The New Climate for Business: Aron Cramer's 2019 Annual Letter

Nov 19, 2019 8:00 AM ET
Blog

By: Aron Cramer, President and CEO, BSR

We are at a hinge point in history.

The French refer to the 30 years after the end of World War II as "Les Trente Glorieuses," or "The Glorious 30 Years," when prosperity flowered, culture was dynamic, and peaceful conditions prevailed after two devastating wars. 

For business, the three decades following the fall of the Berlin Wall in 1989 can be seen the same way. During that time, the market economy has been the world’s dominant organizing principle, business has largely thrived (notwithstanding the global financial crisis), innovation has flowered, and huge numbers of people have enjoyed improved living conditions, especially in the Global South.

As we enter the 2020s, we are at a new hinge point in history. Every business today is facing three strategic challenges:

  • First, there is the need to redefine the role of business in society, in sync with changing expectations, and establish clear business purpose that goes beyond short-term profits.
  • Second, we face the urgent objective to shift the economy to a path that delivers truly shared prosperity that respects the natural boundaries of our planet, not least the climate crisis.
  • Third, every company must craft a strategy that navigates an unprecedented set of disruptions—and in some cases existential questions—that are rapidly reshaping the competitive environment.

These strategic challenges come as a result of major paradigm shifts that have taken place in recent years. Changes in policy, politics, public perception, and the natural world are creating profound impacts for business.

First and foremost, after decades when markets were seen as the ultimate, efficient vehicle to deliver broad societal benefits, the public today is increasingly skeptical about this model, and the light-touch regulation that has marked the past several decades is now distrusted by many.

Our natural resources are also under threat, with considerable impacts for public health and stable, thriving economies. Simply put, the commodities on which we rely for sustenance and enjoyment can no longer be taken for granted.

The rising tide of innovation has also had a fairly wide berth; today, there is more concern about the impacts of new technologies and business models, bringing about the “techlash.”

The accumulation of wealth in the hands of a few is being questioned at a time when the “precariat” is growing, with public anxiety about declining living standards leading to political and economic backlash. And for many interconnected reasons, the consumption-driven economy that has been an engine of growth can no longer be taken for granted as the dominant model. The “religion” of ever-increasing economic growth is losing adherents, and there are signs that many people are seeking satisfaction in new and different ways that do not involve consumption of products.

In this context, many are calling for more activist government. At the same time, nation-states are struggling to deal with global challenges, with many turning toward populism and nationalism and a crackdown on civil society. Political uncertainty and distrust have become endemic.

All of this adds up to a New Climate for Business. The framework conditions that have shaped our world, and the world of business, have changed.

The Decisive Decade

These changes come as we enter the decisive decade of the 2020s. The next 10 years will be decisive for business, and for all of us. We will either deliver on the Sustainable Development Goals (SDGs) or we won’t. We will peak emissions in line with the Paris Agreement or we won’t. Business will regain public trust or it won’t. We will re-establish social mobility and reduce income inequality or we won’t.

Here is what we know for certain: The diverse and powerful assets of business are essential if we are to build a resilient, fair, and sustainable economy. It is impossible to imagine achieving the promise of the decade ahead without business. And it is equally impossible to imagine that outcome with business as usual. This is a time when the scale of change and challenge requires big vision, high levels of ambition, and a strong sense of urgency.

The fundamental changes reshaping our energy systems, our food supply, and water availability demand comprehensive systemic solutions. Sustainability disconnected from investors, policymakers, and communities will have no credibility.

The inescapable implication of this is that sustainable business as we have known it is not enough. So, standalone sustainability projects will have their place, but incremental improvements won’t deliver the SDGs. The fundamental changes reshaping our energy systems, our food supply, and water availability demand comprehensive systemic solutions. Sustainability disconnected from investors, policymakers, and communities will have no credibility. Measurement and reporting that fails to embrace all forms of value misleads markets and leads to bad outcomes. And, in an era of profound change, risk averse leadership only creates more...risk.

The New Climate for Business demands a radically new approach to business and markets. As Marc Benioff wrote recently in the New York Times, “Capitalism as we have known it is dead.” Business as we need it, however, is only getting started. As we enter the 2020s, businesses will be judged by their purpose, their ambition, their urgency, their openness, and their innovation. The only businesses that will thrive in the decade to come, and quite possibly the only businesses that will survive for the long-run, are the ones who will master these challenges.

The question then is how business will “meet the moment.”

Read the rest of Aron Cramer's 2019 Annual Letter on BSR for more on how business can rise to the challenges of the upcoming decade and for his proposed urgency agenda, designed to deliver for 2030.