As we navigate our own private echo chambers day to day, it is tempting to allow oneself to be swept up in the positivity so prevalent in sustainable business circles right now. We have the technologies, ideas and business models to succeed and the time is now to right the world of its wrongs to create a resilient and sustainable society for all.
But the reality presents a frighteningly different picture, filled with huge challenges and a demand for ever more complex solutions.
The Global Risks Report 2018 — produced by the World Economic Forum (WEF) in preparation for its annual meeting of business, politics and economic minds in Davos, Switzerland, next week — offers a stark reminder of just what those challenges look like, and how important they are to overcome.
The key message served up by this year’s edition, released today, is that while the race for economic growth in 2018 presents big opportunities to address many of the creaking systems that underpin our functioning planet, we are still very much struggling to keep pace with everything that is changing. For example, civil unrest means there is a real possibility of new wars, and the loss of biodiversity in some regions is a serious problem.
“Humanity has become remarkably adept at understanding how to mitigate conventional risks that can be relatively easily isolated,” the report says. “But we are much less competent when it comes to dealing with complex risks in the interconnected systems that underpin our world, such as organisations, economies, societies and the environment.”
The warning is clear: When risk cascades through a complex system, the danger is not of incremental damage but of “runaway collapse” leading to a “suboptimal status quo.”
WEF’s annual state-of-play survey asks the views of a range of decision-makers and experts as to what they see as being the biggest risks facing the world today. It appears that while the types of risks have changed little in the last few years, the perceived level of risk and resulting impact has grown. Of the 1,000 respondents, 59 percent pointed to an intensification of risk; just 7 percent suggested a declining of risk.
Much of this is attributed to a deterioration of the geopolitical landscape, which has caused plenty of pessimism. Almost all respondents (93 percent) believe political or economic confrontations between nations will get worse in 2018, with almost 80 percent of experts saying that war is a very real possibility.
But it is our changing natural environment that presents the biggest headache for political and corporate leaders — unsurprising following a year dominated by hurricanes, extreme temperatures and the first rise in CO2 emissions in four years.
The experts were asked (as they are every year) to rank 30 global risks in terms of likelihood and impact. All five environmental risks – extreme weather; biodiversity loss and ecosystem collapse; major natural disasters; man-made environmental disasters; and failure of climate-change mitigation and adaptation — ranked highly on both dimensions, with extreme weather events deemed to be the single most prominent risk.
“Environmental risks, together with a growing vulnerability to other risks, are now seriously threatening the foundation of most of our commons,” says Alison Martin, Group Chief Risk Officer at Zurich Insurance Group and member of the steering board of the Global Risks Report. However, she believes we’re currently seeing a ‘too little, too late’ response by governments and business to solving problems such as climate change. “It’s not yet too late to shape a more resilient tomorrow, but we need to act with a stronger sense of urgency in order to avoid potential system collapse.”
Elsewhere, the threat posed by cyberattacks is growing in prominence, with large-scale cyberattacks ranked third in terms of likelihood and ‘cyber dependency’ considered the second-most significant driver of global risks in the next decade, particularly with more companies reliant on technology to function and succeed.
Unlike previous editions of the Global Risks Report, economic stresses feature less, as the world recovers from the 2008 crash and GDP growth rates slowly improve. However, WEF argues that this apparent upbeat picture is masking underlying concerns: “The global economy faces a mix of long-standing vulnerabilities and newer threats that have emerged or evolved in the years since the crisis,” it says. Familiar risks include unsustainable asset prices and elevated indebtedness, particularly in China.
But there are a number of new challenges that should be on our radar, including the potentially disrupting nature of automation and digitalization, particularly in jobs; plus, the impact of rising nationalist politics, as seen in the US and across Europe in the last year.
Using our global economic recovery as a backbone to support the building of more sustainability into business, economies and governments is a nice idea. Whether we see that starting to materialise in the next 12 months, as business responds to the wealth of risks and challenges presented here and elsewhere, remains to be seen.
“We have an opportunity that we cannot afford to squander, to tackle the fractures that we have allowed to weaken the world’s institutions, societies and environment,” says WEF’s founder and Executive Chairman, Professor Klaus Schwab. “We must take seriously the risk of a global systems breakdown. Together we have the resources and the new scientific and technological knowledge to prevent this. Above all, the challenge is to find the will and momentum to work together for a shared future.”