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Global Human Capital Trends report: The Rise of the Social Enterprise

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Amid concerns about automation, the need for new skills, an aging workforce and tightening labor markets, the make-or-break issue facing companies this year is the need for realignment among the C-suite to focus on business’ evolving role in society. In its 2018 Global Human Capital Trends report, “The Rise of the Social Enterprise,” which can be viewed via its digital-first, progressive web app on mobile, tablet or desktop, Deloitte also examines the increasing expectations of the individual and the breathless pace at which technology is shaping organizations’ human capital priorities.

“As society grapples with daunting demographic, technological and social challenges, people want business leaders to fill the gap, but our research shows they have a long way to go,” said Erica Volini, principal, Deloitte Consulting LLP, U.S. human capital leader. “This year’s report is a wake-up call for organizations to look beyond their own four walls and reimagine their broader roles in society. Integrating the C-suite to build a more social enterprise will be a differentiator for businesses to attract the right talent, drive customer loyalty and sustain long-term growth.”

With more than 11,000 HR and business leaders weighing in, this year’s Global Human Capital Trends report is the largest longitudinal survey of its kind. Respondents overwhelmingly point to the need for a symphonic C-suite—a team-based, cross-disciplinary approach to tackling complex issues—with 85 percent calling this trend important or very important. Survey results show companies where C-suite executives regularly collaborate are one-third more likely to be growing 10 percent more than companies whose leadership operates in siloes. Despite being necessary to advance the enterprise, 73 percent say their executives do not regularly collaborate.

Filling society’s leadership vacuum

Increased transparency and heightened political awareness have drawn widespread attention to business’ role in society as a driver of change. Organizations find they are increasingly expected to exercise their ability to do social good, both externally for customers, communities and society, as well as internally for their employees. True social enterprises must take a total stakeholder approach to pressing public issues to maintain reputation and relevancy.

With more pressure on businesses to be good citizens and engineer solutions to critical social challenges, citizenship must be a core part of an organization’s identity and mission. In fact, 77 percent of survey respondents cited citizenship as important or very important. According to the “Deloitte Millennial Survey 2017,” millennials’ high expectations for corporate responsibility is a strong contributor, with 76 percent regarding business as a force for positive social impact. Despite the emerging link between social impact and companies’ financial performance, only 18 percent of respondents say citizenship is a top priority in corporate strategy. Thirty-four percent have few or poorly funded citizenship programs, and 22 percent are not focused on this at all.

“Corporate citizenship is now a CEO-level strategy and critical to a company’s bottom line,” said Josh Bersin, principal, Deloitte Consulting LLP, and founder and editor-in-chief of Bersin. “It’s not about check-the-box CSR initiatives, but integrating citizenship, fairness, inclusion, and purpose as core values across work practices. Customers and employees alike are holding companies to higher standards than ever before and rewarding companies who demonstrate socially-conscious behavior with unwavering loyalty.”

Internal and external social forces are also driving attention to the aging global workforce. Extended life expectancies raise questions on how long careers will last and how aging workers will impact economies and public policy. Fifteen percent of survey respondents report that their organizational perspective is that older employees are getting in the way of rising talent. Despite the aging global workforce and the competitive advantages older talent offers, 49 percent of respondents indicate their companies have done nothing to help older workers find new careers as they age, and another 15 percent say older workers are viewed as an impediment to rising talent. However, the aging workforce remains an untapped resource of experience and knowledge for social enterprises to use to their advantage.

As constituencies look to how companies treat their own employees, tackling the alternative workforce takes center stage for socially-conscious organizations. By 2020, 37 percent of organizations expect a growth in contractors, 23 percent in freelancers, and 13 percent in gig workers. Despite this anticipated growth, only 16 percent said they have an established set of policies and practices to manage this variety of worker types. It is critical to successfully implement hybrid workforce strategies because they can have a significant impact on an organization’s employment brand and external reputation.

The power of the individual requires a holistic approach to jobs and careers

In the past year, organizations have become laser-focused on how automation induced job shifts will impact individuals. The Deloitte research shows that more than 4 in 10 companies believe automation will have a major impact on jobs, and 61 percent are now actively redesigning jobs around AI and robotics. Additionally, 72 percent of HR and business leaders rated the topic of AI as important or very important.

Against this backdrop, companies and individuals realize the traditional career model is becoming defunct. Forty-seven percent of those surveyed consider building new career models and skills as very important. More than 54 percent have no programs in place to build the skills of the future, and only 18 percent feel they give employees opportunities to develop themselves. Espousing their role as drivers of change in the social enterprise, companies need to work to develop and implement robust solutions to decrease the growing skills gaps.

In addition to investing in employees’ professional development, organizations must also rethink how they invest in their employees on a personal level. Forty-three percent of those surveyed say well-being reinforces their organization’s mission, 60 percent say it improves employee retention, and 61 percent say it improves productivity and bottom-line results. However, according to Bersin research, only 3 percent of companies think their reward offerings are very effective at motivating talent. In a new social enterprise, companies must explore more frequent rewards and other incentives like vacation time or student-loan forgiveness.

“Personalized incentives and well-being strategies are key differentiators in talent acquisition and retention, particularly in a tight labor market,” said Volini. “Once-a-year reviews and bonuses are table-stakes in today’s enterprises. Expanding rewards and well-being strategies is critical for the C-suite if they want to attract and retain the right individuals.”

Leveraging technology for sustainable growth

With the deployment of AI, robotics, automation, and people analytics showing no signs of slowing down, companies are reconciling a demand for human skills and the need for increased productivity. While 72 percent of respondents see this area as important, only 31 percent feel ready to address it.

“Automation is here to stay and will improve scale, speed and quality,” said Brett Walsh, global human capital leader, Deloitte Global. “But it’s important to remember that as routine work is automated, new jobs will be created—jobs that are more service-oriented, interpretive, social, and play to our essential human skills. Only companies whose C-suite embraces this transformation and redesign how work gets done to leverage these skills will be able to stay a step ahead of their competition.”

Executives anticipate a growing requirement for complex problem-solving (63 percent), cognitive abilities (55 percent), and social skills (52 percent). To that end, 70 percent of respondents believe workers will spend more time on collaboration platforms in the future and 67 percent anticipate a growth in “work-based social media.” As a flood of new workplace communications tools augments team-based work, 47 percent of organizations cite the productivity of the hyperconnected workforce as a very important issue.

As technology permeates the workplace, people analytics is at the top of executives’ minds, with 84 percent of respondents rating it as important or very important, while only 10 percent of respondents feel very ready to deal with this challenge. With 64 percent of companies actively managing legal liability related to their organization’s people data, only 22 percent have excellent processes to safeguard this data, exposing them to additional risks that can threaten their status as a social enterprise if not proactively managed.

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Thailand: Growth in Jobs Critical for Sustained COVID-19 Recovery

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Thailand’s economy was severely impacted by the COVID-19 pandemic and is estimated to have shrunk by 6.5 percent in 2020. Growth is projected to expand by 4.0 percent in 2021, according to Restoring Incomes; Recovering Jobs, the latest edition of the World Bank’s Thailand Economic Monitor,” launched today. The report stresses that sustained recovery in employment will be essential to helping the country bounce back in 2021 and 2022.

In 2020, weak global demand, the sharp decline in international tourist arrivals, and domestic mobility restrictions depressed goods and services exports and private consumption. Exports and private investment are estimated to have declined by 18.5 percent and 4.4 percent respectively, while household consumption declined by 1.3 percent.

The resulting declines in income have created economic hardship for many, though the Government has made good progress in implementing a substantial package of measures to support households and firms. Nevertheless, projections indicate that an additional 1.5 million people may have entered poverty in 2020 due to the economic impacts of COVID-19, based on a poverty line of US$5.50 (2011 PPP) per day.

This year, the economy is expected to recover gradually, despite the recent second outbreak of COVID-19, and growth is forecast to pick up further to 4.7 percent in 2022. However, the recovery remains vulnerable to downside risks, including from an extended resurgence of the pandemic resulting in a prolonged stagnation in tourism and domestic activity, a weaker-than-expected global recovery that could lead to continuing trade and supply chain disruptions, and high household debt levels.  

The pandemic’s impact has had a significant impact on Thailand’s labor market, with a particularly large increase in unemployment among young people. Hours worked fell, as did monthly incomes. Hours worked have not fully recovered, and employment in several sectors including manufacturing remains smaller than a year ago. This means the labor market is in a vulnerable position to confront any future shocks including a resurgence of COVID-19.

“The COVID-19 crisis and its economic impact have highlighted a key vulnerability for Thailand: the declining number of working-aged people, which compounds the challenge of recovering the economic losses of the last year,” said Birgit Hansl, World Bank Country Manager for Thailand. “Improvements in employment, productivity and labor incomes, especially among the poor, will be necessary for a sustainable recovery.”  

The report recommends that in the short term, the government put in place training programs to improve workers skills and provide financial support while they get back to work. Ongoing efforts are required to ensure that education and training matches the needs of employers.

In the longer term, the government can increase employment in the care sector, make childcare more accessible and decrease its cost to help increase female labor force employment. The report also recommends increasing the retirement age and putting in place performance-based compensation schemes and flexible working arrangements to extend the working lives of older people.

“The decline in the working age population will reduce labor supply and economic output over the coming decades. Good jobs will need to be created in high-productivity sectors associated with Thailand’s emerging knowledge economy. Policies to boost labor productivity and labor market participation of older people and women can help promote a sustainable recovery from COVID-19, while addressing challenges associated with an aging population,” according to Kiatipong Ariyapruchya, World Bank Senior Economist for Thailand.

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The World Needs to Wake Up to Long-Term Risks

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For the last 15 years the World Economic Forum’s Global Risks Report has been warning the world about the dangers of pandemics. In 2020, we saw the effects of ignoring preparation and ignoring long-term risks. The COVID-19 pandemic has not only claimed millions of lives, but it also widened long-standing health, economic and digital disparities. Billions of caregivers, workers and students – especially minorities who were disadvantaged before the pandemic – are now at risk of missing pathways to the new and fairer societies that the recovery could unlock. According to the Global Risks Report 2021, released today, these developments may further impede the global cooperation needed to address long-term challenges such as environmental degradation.

When it comes to technology access and digital skills, the gap between the “haves” and the “have nots” risks widening and challenging social cohesion. This will particularly affect young people worldwide, as this group faces its second global crisis in a generation and could miss out altogether on opportunities in the next decade.

Financial, digital and reputational pressures resulting from COVID-19 also threaten to leave behind many companies and their workforces in the markets of the future. While these potential disparities could cause societal fragmentation for states, an increasingly tense and fragile geopolitical outlook will also hinder the global recovery if mid-sized powers lack a seat at the global table.

Once again, environmental risks dominate by impact and likelihood, looking ahead towards the next decade. Societal fractures, uncertainty and anxiety will make it more difficult to achieve the coordination needed to address the planet’s continued degradation.

For the first time, the report also rates risks according to when respondents perceive they will pose a critical threat to the world. Clear and present dangers (0-2 years) reveal concern about lives and livelihoods – among them infectious diseases, employment crises, digital inequality and youth disillusionment. In the medium-term (3-5 years), respondents believe the world will be threatened by knock-on economic and technological risks, which may take several years to materialize – such as asset bubble bursts, IT infrastructure breakdown, price instability and debt crises. Existential threats (5-10 years) – weapons of mass destruction, state collapse, biodiversity loss and adverse technological advances – dominate long-term concerns.

“In 2020, the risk of a global pandemic became reality, something this report has been highlighting since 2006. We know how difficult it is for governments, business and other stakeholders to address such long-term risks, but the lesson here is for all of us to recognize that ignoring them doesn’t make them less likely to happen. As governments, businesses and societies begin to emerge from the pandemic, they must now urgently shape new economic and social systems that improve our collective resilience and capacity to respond to shocks while reducing inequality, improving health and protecting the planet. To help meet this challenge, next week’s event, The Davos Agenda, will mobilize global leaders to shape the principles, policies and partnerships needed in this new context,” said Saadia Zahidi, Managing Director at the World Economic Forum.

The report also reflects on the responses to COVID-19, drawing lessons designed to bolster global resilience. These lessons include formulating analytical frameworks, fostering risk champions, building trust through clear and consistent communication, and creating new forms of partnership. The key risks outlined in the report are complemented with recommendations to help countries, businesses, and the international community to act, rather than react, in the face of cross-cutting risks. The report closes with an overview of “frontier risks” – nine high-impact, low-probability events drawn from expert foresight exercises – including geomagnetic disruption, accidental wars and exploitation of brain-machine interfaces.

“The acceleration of the digital transformation promises large benefits, such as for example the creation of almost 100 million new jobs by 2025. At the same time however, digitalization may displace some 85 million jobs, and since 60% of adults still lack basic digital skills the risk is the deepening of existing inequalities,” said Peter Giger, Group Chief Risk Officer, Zurich Insurance Group. “The biggest long-term risk remains a failure to act on climate change. There is no vaccine against climate risks, so post-pandemic recovery plans must focus on growth aligning with sustainability agendas to build back better.”

“Economic and societal fallout from COVID-19 will profoundly impact the way organizations interact with clients and colleagues long after any vaccine rollout. As businesses transform their workplaces, new vulnerabilities are emerging. Rapid digitalization is exponentially increasing cyber exposures, supply chain disruption is radically altering business models, and a rise in serious health issues has accompanied employees’ shift to remote working,” said Carolina Klint, Risk Management Leader, Continental Europe, Marsh. “Every business will need to strengthen and constantly review their risk mitigation strategies if they are to improve their resilience to future shocks.”

“The pandemic in 2020 was a stress-test that shook the foundations of economies and societies worldwide. Rebuilding resilience to systemic shocks will require significant funding, international cooperation and greater social cohesion. Resilience will also hinge on the continued growth in connectivity worldwide, as we know that economies that digitized early performed relatively better in 2020,” said Lee Hyung-hee, President, Social Value Committee, SK Group. “If the continued deployment of 5G and AI is to emerge as an engine of growth, however, we must urgently bridge digital divides and address ethical risks.”

The Global Risks Report 2021 has been developed with the invaluable support of the World Economic Forum’s Global Risks Advisory Board. It also benefits from ongoing collaboration with its Strategic Partners Marsh McLennan, SK Group and Zurich Insurance Group and its academic advisers at the Oxford Martin School (University of Oxford), the National University of Singapore and the Wharton Risk Management and Decision Processes Center (University of Pennsylvania).

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Air travel down 60 per cent, as airline industry losses top $370 billion

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A new report from the UN’s air transportation agency confirms there was a “dramatic” fall in international air travel due to COVID-19, of around 60 per cent over the course of last year, to levels last seen in 2003.

The International Civil Aviation Organization (ICAO) said on Friday, that as seating capacity fell by around 50 per cent last year, that left just 1.8 billion passengers taking flights through 2020, compared with around 4.5 billion in 2019.

That adds up to a staggering financial loss to the industry of around $370 billion, “with airports and air navigation services providers losing a further 115 billion and 13 billion, respectively”, said ICAO in a press statement.

Grounded in March

As the coronavirus began its global spread, the air industry came to a virtual standstill by the end of March. Following widespread national lockdowns, by April the overall number of passengers had fallen 92 per cent from 2019 levels, an average of the 98 per cent drop-off seen in international traffic and 87 per cent fall in domestic air travel.

There was a moderate rebound during the summer travel period, but recovery was short-lived. “Sectoral recovery became more vulnerable and volatile again during the last four months of 2020, indicating an overall double-dip recession for the year”, ICAO said.

Disparity at home and abroad

The report notes “a persistent disparity between domestic and international air travel impacts resulting from the more stringent international measures in force.”

Domestic travel proved more resilient and was the main driver of any glimmer of recovery to the industry, particularly in China and Russia, ICAO notes, where domestic passenger numbers have already returned to the pre-pandemic levels.

Overall, there was a 50 per cent drop in domestic passenger traffic globally, while international traffic fell by 74 per cent, or around 1.4 billion passengers.

The plunge in traffic, has put the entire industry’s financial liability into question said ICAO, and threatens the viability of millions of associated jobs around the world.

Tourism in crisis

It has also severely impacted global tourism, given that more than 50 per cent of international travellers used to reach their destinations by plane.

ICAO said that the regional breakdown in losses showed a $120 billion loss year-on-year in the Asia-Pacific region, $100 billion in Europe, $88 billion in North America, followed by $26 billion, $22 billion and $14 billion in Latin America and the Caribbean, the Middle East, and Africa, respectively.

The agency described the near term outlook as one of “prolonged depressed demand, with downside risks to global air travel recovery predominating in the first quarter of 2021, and likely to be subject to further deterioration.”

It does not expect any improvement until the second quarter of 2021, athough this will still be subject to the effectiveness of pandemic management and vaccination roll out across the world.

Best-case scenario

In the most optimistic scenario, said ICAO, by June of 2021 passenger numbers will be expected to recover globally to 71 per cent of their 2019 levels (or 53 per cent for international and 84 per cent for domestic flights). A more pessimistic scenario foresees only a 49 per cent recovery (26 per cent for international and 66 per cent for domestic).

ICAO will continue to provide recommendations and support for the aviation sector to weather the crisis. Its new Guidance on Economic and Financial Measures summarizes a range of measures that can be explored by States and the industry to ease the crisis, and strengthen the industry to withstand future shocks better.

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