This is true, now more than ever before. In a world beset with uncertainty, governments struggling to keep economies afloat, and a public health crisis – the status quo has never been more insignificant. Change is now the order of the day.
While the pandemic has brought about hardship in many lives, there is a silver lining – an opportunity to rebuild our economies in a more sustainable and resilient manner. Truthfully, COVID-19 has brought the global economic model, which was already living beyond its means on various fronts, to a halt. So how do we make sure that going back to ‘normal’ does not mean going back to our previously unsustainable way of life?
Even before the pandemic, several global megatrends were reshaping economies, changes were taking place but, arguably, with much resistance. Now change is inevitable, businesses are showing greater willingness to embrace it at an accelerated and almost breakneck speed. By riding the waves created by these megatrends, we can begin to usher in a new economic era.
The first trend is that of changing consumer behaviours. The EY Future Consumer Index (2020) has shown that 62 per cent of consumers prefer to buy goods from companies who do good for the community. Twenty-nine per cent are ready to pay a premium for brands that contribute towards the community itself. Consumers are increasingly interested in product ‘labels’ to ensure sustainability across the whole supply chain.
COVID-19 has brought the global economic model to a halt
Lifestyles are also changing. E-commerce has accelerated, since social distancing and lockdowns left businesses with no other option other than digital sales. COVID-19 also upended jobs, with many people working remotely and possibly changing the future workplace as well. The FT Future Forum research has shown that 72 per cent of interviewed knowledge workers would want a hybrid remote-office model in the future.
This could strengthen gender equality, as juggling work and home responsibilities will be shared more easily by both parents. Moreover, business travel has also been minimised, indicating which trips are truly indispensable. These shifts will lead to lower levels of commuting, save time, money and lower carbon footprints.
Gauging economic success at both macro and micro levels has also been altered. Nations are starting to explore the idea of moving beyond GDP, integrating quality of life within metrics of success. At a micro level, financial reports are losing their supremacy and the need for further integrated and sustainability reporting is being championed.
Metrics are linked to the financing landscape. Both individual investors as well as institutional investors, such as private equity houses, are increasingly scrutinising non-financing disclosures by the companies they invest in, giving greater importance to Environmental Social and Governance (ESG) elements. Ninety-one per cent of investors surveyed in the 2020 EY Climate Change and Sustainability Services Survey, stated that nonfinancial performance played a pivotal role in their investment decisions in the previous year.
Moreover, tools such as green bonds and similar options are also being introduced on the markets. Even in Malta, the Malta Stock Exchange introduced a Green Market last month. To assist investors, the EU created a classification system of sustainable economic activities known as the ‘EU taxonomy’, to help shift capital towards sustainable projects and activities.
This classification has also been set up to reach the new EU targets in terms of climate change, through the EU Green Deal. At the same time, regional and/or national rules and regulations are also pushing businesses to become more sustainable in their processes as well as being more transparent in terms of their operations.
Slowly but surely, the Maltese economy is reacting to these megatrends, exposing new models which hopefully sees to the introduction of even more long-term sustainable business over the next few years.
Further discussion on how to make sure these megatrends lead to a more sustainable economy and society will be taking place on April 8, during an EY webinar. More information and registration is available online.
Maria Giulia Pace is a manager within EY Malta’s Climate Change and Sustainability sub-service line.
Spyridoula Stamatopoulou is a manager within EY Greece’s Climate Change and Sustainability Services sub-service line.