it is also possible to categorize two major, even systemic cyber-attacks that were discovered in the past year (whether or not they are directly related to the pandemic) as “unprecedented.” At the time of this writing in the Spring of 2021, they are ongoing, vast in scale, and still of unknown impact and consequence. They are the so-called SolarWinds/Sunburst case and the Microsoft Exchange case. Purportedly each was the handywork of hostile Russian and Chinese nation state actors (or their affiliates), respectively. These attacks have had not only national security impacts in that key government agencies have been affected, but very direct business impacts from the biggest of companies all the way to Small and Medium Enterprises (SMEs). SolarWinds Sunburst On December 13, 2020, FireEye announced the discovery of a highly sophisticated cyber intrusion that leveraged a commercial software application made by SolarWinds. It was determined that the advanced persistent threat (APT) actors infiltrated the supply chain of SolarWinds, inserting a backdoor into the product. As customers downloaded the Trojan Horse installation packages from SolarWinds, attackers were able to access the systems running the SolarWinds product(s). This cyber-attack is exceptionally complex and continues to evolve. The attackers randomized parts of their actions making traditional identification steps such as scanning for known indicators of compromise (IOC) of limited value. Affected organizations should prepare for a complex and difficult remediation from this attack. Source: https://www.cisecurity.org/solarwinds/
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Microsoft Exchange Zero Day Vulnerability Microsoft and DHS CISA announced the confirmed exploitation of several vulnerabilities in Microsoft Exchange Server which have allowed adversaries to access email accounts, exfiltrate data, move laterally in victim environments, and install additional accesses and malware to allow long-term access to victim networks. The exploitation of these vulnerabilities is described as a zero-day (or 0day), which means they were targeted and acted upon prior to the vendor knowing that the vulnerabilities existed. In other words, there were zero days for the vendor to implement a fix for the vulnerability before it was used in an attack. Microsoft detected multiple successful attacks against previously unknown vulnerabilities in Microsoft Exchange Server. Microsoft Threat Intelligence Center (MSTIC) has attributed observed activity with high confidence to a group they have named HAFNIUM, which they assess to be state-sponsored and operating out of China. The U.S. Government has not confirmed attribution at this time. In most cases observed so far, the attack unfolded in three phases. First was initial access, either via stolen credentials or exploitation of previously mentioned vulnerabilities. After gaining initial access, actors deployed web shells on the compromised server. A web shell is an interface that allows attackers to execute commands on the victim device over the Internet, and can be interacted with via a web browser. After successfully deploying a web shell, the actors would maintain access via U.S.-based private servers to take further actions, including downloading additional malware, stealing data, and moving around the victim’s network. Source: https://www.cisecurity.org/ms-exchange-zero-day/
The Promise and the Opportunity of Tech Disruption at the Speed of Light At a time when we are in dire need of good news, here are three excellent examples of deploying cutting edge technologies to achieve ESGT good. Deploying AI for Environmental Good Here’s an example of scientists discovering 1.8 billion trees in a section of the Sahara Desert that no one knew about with certainty before and which will help in understanding environmental issues using deep learning, one of the world’s most powerful supercomputers (Blue Waters at the University of Illinois) and in collaboration with the likes of NASA’s Goddard Space Flight Center and satellite imagery from DigitalGlobe. This team of scientists DIPLOMATIC COURIER | 19
were able to map this part of the Sahara and contribute to research on monitoring trees in areas previously thought devoid of them. As the scientists conclude in their paper published in October 2020 in Nature.com: “Although the overall canopy cover is low, the relatively high density of isolated trees challenges prevailing narratives about dryland desertification and even the desert shows a surprisingly high tree density. Our assessment suggests a way to monitor trees outside of forests globally and to explore their role in mitigating degradation, climate change and poverty”. Thus, a very positive interconnectedness of multiple cutting-edge technologies working in unison to achieve important environmental and climate change related research that could help with mitigating not only environmental degradation but the dire social consequences relating thereto like massive migrations, poverty, food insecurity, and famine. Vaccinations at the Speed of Light The way the world does science together will never be the same after this year of global pandemic. This is a good thing. Despite some of the mediocre to awful political and national leadership (and social behaviors) we have witnessed in the past year in both “advanced” countries like the U.S. and the UK as well as emerging powers like Brazil, the global scientific community has amazed all of us in their singular determination to find not one but multiple vaccines to address the devastating global health crisis. Indeed, a country as small and underprivileged, but in many ways hyper-focused and advanced in healthcare like Cuba, is apparently about to announce multiple, internally researched and produced COVID-19 vaccines. Take a look at the figure to the left to understand the full meaning of “new vaccinations at the speed of light.” In this entire process, the global scientific community has deployed cutting edge science—the mRNA methodology used in some of the most effective COVID-19 vaccines appears to be deployable to numerous additional global health scourges, like Malaria, for example.
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Big Tech Ethics and Principles As the alarming documentary Coded Bias demonstrates, one of the key dangers of AI-driven Facial Recognition Technology (FRT) is how incredibly biased and discriminatory the data inputs into the algorithms and machine learning usually are, resulting in only white people—and at that, white men—being properly facially recognized, thus leaving vast swaths of humankind subject to mistakes, discriminatory behaviors, and much worse (if you think of a young 14 year old school boy of color being detained by London police using flawed FRT, as seen in Coded Bias). On the better news side of this equation, there are more responsible tech firms that are trying to make a difference at the early inception points of new tech tool development looking to insert data integrity, ethical considerations, and other important principles into the development of new technology. Microsoft’s approach to FRT and other technologies is profiled in this study by the World Economic Forum and the Markkula Center for Applied Ethics at Santa Clara University and illustrated in the table below from “Responsible Use of Technology: the Microsoft Case Study” (February 2021). Microsoft – Six Principles of AI Ethics
Source: World Economic Forum 2021.
A Leadership Battle Plan to Deal with Tech Disruption at the Speed of Light There are four key actionable items that leaders of any kind of organization should think about as they both cope with and develop tools to combat the downsides and take advantage of the upsides of tech advancements. DIPLOMATIC COURIER | 21
1. Deploy an ethical lens on new technology early and often. Whether it is in the review of new tech products and services your organization is purchasing and implementing, or especially in the development of your own tech products and services. 2. Test and audit your tech regularly. For cyber insecurity, ethical issues, and product integrity. 3. Propagate information and cyber hygiene anytime, anyplace. At home, in the office, in the workplace, amongst friends, and in community events. 4. Know your key tech stakeholders. Whether employees or customers—survey them regularly on the impact of the tech you are using, its usefulness, its consequences, its ease of operations, and its importance in their lives. Understand the intersection of your advanced tech products and services on your stakeholders’ well-being. Who Are Your Key Technology Stakeholders?
Original source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020, recreated by Dialogue Magazine.
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Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
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MEGATREND #2 LEADERSHIP AND INSTITUTIONAL TRUST PLUMMETING
T
he entire world and its major institutions—government, business, media and the nonprofit sector—are experiencing a continuing downward trend in stakeholder trust. Is this a trust “recession” from which we will recover soon or a longer-term collapse, closer to a trust “depression”, from which we will have to meticulously and deliberately build our way back to “normalcy” (whatever that might look like) or some other “new normal”? Leadership & Institutional Trust Plummeting is a multi-year megatrend because, sadly, the mediocre to bad leadership behaviors at every level—government, society, business—that we have been witnessing for more than a few years continues to be deeply concerning. In the midst of this deep concern, it is possible to discern a few green shoots of hope that may be emerging in 2021—mainly in the business sector. The plummeting of leadership and institutional trust is a long-term megatrend measured most dramatically by the Edelman Trust Barometer over the past decade and is also illustrated starkly by the decline of democracy and increase in autocracy in countries around the world (something we discuss under Megatrend #4— Geopolitical Tectonics Shifting). This megatrend is most related to governance at every level—from the small municipality to the largest national governments, from the mom-and-pop store to the global multinational, and from small local nonprofits to global NGOs. Here’s a good reference point for a definition of governance from the investor community applied to corporations but which applies equally to other entities (Robecosam): “Governance refers to a set of rules or principles defining rights, responsibilities, and expectations between different DIPLOMATIC COURIER | 27
stakeholders in the governance of corporations. A well-defined corporate governance system can be used to balance or align interests between stakeholders and can work as a tool to support a company’s long-term strategy.” And here’s a typology of where governance exists or should exist at the global, national, and local levels in all forms of institution— government, business, or societal:
Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
Governance touches every aspect of ESGT because whether it is coming from a corporation, a regulator, or an NGO, governance is either robust, mediocre, or non-existent with concomitant consequences for all stakeholders concerned. The Danger and the Risk of Leadership & Institutional Trust Plummeting Looking at the trendline best illustrated by Edelman in its 2018 Trust Barometer (see Figure on page 29 at the top), we can see more dramatic declines over the five-year period between 2013 and 2018 in the trust that stakehodlers had in aggregate for the four types of institutions that Edelman analyzes each year— business, government, media, and NGOs. In other words, there are more trust losses than gains. 28 | ESGT MEGATRENDS MANUAL
Source: Edelman Trust Barometer 2018
What happens to leaders and institutions especially in the business sector that lose the trust of their stakeholders? The Deloitte chart below provides a stark graphic of the long-term share price fluctuations for companies without scandal in a particular industry sector against that of a company coming back from a major trust bust, aka scandal:
Source: Deloitte. The Chemistry of Trust 2021.
That doesn’t even begin to touch on a number of additional financial and non-financial consequences that occur as a result of a serious reputation risk event, as per the chart on pages 30-31 from my book, “The Reputation Risk Handbook.” DIPLOMATIC COURIER | 29
Source: A. Bonime-Blanc, The Reputation Risk Handbook. Routledge 2014.
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Source: A. Bonime-Blanc, The Reputation Risk Handbook. Routledge 2014.
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The figure below plots the four institutions Edelman examines on an x/y axis of ethics and competence. The Edelman Trust Barometer of 2021 illustrates the lack of trust generally that exists in all four institutions into 2020 and 2021. However, there appears to be an interesting silver lining for 2021, which we will keep an eye on to see if it is truly an improvement or reversal in direction or a blip on an otherwise unhappy trendline. The silver lining is that business appears to be rising slightly in ethicality and is now the only one of the four institutions examined that can be said to be both ethical and competent.
Source: Edelman 2021.
The Promise and the Opportunity of Leadership & Institutional Trust Plummeting The issue of leadership and institutional trust plummeting and the possible silver lining of business becoming a more trusted institution globally does appear to have some validity. Looking at Just Capital data that illustrates how stakeholders are demanding and, in some cases, getting more for their demands around ESGT issues, the chart on page 34 shows Just Capital’s top ten 2021 Annual Rankings. These companies achieved this status by receiving the most stakeholder support along a series of ESG and T issues. The stakeholders surveyed are catalogued into the following groups: 32 | ESGT MEGATRENDS MANUAL
• Workers • Communities • Customers • Shareholders • Environment
The 19 issues that Just Capital surveys stakeholders on are the following: 1. Pays a fair, livable wage. 2. Upholds human rights standards across the supply chain. 3. Invests in workforce training. 4. Acts ethically at the leadership level. 5. Cultivates a diverse and inclusive workplace. 6. Protects worker health and safety. 7. Provides benefits and work life balance. 8. Creates jobs in the United States. 9. Protects consumer privacy. 10. Treats customers fairly. 11. Prioritizes value creation for all stakeholders. 12. Minimizes pollution. 13. Helps combat climate change. 14. Develops and support sustainable products. 15. Makes products that do no harm. 16. Contributes to community development. 17. Generates returns for investors. 18. Communicates transparently. 19. Supports local communities. And the results of their first Just Capital Ranking for 2021 are shown in the following table—with technology companies dominating the top ten.
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2021 Overall Rankings “Our annual Rankings reflect the performance of America’s largest companies on the issues that matter most in defining just business behavior today. The issues, and their weights in our model, are determined by our polling of the American public. The 2021 Rankings were published on October 14, 2020.”
Source: Just Capital 2020.
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Perhaps one of the lessons learned from this ranking of most “Just Companies” according to their stakeholders is that leadership and institutional trust is possible, but it requires deliberate, conscientious action, tone from the top, not just in word but in deed. That is the thinking behind my typology of ESGT leadership shown in the figure below. In this typology, I gauge a leader’s commitment (or lack thereof) to the ESGT issues, risks, and opportunities that are most relevant to that leader’s institution—whether a business or some other entity. The range of leadership styles goes from the worst—the Irresponsible Leader who ignores or is hostile to such issues, risks, and opportunities; to the mediocre and manipulative—the Superficial Leader who uses ESGT issues, risks, and opportunities as a marketing or greenwashing ploy; to the Responsible and Enlightened Leader who’s only difference is that in the case of the enlightened she not only walks the talk and provides substantive support in budget and resources on all things ESGT, but she also integrates ESGT into product and service development, innovation, and the overall culture of the institution.
Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
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A Leadership Battle Plan to Deal with Leadership & Institutional Trust Plummeting 1. Adopt the practices of emotionally intelligent leaders. Create collaborative, interdisciplinary approaches to problem solving and strategic development because the world is too complicated for autocracy (whether in politics or business). 2. Better yet, elect or choose emotionally intelligent leaders. Not only in political elections but in corporate searches, board recruitment, and talent recruitment to key leadership positions. 3. Listen to your key stakeholders. Understand what they need and expect from you and reverse engineer solutions to address their concerns. 4. Have a robust risk, ethics, and compliance program in your institution. Whether you are a government agency, business, university or NGO—there are no excuses for not having a robust speak-up, listen-up, and follow-up culture.
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Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
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MEGATREND #3 COMPLEX INTERCONNECTED RISK INTENSIFYING
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y definition, this megatrend states that risk is more complex, systemic, large-scale, and interconnected than ever. We call it Complex Interconnected Risk Intensifying because what was already a megatrend for a few years—the deep interconnection between different kinds of risk both affecting and morphing—continues to accelerate as our pandemic year has dramatically illustrated. Taking my inspiration from the annual World Economic Forum Global Risks Reports as well as my own work, this megatrend speaks to how systemic, strategic, global, material risks are not only rising in number and importance but also in interconnectedness. In the case of this pandemic year, in which complex interconnected ESGT risk was more visible than ever before, it all began with what scientists are increasingly seeing: environmental degradation, deforestation, and the loss of biodiversity as instigators for inter-species virus jumping from animals to people. The Danger and the Risk of Complex Interconnected Risk Intensifying In the department of a picture speaking louder than words, the following is the WEF GRR 2019 depiction of the interconnectedness of their five major categories of risk—economic, environmental, societal, geopolitical, and technological. The pandemic revealed the deep interconnected ESGT systemic risks of the globe primarily driven by environmental degradation, but it actually represents the confluence of a number of trends coming together over time, as stated in this piece I wrote for the Crisp Blog:
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Source: A. Bonime-Blanc, Gloom to Boom. Adapted from World Economic Forum Global Risks Report 2019.
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“A Perfect Storm Brewing for Years What happened in 2020 is the perfect storm of systemic and other ESGT risks coming together at a scale greater than we have seen before. The catalysts, though, have been brewing for years: climate change, pandemics, social justice, pay inequity, corruption, geopolitical upheaval, and technological disruption.” A quick look at how one thing led to another during our pandemic year—not necessarily as direct or sequential causation but more as a series of converging and interconnecting mutually influencing factors, we can distinguish the following interconnected ESGT risks: 1. Environmental Risk. Zoonotic virus jumping from bats to people apparently partly because of their loss of habitat, deforestation, closer contact of people and animals that they eat or handle. 2. Environmental and Social Risk. A pandemic spreads across the world with a variety of deep and broad social consequences everywhere: health, safety, and security. 3. Social Risks Propagate. Because of some of the other social factors—some of which were deeply embedded in American society for example, lockdown and other sociopolitical tensions led to a summer of outrage across America at the videotaped murder of an innocent black man by a brutal police officer. 4. Governance Risks. Across all companies and boardrooms governance challenges multiply as boards are unprepared or unable to deal with the complexities of the moment, which include social justice, health and safety of immigrant and working-class workers on the front lines, fake news, and more. 5. Technology. With the chaos of the pandemic, nation state and criminal actors take full advantage to exponentially spread misinformation, fake news, deep fakes, and all manner of cyber attack and virtual (including social media) attack vectors.
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Source: Allianz Risk Barometer 2021.
Given the unprecedented disruption caused by the coronavirus outbreak, it is no surprise that business interruption and pandemic outbreak top the 2021 Allianz Risk Barometer. Pandemic is the biggest climber this year (up 15 positions), with cyber incidents ranking a close third. All three risks—and many of the others in this year’s top 10—are interlinked, demonstrating the growing vulnerabilities and uncertainty of our highly globalized and connected world, where actions in one place can spread rapidly to have global effects. Looking forward, the pandemic shows companies need to prepare for a wider range of business interruption triggers and extreme events than previously. Building greater resilience in supply chains and business models will be critical for managing future exposures.
Source: World Economic Forum. Global Risks Report 2021.
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The Promise and the Opportunity of Complex Interconnected Risk Intensifying What do businesses, governments and social actors need in a world of intensifying interconnected systemic ESGT risk? It would seem that the antidote to such intensifying complexity would be to build resilience, and most specifically organizational resilience, a form of systemic resilience that is internal to a company, for example, but that is closely in touch with the outside world through industry collaboration, private public partnerships, stakeholder relations, and supply chain fortitude. How does a company build such organizational resilience? Apart from having the typical programs associated with the traditional view of “resilience”—i.e., business continuity, data protection, and crisis management—the resilient organization follows the “responsible” or “virtuous” resilience lifecycle, which consists of eight major elements that begin with lean-in governance and build up with seven successive but integrated systems and programs around a culture of integrity, an understanding of and relationship with key stakeholders, risk intelligence at every level, an integrated holistic approach to ESGT in strategy, performance metrics that measure more than financial performance but also include key ESGT metrics, crisis readiness, and innovations ethos—an ethos that believes in lessons learned, root cause analysis, continuous improvement, and applying those lessons to improving existing products and services.
DIPLOMATIC COURIER | 45 Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
Some of the leading companies mentioned under megatrend #2 as exemplars of good stakeholder relations during this past year in the rankings of Just Capital are potential exemplars of organizational resiliency as they clearly appear to be doing a good to great job catering to the needs, expectations, and demands of their principal stakeholders—be they workers, consumers, communities, or others—as well as doing well on some of the other eight elements of organizational resilience. Indeed, an Edelman survey of institutional investors in late 2020, showed that investors believed that companies with a strong ESG performance were dealing better with the crisis than those that did not and thereby had greater resilience than others without strong ESG profiles.
Source: Edelman 2020.
Also, in the good news department is the reaction that a lot of company boards are having to the effects of the simultaneous, interconnected, systemic risk environment we are living through because of the COVID-19 crisis, paying attention for the first time ever to some of the risks that were always there but were finally laid bare to company leadership, as can be seen in this NACD survey of what boards are prioritizing now.
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NACD Board Top Five Trends For 2021 Survey
Source: 2020-2021 NACD Trends and Priorities of the American Boardroom
A Leadership Battle Plan to Deal with Complex Interconnected Risk Intensifying In such a fast-changing complex interconnected world of systemic, strategic, tactical risk it is imperative that organizations be equipped to navigate such treacherous waters. Some of the key takeaways leaders of all types should consider are the following: 1. Make sure your organization has a continuous risk and crisis management mindset. No matter whether an organization is governmental, corporate, societal, or communal and no matter the size, footprint, or mission; every organization should have some form of risk and crisis management system in place—before the crisis hits. 2. Ensure that the organization has the right talent—internal and external—to work on risk and crisis management; whether it exists internally already, needs to be recruited, or whether outside experts need to be lined up for ongoing assistance. 3. Consider cross-disciplinary teams to tackle risk management. In today’s complex, interconnected, risk environment no one person can successfully address and solve these challenges. It takes an interdisciplinary internal team assisted by necessary outside experts. 4. Ensure a rapid deployment force attitude to continuous risk management. Our world of evolving interconnected risks isn’t getting simpler. Have a rapid risk deployment force at the ready. DIPLOMATIC COURIER | 47
Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
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MEGATREND #4 GLOBAL GEOPOLITICAL TECTONICS SHIFTING
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his megatrend has been years in the making both at the domestic/national level as well as the international level, with some interesting twists and turns recently emerging with the election of the Biden/Harris Administration in the United States.
We place this megatrend principally under the category of “Governance” because international geopolitical frameworks (or their absence) are all about international governance (or its absence), and having an effective democracy and rule of law within a country is all about relatively benevolent political governance while autocracy, oligarchy, or civil war are all about mediocre to poor or non-existent political governance. To paraphrase Churchill: Democracy is the worst form of governance except for all the others. The Danger and the Risk of Global Geopolitical Tectonics Shifting From a geopolitical standpoint, the past few years have been marked by two parallel tectonic shifts-the decline of democracy and the degradation of long-standing, post-World War II international governance frameworks. First, we have witnessed shifts taking place within established democracies including the United States, Great Britain, and several Eastern European countries, towards greater populism or what some leading political analysts have called “illiberal democracy.” This shift is exemplified by either a splitting and centrifugal distancing of the political extremes hurtling away from the center like we haven’t seen in established democracies in a long time (preWorld War II Germany, Italy, and Spain come to mind) or by the dominance and coming to power of an “illiberal” party focused on suspending or eroding the rule of law and gaining greater dominance at the expense of democracy as we have seen, for example, DIPLOMATIC COURIER | 51
in Hungary and Poland, or as we are seeing in the United States today in efforts by several Republican States and their legislatures to abridge rights with disproportionate malignant effects on the voting rights of people of color. This is exemplified by the Georgia State voter legislation their Governor signed into law in March 2021 and by the more than 300 state legislature bills and/or laws aimed at limiting voter rights sponsored mainly by the U.S. Republican Party in each such state. The decline of democracy around the world is starkly illustrated in the following two graphics from Freedom House’s annual publication “Freedom in the World” covering the last 15 years and by the Economist Intelligence Unit Democracy Index showing a steep decline in democracy over the past 14 years as well.
Source: The Economist 2021
Source: Freedom House 2021
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The populist versus establishment tension within democracies is heavily fueled by a combination of factors some of which are social and endemic—like rising inequality, migration patterns, and generational shifts—while others are externally induced or amplified by nation-states (principally Russia and China) and others hostile to democracy, aiming to sow chaos and instability in democracies using a variety of social engineering, virtual and cyber means to spread misinformation, disinformation, and outright fabrications via a variety of technologies including deep web chatter, social media campaigns and bots, deep fakes of all kinds (video, audio, facial), infiltrating business and government for theft, espionage or other disruptive purposes (via cyber-attacks ranging from ransomware, malware, phishing, and other invasive technological expeditions). The second major tectonic shift that is part of this megatrend is the erosion over the past few years—mostly coincidental with the Trump Administration—of longstanding international institutions and governance frameworks like WHO, NATO, the Paris Climate Accord, and others. This has negatively coincided with the rise of China and President Xi’s special and more intense form of authoritarianism and international expansion (Belt & Road, Digital Silk Road) and Russian geographical and cyber-adventurism within its borders and beyond (including the U.S.). This all culminated at the time the COVID-19 pandemic broke out and in the midst of the most intense conglomeration of systemic ESGT risk (as described earlier). The pandemic in some ways has made it clearer and starker than ever before what some of the key systemic, and even existential, global challenges of our times are. Among them: social justice, climate change, cyberwar, and repairing democracy and reforming capitalism. But the one that seems to be emerging as the clearest geopolitical tectonic shift in the making is that we are moving into a new form of global organizing principle—similar to the Cold War but this time between democracy and autocracy, as President Biden put it in a recent speech. The competition between democracy and autocracy is the existential fight of our times and will replace the Cold War as the next phase of global geopolitics, marrying the two manifestations of this megatrend—national political governance and international geopolitical governance. These will be more deeply intertwined and interconnected (similar to megatrend #3) than ever before with consequences and reverberations complicated by the continued breakneck speed of technological change (the global AI DIPLOMATIC COURIER | 53
competition between China and the U.S. is but one manifestation of this), the proliferation of all manner of other technologies and the misinformation warfare, which other bad actors (criminal and terrorist) will take full advantage of as well, all this obliterating what’s left of physical and geographical borders in the process. The Promise and the Opportunity of Global Geopolitical Tectonics Shifting Therein lies the opportunity and the promise. The demonstration by a seriously challenged and wounded American democracy that democracy can still be done and done well even in the midst of a pandemic, potential nation-state cyber-attacks, a domestic, homegrown white national terrorist movement, the January 6, 2021, insurrection against the U.S. Congress, and other serious social, racial justice, and economic challenges demonstrates hope for democracy. That’s the good news. But the mediocre news is that the U.S., both as a country and as the leader of the democratic world (whether it deserves to be or not), must work out its substantial internal deficiencies and threats and serious historical undemocratic history of racism, to emerge a smarter, more resilient democracy while simultaneously collaborating with and leading the rest of the democratic world to achieve the same. The recognition in the U.S. and pro-democratic alliances that democracy is at risk is a good thing. The fact that democracies are aligning with each other again on basic areas of shared interest— climate, global governance, trade, human rights, military, cyber collaboration—is a good thing for the world. What this all means for the non-governmental sectors—business and society—worldwide is that for the moment the United States is back as a force for international cooperation on key global issues such as climate, cyber, trade, etc. Whether this means more peace and stability is not clear as war could break out, for example, in the South China Sea and human rights issues could intensify substantially. But for the moment, there seems a greater likelihood that business and society can depend on a more predictable U.S. policy and alliances, which can create other positive offshoots. A Leadership Battle Plan to Deal with Global Geopolitical Tectonics Shifting Leaders in all walks of life must pay greater attention to the larger geopolitical tectonic shifts taking place in their own country as 54 | ESGT MEGATRENDS MANUAL
well as others that have a direct or indirect relationship with their organizations—whether because of business activities, supply chain considerations, talent management, etc. Some top-of-mind tactics should include: 1. Ensure that someone senior in your organization is looking at geopolitical and political risk both domestically and internationally as may be relevant to the organization’s footprint and mission. 2. Ensure that public relations and communications closely monitor early-stage social media and internet-based misinformation. 3. Make sure that global talent and human resources management keeps a finger on the pulse of your human capital wherever they are located and the dangers they may encounter, especially as the pandemic continues. 4. Consider or reconsider what your company’s political involvement (via lobbying or contributions) and position on key ESGT and political issues will be when pressed by stakeholders. 5. Where there is a danger of domestic terrorism and unrest ensure that workplace violence and safety programs are in place and properly deployed. 6. Carefully consider human rights and other privacy rights of your key stakeholders and what your corporate government relations and lobbying policies look like.
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Source: A. Bonime-Blanc, Gloom to Boom. Routledge 2020.
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MEGATREND #5 STAKEHOLDER CAPITALISM RISING
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ilton Friedman’s “shareholder primacy” form of capitalism has been taking incoming for more than a decade but with the pandemic forcing business to think more broadly about its other key stakeholders—namely employees and customers—the rise of Stakeholder Capitalism has advanced substantially in the past year. The pandemic has put in stark relief certain needs and expectations of key stakeholders (safety, health, WFH, equity, inclusion, and diversity) that were ignored for too long, adding rocket fuel to the rise of ESG investing. Indeed, 2021 may be an intensification turning point for this megatrend. This megatrend is mostly about stakeholders—all kinds but the key is to know which ones are the most important for your organization. Hence, we categorize this megatrend as mostly dominated by the S in ESGT but as with the other megatrends there are aspects of this megatrend that touch on all the other categories as well.
Below is a useful table from the World Economic Forum that explains the three dominant types of capitalism or economic organization that dominate the world today, with a useful side-by-side comparison showing most relevantly to this discussion the prime differences between what has been the dominant form of capitalism in the world in the past 50 years—Shareholder Capitalism—to what seems to be emerging as the possible next stage in capitalism in the democratic world.
The Danger and the Risk of Stakeholder Capitalism Rising The danger is that the new global investor push to ESG investing is more greenwashing than reality. The FT Moral Money newsletter recently coined the cute phrase that now “green is good” asking whether that turn of the “greed is good” phrase from the movie Wall Street (1985) wasn’t simply masking the reality that greed (continues to be) good. The core challenge in this transformation is not having the right kind of leaders (business and government) that actually care about their key stakeholders and their key ESGT issues. Maybe the green rush is just another blind rush to make the most money possible at any cost (except financial). Indeed, the regulatory world has been increasingly interested in finding out whether the ESG investment fund rush (see Figure on page 61) and all the excitement that goes with it isn’t just a veneer that allows funds to mask the true ESG facts (i.e., ESG wash) and investors to pretend that they are doing good by investing in black boxes (i.e., companies who claim to follow ESG practices 60 | ESGT MEGATRENDS MANUAL
but it’s unclear whether they really do). Add to the confusion that the ESG reporting world is a true wild west or as some have called alphabet soup of acronyms, reporting regimes, standards, etc. and we have ourselves an opportunity for bad and mediocre actors in the financial sector to pretend to sell ESG vetted investments that aren’t really very ESG and for company leaders to engage in ESG marketing that is only skin deep. The new U.S. Administration has signaled that it will begin to analyze and potentially police the ESG frontier with a series of new leaders in important positions—such as Gary Gensler as Chairman of the SEC—that will pay more attention to more profoundly analyzing company ESG data, and requiring companies themselves to not only provide more disclosure but develop broader disclosure regimes, especially in key ESG risk and compliance areas—environment, health, safety, and privacy—that the government has been lax in regulating (or has outright deregulated) over the past few years.
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The Promise and the Opportunity of Stakeholder Capitalism Rising The opportunity is immense. There are trillions of dollars of opportunity globally to marry investors to ESG funds, circular economy investments, UN Sustainable Development Goals (SDGs) related projects, and other pro-planet ESGT innovation and causes. Indeed, the space of social impact investing, which would address directly some of the most intractable SDGs like poverty and hunger is another wing of this movement that could garner far greater investor attention as new financial investment structures and vehicles are devised. ESG has been developing for over two decades but has only erupted forcefully in the U.S. in the last few years. It is a trendline that became a wave and then a tsunami in the past year. There is no turning back mainly because the pandemic has underscored how critical it is to align capitalism and economic development with the needs of the planet. We are all interconnected, interdependent, and we will sink or swim together. Because of the confluence of the Paris Climate Accord (now rejoined by the United States), the 2030 SDGs, the rise of ESG investment, and the broadly recognized need to save the planet especially underscored over the past year of great disruption, pain, death and struggle, and because of an environmentally induced global pandemic having a series of tremendously damaging reverberations around the world, there may be a push to great connectivity between business interests and the needs of the planet and its people. A shining example of how innovation, SDGs, and potential economic growth are all intricately interconnected can be found in the UN Big Data for the SDGs. This initiative shows how data science and analytics can contribute to the SDGs and in the process create widespread opportunity for start-ups and others to develop new products and services. Here is a list of their possible digital projects related to each SDG: 1. SDG # 1 – No poverty. Spending patterns on mobile phone services can provide proxy indicators of income levels. 2. SDG #2 – Zero hunger. Crowdsourcing or tracking of food prices listed online can help monitor food security in near real-time. 62 | ESGT MEGATRENDS MANUAL
3. SDG #3 – Good health and well-being. Mapping the movement of mobile phone users can help predict the spread of infectious diseases. 4. SDG #4 – Quality education. Citizen reporting can reveal reasons for student drop-out rates. 5. SDG #5 – Gender equality. Analysis of financial transactions can reveal the spending patterns and different impacts of economic shocks on men and women. 6. SDG #6 – Clean water and sanitation. Sensors connected to water pumps can track access to clean water. 7. SDG #7 – Affordable and clean energy. Smart metering allows utility companies to increase or restrict the flow of electricity, gas or water to reduce waste and ensure adequate supply at peak periods. 8. SDG #8 – Decent work and economic growth. Patterns in global postal traffic can provide indicators such as economic growth, remittances, trade and GDP. 9. SDG #9 – Industry, innovation and infrastructure. Data from GPS devices can be used for traffic control and to improve public transport. 10. SDG #10 – Reduced inequality. Speech to text analytics on local radio content can reveal discrimination concerns and support policy response. 11. SDG #11 – Sustainable cities and communities. Satellite remote sensing can track encroachment on public land or spaces such as parks and forests. 12. SDG #12 – Responsible consumption and production. Online search patterns or e-commerce transactions can reveal the pace of transition to energy efficient products. 13. SDG #13 – Climate action. Combining satellite imagery, crowd-sourced witness accounts and open data can help track deforestation. 14. SDG #14 – Life below water. Maritime vessel tracking data can reveal illegal, unregulated and unreported fishing activities. DIPLOMATIC COURIER | 63
15. SDG #15 – Life on land. Social media monitoring can support disaster management with real-time information on victim location, effects and strength of forest fires or haze. 16. SDG #16 – Peace, justice and strong institutions. Sentiment analysis of social media can reveal public opinion on effective governance, public service delivery or human rights. 17. SDG #17 – Partnerships for the goals. Partnerships to enable the combining of statistics, mobile and internet data can provide a better and real-time understanding of today’s hyper- connected world. In the table below one can also see how each of the SDGs incorporate one or more aspects of ESGT—all of them have two or more ESGT aspects to them, once again validating the interconnectedness of all of these issues as risks and as opportunities.
UN SDGs Source: UN; ESGT Analysis, Author.
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Finally, in a recent study by NYU Stern’s Sustainability Institute, the connection between ESG and improved financial performance and resilience was made. This NYU Stern Sustainability analysis of ESG trends includes the following observations that businesses and investors (as well regulators) should carefully examine and consider: 1. Improved financial performance due to ESG becomes more marked over longer time horizons. 2. ESG integration as an investment strategy seems to perform better than negative screening approaches. 3. ESG Investing appears to provide downside protection especially during a social or economic crisis. 4. Corporate sustainability initiatives appear to drive better financial performance due to mediating factors such as risk management and more innovation. 5. Managing for a low carbon future improves financial performance. 6. ESG disclosure on its own does not drive financial performance. Key leadership tactics to accomplish this include: 1. Truly know who your key stakeholders are. If you’re a business, know your key stakeholders beyond your primary stakeholder, shareholders—like customers and employees. If you’re an NGO understand who else matters beyond beyond your beneficiaries. If you’re a government entity, be cognizant of the fact that beyond your citizens, you should heed the interests and expectations of other key stakeholders like communities, visitors, migrants, etc. 2. Equip an interdisciplinary team with stakeholder engagement power. Establish an internal cross functional team that can understand—indeed empathize—with the key stakeholders on key issues, risks, and opportunities. 3. Understand the financial and reputational implications of stakeholder EQ. Stakeholder “emotional intelligence” or EQ is something most companies don’t think about consciously. In the age of Stakeholder Capitalism, it’s a really good idea to understand the actual expectations of your key stakeholders and what the possible financial and reputational downside or upside might be on issues and risks your company is involved with concerning them. 4. Reconstruct your strategy to include ESGT and stakeholder considerations. Make sure to understand your key ESGT issues, risks, and opportunities and integrate them into strategic planning and implementation. DIPLOMATIC COURIER | 65
CONCLUSION
THE ESGT MEGATRENDS BLUEPRINT FOR 2021-2022 MEGATREND #1 Tech Disruption at the Speed of Light 1. Deploy an ethical lens on new technology early and often— whether it is in the review of new tech products and services your organization is purchasing and implementing, or in the development of your own tech products and services. 2. Test and audit your tech regularly—for cyber insecurity, ethical issues, and product integrity. 3. Propagate information and cyber-hygiene anytime, anyplace— at home, in the office, the workplace, amongst friends, in community events. Think of it as physical hygiene but in the virtual space. 4. Know your key tech stakeholders—whether employees or customers. Survey them regularly on the impact of the tech you are using, its usefulness, its consequences, its ease of operations, its importance to them in their lives. Understand the intersection of your advanced tech products and services on your stakeholders’ well-being. *****
Megatrend #2 Leadership & Institutional Trust Plummeting 1. Adopt the practices of emotionally intelligent leaders—create collaborative, interdisciplinary approaches to problem solving and strategic development because the world is too complicated for autocracy (whether politics or business). 2. Better yet, elect or choose emotionally intelligent leaders— not only in political elections but in corporate searches, board recruitment, and talent recruitment to key leadership positions.
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3. Listen to your key stakeholders—understand what they need and expect from you and reverse engineer solutions to address their concerns. 4. Have a robust risk, ethics and compliance program in your institution—whether you are a government agency, business, university, or NGO—there are no excuses for not having a robust speak-up, listen-up, and follow-up culture. *****
Megatrend #3 Complex Interconnected Risk Intensifying 1. Make sure your organization has a continuous risk and crisis management mindset—no matter whether an organization is governmental, corporate, societal, or communal—and no matter the size, footprint, or mission, every organization should have some form of risk and crisis management system in place, preferably before the crisis hits. 2. Ensure that the organization has the right talent—internal and external—to work on risk and crisis management, whether it exists internally already, needs to be recruited, or whether outside experts need to be lined up for ongoing assistance. 3. Consider cross-disciplinary teams to tackle risk management. In today complex, interconnected risk environment no one person can successfully address and solve these challenges. It takes an interdisciplinary internal team assisted by necessary outside experts. 4. Ensure a rapid deployment force attitude to continuous risk management—our world of evolving interconnected risks isn’t getting simple. Have a rapid risk deployment force at the ready. *****
Megatrend #4 Global Geopolitical Tectonics Shifting 1. Ensure that someone senior in your organization is looking at geopolitical and political risk—both domestically and internationally as may be relevant to the organization’s footprint and mission. 2. Ensure that public relations and communications closely monitor early-stage social media and internet-based misinformation.
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3. Make sure that global talent and human resources management keeps a finger on the pulse of your human capital wherever they are located and the dangers they may encounter, especially as the pandemic continues. 4. Consider or reconsider what your company’s political involvement (via lobbying or contributions) and position on key ESGT and political issues will be when pressed by stakeholders. 5. Where there is a danger of domestic terrorism and unrest ensure that workplace violence and safety programs are in place and properly deployed. 6. Carefully consider human rights and other privacy rights of your key stakeholders and what your corporate government relations and lobbying policies look like. *****
Megatrend #5 Stakeholder Capitalism Rising 1. Truly know who your key stakeholders are—if you’re a business, know your key stakeholders beyond your shareholders—like customers and employees; if you’re an NGO understand who else matters beyond your beneficiaries; if you’re a government entity be cognizant of the fact that beyond your citizens, you should heed the interests and expectations of other key stakeholders like communities, visitors, migrants, etc. 2. Equip an interdisciplinary team with stakeholder engagement power—establish an internal cross functional team that can understand—indeed empathize—with the key stakeholders on key issues, risks, and opportunities. 3. Understand the financial and reputational implications of stakeholder EQ—Stakeholder “emotional intelligence” or EQ is something most companies don’t think about consciously. In the age of Stakeholder Capitalism, it’s a really good idea to understand the actual expectations of your key stakeholders and what the possible financial and reputational downside or upside might be on issues and risks your company is involved with concerning them. 4. Reconstruct your strategy to include ESGT and stakeholder considerations—make sure to understand your key ESGT issues, risks, and opportunities and integrate them into strategic planning and implementation. 68 | ESGT MEGATRENDS MANUAL