The economic downturn has been called many things. For now, the consensus choice appears to be “The Great Recession.” Yet, we may be better able to understand the meaning and implications of this consequential time in world history by thinking of it as “The Great Acceleration”—a time when underlying trends jumped to the surface and gained speed.
With the most visible signs of economic collapse now several months behind us, there is mounting evidence to suggest that the downturn is reinforcing underlining trends—as much as or more than it is creating fundamentally new ones.
First, we are seeing a relative increase in the economic and political influence of the world’s largest emerging economies. China’s economy is showing signs of earlier recovery than many of the richest nations. At the same time, the Chinese government is now universally recognized as a crucial actor in the G20 and the Copenhagen negotiations on climate. Few denied this emerging dynamic a year ago, but it is now a political reality.
Similarly, the world’s investors have returned to emerging markets, signaling a view that these markets present the best opportunities for growth. One recent survey shows that money managers are overweighting their investments in emerging markets—by a factor of two over just two months ago—and foreign direct investment is beginning to return as well.
After a year of record volatility, commodity prices are also beginning to head north again. Oil, one of the most manic depressive of all tradable items, is now nearly double its late-2008 low. Wheat, corn, and soybeans have returned to prices not seen since before last fall’s collapse. This suggests that the long-term trend of greater scarcity and higher demand is returning to shape markets.
It is also clear is that the economic slowdown has in no way blunted the advance of climate change. Sir Nicholas Stern, author of the authoritative assessment of the economics of addressing climate change, told the recent Bonn conference that the cost of inaction was growing substantially and exceeds estimates in his 2007 report. “Some of the consequences seem to be coming through faster and more worryingly than we thought.”
The implications of these trends are important for sustainable business strategies.
The “reset economy, reset world” (to borrow the theme of the BSR Conference 2009) is marked by a deepening and acceleration of many of the trends we saw pre-crisis. This means that business will continue to encounter a world that is more transparent, more focused on emerging economies, and more resource constrained than the one we have left behind.
This only reinforces the need to shape business strategies that are fit for purpose in a world that’s changed faster than many would have expected. Happily, we are seeing the vast majority of companies maintain their commitment to sustainability, just as The Economist wrote recently: “<a href="http://www.economist.com/node/13648978?story_id=13648978The preliminary results of the CSR stress tests are encouraging</a>."
All this reinforces the case sustainability, and at the same time, shows the need for new approaches. The Great Acceleration will change market rewards. Companies that focus on innovation to meet the needs of new markets and a low-carbon economy, build value chain solutions for systemic change, embrace transparency, and make massive increases in resource and process efficiency will prosper in this world. Those that don’t will likely suffer.
In the aftermath of September 11, many commentators in the United States said that “everything has changed.” In retrospect, it is clear that those claims were wildly overblown.
We should remember this as we think about the impact of the recession. Historians may well look back on the last several months and conclude that the financial crisis meant mainly that the future arrived ahead of schedule. Business strategies that embrace this future can’t wait.
Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.
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