Climate risks are back at the top of our most pressing global concerns as the
world enters the third year of the pandemic, according to the World Economic
Forum’s Global Risks Report 2022. While climate
concerns dominate the top long-term risks, the top shorter-term global concerns
include societal divides, livelihood crises and mental health
deterioration.
Additionally, most experts believe a global economic recovery will be volatile
and uneven over the next three years — this echoes sentiments from the most
recent GlobeScan/Sustainability Institute by ERM
report,
in which 70 percent of sustainability experts expressed skepticism at our
ability to avert major damage from climate change.
Now in its 17th edition, the Global Risks Report encourages leaders to think
outside the quarterly reporting cycle and create policies that manage risks and
shape the agenda for the coming years. It explores four areas of emerging risk:
cybersecurity; competition in space; a disorderly climate
transition; and migration pressures, each requiring global coordination
for successful management.
OK, Now What?: Navigating Corporate Sustainability After the US Presidential Election
Join us for a free webinar on Monday, December 9, at 1pm ET as Andrew Winston and leaders from the American Sustainable Business Council, Democracy Forward, ECOS and Guardian US share insights into how the shifting political and cultural environment may redefine the responsibilities and opportunities for companies committed to sustainability.
As the pandemic drags on into a third calendar year, the resulting, ongoing
global economic disruptions will continue to chip away at our ability to rebound
on many critical levels.
As WEF Managing Director Saadia Zahidi explains in the report’s preface:
“Widening disparities within and between countries will not only make it more difficult to control COVID-19 and its variants, but will also risk stalling — if not reversing — joint action against shared threats that the world cannot afford to overlook. Last year’s edition of the Global Risks Report warned of potential knock-on economic risks that are now clear and present dangers. Supply chain disruptions, inflation, debt, labor market gaps, protectionism and educational disparities are moving the world economy into choppy waters that both rapidly and slowly recovering countries alike will need to navigate to restore social cohesion, boost employment and thrive.
“These difficulties are impeding the visibility of emerging challenges — which include climate transition disorder, increased cyber vulnerabilities, greater barriers to international mobility, and crowding and competition in space. Restoring trust and fostering cooperation within and between countries will be crucial to addressing these challenges and preventing the world from drifting further apart.”
Insights for business
-
Businesses may be unprepared for transition risks such as rapid shifts in
policies and regulations, the need to develop low-carbon technologies and
changes in consumer behavior and investor preferences. These risks have the
potential to destabilize the financial system, as in aggregate they can
increase default rates and asset volatility.
-
Businesses perceived as lagging, or as complicit in slowing down climate
action, could lose consumer and investor confidence and face additional
state intervention and liability risk through judicial action. A disorderly
transition could see more frequent and severe supply chain disruptions due
to labor and product shortages, especially as sectors and companies switch
operating models or simply go out of business. These disruptions present
challenges to the resilience of business models across all industries.
-
Businesses of all sizes need to be incentivized to proactively factor in
transition risks and move to circular economy models, while governments
should be encouraged to take bold and immediate steps towards implementing
robust legal frameworks that ensure a just transition.
-
Businesses can leverage opportunities in areas such as supply chains, codes
of conduct within their industry and inclusion of a resilience dimension
into workforce benefit offerings.
Peter Giger, Group Chief Risk Officer at Zurich Insurance Group, said: “The
climate crisis remains the biggest long-term threat facing humanity. Failure to
act on climate change could shrink global GDP by one-sixth and the commitments
taken at COP26 are still not enough to achieve the 1.5°C goal. It is not too
late for governments and businesses to act on the risks they face and to drive
an innovative, determined and inclusive transition that protects economies and
people.”
The report closes with reflections on year two of the COVID-19 pandemic —
yielding fresh insights on national-level resilience, as well as practical
advice for implementing resilience within organizations.
Read the Global Risks Report 2022 here and find out more about the Global Risks Initiative here.
Get the latest insights, trends, and innovations to help position yourself at the forefront of sustainable business leadership—delivered straight to your inbox.
Sustainable Brands Staff
Published Jan 11, 2022 1pm EST / 10am PST / 6pm GMT / 7pm CET