"Uncertainties of recovery reinforce a dual strategy"

" \n In economics, as in medicine, a recovery is rarely clear cut; different cases respond differently to treatment. \n \n\n \n While the international consensus is that global gross domestic product (GDP) will rise this year after last year\u2019s calamitous 4.2% fall caused by Covid-19, the diagnosis varies. \n \n\n \n The OECD predicts global GDP will rise by\u00a04.2%, boosted by vaccination campaigns, health policies and government intervention, and\u00a0the IMF\u2019s latest forecast is even brighter,\u00a0foreseeing 5.5%\u00a0growth this year\u00a0and 4.2% in 2022.\u00a0Yet, at the same time,\u00a0the fund highlights real\u00a0unpredictability\u00a0\u2014 warning\u00a0the pandemic could yet halt the\u00a0rebound\u00a0if surging infections, renewed lockdowns and\u00a0vaccine distribution problems\u00a0conspire.\u00a0 \n \n\n \n Such uncertainties help to explain\u00a0diverging regional expectations\u00a0over the pace of recovery and mixed levels of confidence in the ability of industries to meet growth targets. \n \n\n \n A survey of 4050 C-level executives in large companies worldwide by Accenture, for example, reveals that business leaders in Europe and North America foresee a U-shaped recovery taking up to 18 months, while their Asian counterparts anticipate a rebound in 12 months. Indeed, executives in the Asia-Pacific (Apac) region are far more confident about meeting 2021 growth targets (60%) than their European and US counterparts (45% and 48%, respectively). \n \n\n \n The crisis has also exposed large differences in the resilience of companies. Just one-third (32%) of Europe\u2019s executives expect profitable growth in the next recovery phase, on par with the US, but behind Apac (41%), and while some European firms (4%) are reinventing themselves and doing better than before, more are doing so in Asia (7%). \n \n\n \n Dual strategy \n \n\n \n This fragmented picture not only highlights the uncertainties of the recovery, but it also offers clues about how companies should respond to the main forces that will shape it. If digital transformation defined the landscape in the 2010s, global change today is being defined by sustainability; those companies pursuing both \u2014 and integrating them \u2014 are likely to recover faster and emerge stronger. \n \n\n \n Research suggests this intersection of digital technologies and sustainability holds tremendous concealed value \u2014 and Asian companies have so far been marginally better at tapping it. Accenture data suggest such \u201ctwin transformers\u201d are nearly three times more likely to be tomorrow\u2019s market leaders, as resilience during the crisis will catapult them rapidly into a rebound. These companies are unique and display common strategic traits. Most twin transformers (61%) already generate more than 10% of their revenues through business models driven by sustainability and enabled by technology \u2014 and nearly 80% expect to do so in three years\u2019 time. \n \n\n \n They have learned how to combine resources in order to scale technology applications to sustainable practices. Not only do they plough more into innovation \u2014 45% are investing more than 10% of annual revenue pre-Covid, jumping to 57% over the next year \u2014 they target initiatives that combine sustainability impact and technology at scale. They are also distinct for engaging suppliers in their sustainability journeys, forging broad partnerships to ensure sustainable product lifecycles and improve traceability. \n \n\n \n Additionally, they assign key performance indicators that go beyond financial results by linking performance to progress on cutting emissions, the share of their products with positive societal impact and the share of the resources they procure from sustainable sources. And if there is one characteristic by which twin transformers can be distinguished above all others, it is their conviction that talent translates into concrete business value. \n \n\n \n European leadership \n \n\n \n Data suggest Europe\u2019s twin transformers, for example, believe passionately that failing to nurture their workers will hamper digital and sustainable transformation. These companies take real responsibility for the continued employability of staff in a radically changing labour market, acting decisively to give them the skills they need for the post-Covid future. They realise instinctively that sustainability attracts the very best people, inspired by values and commitment and often at the forefront of efforts to address climate change. \n \n\n \n European companies are particularly well placed to undertake this twin transformation \u2014 and with the right strategic mix can lead it. That is because success requires a commitment to cutting-edge innovation applied with purpose to enable sustainable solutions \u2014 a mix that plays well to traditional European strengths. \n \n\n \n The continent already has a global head start in sustainability.\u00a0In 2020, it created\u00a0more energy from renewables\u00a0than fossil fuels\u00a0and its leaders are\u00a0collaborating\u00a0across business, government and society to create an\u00a0ambitious agenda\u00a0for sustainable change while investing in\u00a0green start-ups.\u00a0 \n \n\n \n Europe\u2019s companies score more highly in ESG ratings than competitors, and in their post-pandemic rebound and mid-term strategies, they are prioritising both technology adoption and sustainability. \n \n\n \n Investors are interested: last year sustainability was featured in far more European earnings calls than in other regions and 53% of Europe\u2019s top companies also discussed technology. \n \n\n \n The embodiment of Europe\u2019s potential to lead the twin transformation can be found, for instance, at Schneider Electric.\u00a0In January,\u00a0it soared to the top\u00a0of the annual Global 100 index of green firms to be named the world\u2019s most sustainable corporation.\u00a0The company epitomises the strategic embrace of technology and sustainability, but also illustrates something that at this juncture is just as important: the concrete business value of doing so. Schneider has doubled its market value to more than \u20ac70bn\u00a0in the past two years alone. \n \n\n \n Of course, Schneider is not alone \u2014 it is one of nine companies in the\u00a0Global 100 index\u00a0based in France, whose neighbour Germany is home to seven of the top 100.\u00a0Other European companies making the twin transformation also score highly in the rankings \u2014 Schneider ousted Danish wind power giant\u00a0\u00d8rsted\u00a0from last year\u2019s top spot \u2014 or have become household names.\u00a0 \n \n\n \n Danish bioscience company\u00a0Christian Hansen\u00a0allocates 75% of research and development spending to natural nutrition supported by digital technologies. German engineer\u00a0Siemens\u00a0uses simulation and digital twins to green its output, and French luxury goods group\u00a0Kering\u00a0has devised digital solutions to slash the environmental footprint of fashion. \n \n\n \n French personal care company\u00a0L\u2019Or\u00e9al\u00a0harnesses technology to ensure use of sustainable palm oil, and German delivery group\u00a0Deutsche Post DHL\u00a0has empowered consumers to choose low-carbon shipping. \n \n\n \n New world order \n \n\n \n With their strategic vision and commitment to a way of doing business that prioritises values, these European companies feel very different to their predecessors. That is because twin transformers instinctively understand they are on the brink of a global transformation in which success \u2014 indeed survival \u2014 is premised on a need to harness the forces of the future. \n \n\n \n At the end of the cold war, it was current to talk about the \u201cnew world order\u201d \u2014 which was as unpredictable as it was exhilarating \u2014 and there is little doubt in the context of the digital and sustainable transformations that Covid-19 has brought us to a similar juncture. \n \n\n \n Just as it was then, the future will be distinguished by both contradictory and complementary trends \u2014 many of which have already played out in Europe. A new multilateralism will tussle with regional divergence as continents cooperate, but also diverge. \n \n\n \n A key lesson from the pandemic is the importance of global cooperation to tackle problems that affect the whole human race \u2014 and multilateralism will change to reflect this. Yet at the same time, regional supply chains could turn inwards as companies facing shortages and bottlenecks decide to reshore production: a form of \u201cdeglobalisation\u201d that will push some to localise business operations favouring national or regional suppliers. \n \n\n \n How we view the world economy is also being turned on its head. Striking variations in the impact of Covid-19 have highlighted deep inequalities and drawn attention to the social value of \u2018key\u2019 public workers. \n \n\n \n Nothing short of the future of capitalism is up for grabs, as the goals for recovery are shaped by a new social contract distinguished by public investment in the care economy, education, and low-carbon infrastructure \u2014 features reflected in the fabric of European society. \n \n\n \n Twin transformers are ahead of the curve, having instinctively understood the new challenges posed by the pandemic to business models that have in the past allowed companies to shirk responsibility for their workers. The rise of digital behaviour \u2014 from remote working and learning to telemedicine \u2014 has accelerated alongside automation, meaning the future of work has never been more fluid. This poses huge challenges for businesses, which must address workers\u2019 needs more than ever while preparing them for a workplace revolution. \n \n\n \n Against this backdrop, changing dynamics in technology and sustainability investment will reshape international performance, and could result in greater regional levelling \u2014 fuelling competition. \n \n\n \n As Europe begins to catch up with Asia on technology, for example, Asia will begin to catch up with Europe on sustainability.\u00a0While before Covid-19 Europeans trailed in the adoption of technologies like artificial intelligence, cloud computing and 5G, nearly\u00a040% are now making large investments. In turn, Europe\u2019s first mover advantages in sustainability look precarious as\u00a0demand for ESG investment in Asia-Pacific\u00a0soars. \n \n\n \n The rise of the twin transformers represents an evolutionary adaptation to these monumental changes in the business landscape as the recovery gains momentum. They are equipping themselves for a new order shaped by unforeseen change more comprehensively and rapidly than their peers \u2014 and immunising themselves against the uncertainties of recovery. \n "

"Uncertainties of recovery reinforce a dual strategy"

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