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Only 19 Percent of Business Leaders Say They Are Ready to Lead the Social Enterprise

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Amid rapid technological, economic and social change, it is important for organizations to move beyond mission statements and social impact programs to put humans at the center of their business strategies.

In its “2019 Global Human Capital Trends” report, “Leading the social enterprise: Reinvent with a human focus,” Deloitte examines ways organizations can reinvent themselves on a broad scale, including interacting, motivating, and personalizing experiences with the workforce to help build identity and meaning for workers.

Completed by nearly 10,000 respondents in 119 countries, Deloitte’s ninth annual Global Human Capital Trends report is the largest longitudinal survey of its kind. In the report, respondents said the role of the social enterprise is more important now than ever and noted a positive link between leading the social enterprise and an organization’s financial performance. In fact, 73 percent of industry-leading social enterprises expect stronger business growth in 2019 than in 2018, compared to only 55 percent of those where the social enterprise is “not” a priority. However, only 19 percent of respondents reported being “industry leaders” in their organization’s maturity as a social enterprise.

Today, more than 4 in 10 (44 percent) of respondents said social enterprise issues are more important to their organization than they were three years ago, and 56 percent expect them to be even more important three years from now.

“There is a lot of discussion about organizational purpose and while I agree that it is important, what’s missing for many organizations is the focus on the individual and the day-to-day challenges that workers are facing,” said Erica Volini, principal, Deloitte Consulting LLP, U.S. human capital leader. “The reality is that while technology is helping organizations gain competitive advantage, if not managed appropriately, it can simultaneously mean that workers lose their identity in the workplace. We see a call to action for organizations to reinvent their approach to human capital with the worker in mind to create opportunities for continuous learning, accelerated development, and professional and personal growth.”

The future of the workforce
As organizations look to effectively lead the social enterprise, they must adapt to the forces restructuring work and the implications to the workforce – both in composition and capability – while embedding a meaningful experience for workers.

This focus on the workforce comes as more than 86 percent of respondents cited reinventing the way people learn as important or very important – the No. 1 trend for 2019. Leading organizations are empowering individuals’ need to continuously develop skills by investing in new tools to embed learning not only into the flow of work, but the flow of life. With the need to sustain 50-60 year careers as part of a 100-year life, lifelong learning has evolved from a matter of career advancement to workplace survival. However, even with this emphasis on learning, only 10 percent of respondents said their organizations are “very ready” to address this topic.

Amplifying the need for continuous learning is the ongoing adoption of automation technologies as 64 percent of respondents said that automation is important or very important. Yet even with these advancements, human skills remain critical to augmenting the value of this technology. In response, organizations should consider redesigning work into a new category of “superjobs,” which combine the work and skill sets across multiple domains, opening up opportunities for mobility, advancement and the rapid adoption of new skills desperately needed today.

But even as part of the workforce reorganizes into superjobs, Volini shared, lower-wage-work across service sectors continues to grow, along with non-traditional contract, freelance, and gig employment – and it is imperative that these jobs are not left behind. “There is no ‘one-size-fits-all’ when it comes to the workforce of the future. Organizations need to explore all options and create the culture and infrastructure where everyone has a place. That will be part of how organizational inclusion will be defined in the future,” said Volini.

The future of the organization
In the age of the social enterprise, organizations are being challenged to up their game when it comes to the employee experience. This emphasis comes as only 49 percent of respondents believed that their organizations’ workers were satisfied or very satisfied with their job design and only 42 percent thought that workers were satisfied or very satisfied with day-to-day work practices.

As organizations look to provide technology to support employees’ work, only 38 percent of respondents said that they were satisfied or very satisfied with the current work-related tools and technology available. Finally, only 38 percent of respondents thought that they have enough autonomy within their jobs to make good decisions, providing further evidence that significant reinvention is required.

“Over the last five years, issues related to productivity, well-being, overwork and burnout have grown,” said Jeff Schwartz, principal, Deloitte Consulting LLP, U.S. future of work leader. “As a result, organizations need to shift from the traditional employee experience to a new category we call ‘human experience,’ where relationships are enduring, learning is continuous, and work has meaning centered around human identity.”

Creating this human experience requires a different type of leader. Eighty-one percent of survey respondents believed that “21st-century leaders” face unique challenges and requirements, making it critical for organizations to extend leadership pipelines to find and build leaders from within the organization. Developing new leaders from within can help them hone critical skills, including managing through influence, promoting transparency, and thriving in a more collaborative and connected world.

Underlying this shift is the continued reinvention of the traditional hierarchical organizational model. One-third (31 percent) of survey respondents said their organizations now operate mostly in teams within a hierarchal framework and another 46 percent said that they are somewhat team-based. However, most C-suite leaders, tools, cultures and incentives are still struggling to adopt and support the team-based model. With the advent of new technology, organizations can use data and insights to complete this shift.

The future of HR
In this 10th year of the economic recovery, organizations are finding themselves in a job-seekers’ market as the war for talent rages on. “As organizations’ workforce needs drastically change, leaders should shift from focusing on acquiring talent to accessing capabilities. While the change may seem nuanced, taking a more expanded view of where skills can be found – whether it’s in automation, the gig economy or current employees – can pay dividends in today’s fast-paced and high-demand business environment,” said Volini.

As a result, the importance of internal, enterprise-wide talent mobility has become paramount. In 2019, three-quarters (76 percent) of survey respondents believed new tools and models for careers, and internal mobility are important or very important. Beyond mobility, organizations are finding that they need to look at the technology provided by the cloud as a launchpad, not a destination. But despite investing billions in HR technology, 65 percent of respondents report that this technology is inadequate or only fair at achieving its overall objectives.

With new talent approaches, the way many organizations compensate and reward workers has fallen out of date. Today, only 11 percent of respondents felt that their rewards systems are highly aligned with their organizational goals and nearly one-quarter (23 percent) do not feel they know what rewards their employees value.

“The combination of shifts in the work, the workforce, and the organization have created a new mandate for HR to shape the future,” said Heather Stockton, principal, Deloitte Global, global human capital leader. “But HR cannot do this alone. The entire organization, led by the symphonic C-suite, needs to come together to help organizations truly take the lead in the future of work.”

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Amidst Strong Economic Rebound in Russia, Risks Stemming from COVID-19 and Inflation

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Following a strong economic rebound in 2021, with 4.3 percent growth, Russia’s growth is expected to slow in 2022 and 2023, with a forecast of 2.4 percent and 1.8 percent growth, respectively, according to the World Bank’s latest Regular Economic Report for Russia (#46 in the series).

The Russian economy has now recovered to above its pre-pandemic peak, with growth driven by a strong rebound in consumer demand. In 2022, growth will be supported by continued strength in commodity markets, but will likely also be hampered by COVID-19 control measures and tighter interest rates.

Household consumption in the second quarter increased to more than 9 percent on the previous quarter (seasonally adjusted), showing the fastest rate of growth in a decade. Labor markets also saw a substantial upswing, with unemployment falling to a four-year low and real wages growing.

Russia’s current account surplus has also been exceptionally strong, on the back of high commodity prices and low levels of outbound tourism. The federal budget has been consolidated, led by a strong growth in revenue, and is on track to meet the authorities’ target of meeting the fiscal rule next year.

“This surge in spending resulted from the release of pent-up demand created by pandemic restrictions,” said David Knight, Lead Economist and Program Leader, World Bank. “It was aided by increased credit, Russian tourists staying at home for the holidays this year, and resource inflows via the energy sector.”

The report assesses the short-term risks weighing on Russia’s growth and finds that  low vaccination rates are necessitating stricter COVID-19 control measures that may reduce economic activity, while more persistent inflation will likely call for tighter interest rates for a longer period, limiting the growth outlook.

The report also analyzes how Russia could be impacted by global economic growth under three different green transition scenarios, and suggests that domestic climate action can help mitigate some of the possible impacts of a global green transition and create new opportunities for Russia.

The country’s new low-carbon development strategy, which aims for a 70 percent reduction in net emissions by 2050 and net carbon neutrality by 2060, will become an important first step for Russia. A focus on enabling the transition to a more diversified and faster growing economy will call for strengthening of a broad range of assets including human capital, knowledge, and world-class market institutions.

“Environmental sustainability is becoming central to the global economic agenda. Increased commitments by countries and firms to carbon neutrality signal that wholesale changes to policy frameworks will be needed in the coming years,” said Renaud Seligmann, World Bank Country Director for Russia. “With Russia’s pledge to become carbon neutral by 2060, the country now needs to take concrete actions of moving towards decarbonization.”

To accomplish these goals, the report recommends the implementation of carbon pricing and the consolidation of energy subsidies for consumers in Russia. At the same time, measures should be taken to ensure people are protected from the costs and any adverse impacts of the transition.

The report estimates that consumer energy subsidies on electricity, gas and petroleum in Russia amounted to 1.4 percent of the country’s GDP in 2019. By redeploying these resources, the authorities could increase GDP and ensure that no consumers are left worse off. At the same time, this would help reduce greenhouse gas emissions and move Russia closer to its goal of a green and sustainable economy.  

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World trade reaches all-time high, but 2022 outlook ‘uncertain’

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Global trade is expected to be worth about $28 trillion this year – an increase of 23 per cent compared with 2020 – but the outlook for 2022 remains very uncertain, UN economists said on Tuesday.

This strong growth in demand – for goods, as opposed to services – is largely the result of pandemic restrictions easing, but also from economic stimulus packages and sharp increases in the price of raw materials.

According to UN trade and development body UNCTAD, although worldwide commerce stabilized during the second half of 2021, trade in goods went on to reach record levels between July and September.

Services still sluggish

In line with this overall increase, the services sector picked up too, but it has remained below 2019 levels.

From a regional perspective, trade growth remained uneven for the first half of the year, but it had a “broader” reach in the three months that followed, UNCTAD’s Global Trade update said.

Trade flows continued to increase more strongly for developing countries in comparison to developed economies overall in the third quarter of the year, moreover.

The report valued the global goods trade at $5.6 trillion in the third quarter of this year, which is a new all-time record, while services stood at about $1.5 trillion.

For the remainder of this year, UNCTAD has forecast slower growth for the trade in goods but “a more positive trend for services”, albeit from a lower starting point.

Among the factors contributing to uncertainty about next year, UNCTAD cited China’s “below expectations” growth in the third quarter of 2021.

“Lower-than-expected economic growth rates are generally reflected in more downcast global trade trends,” UNCTAD noted, while also pointing to inflationary pressures” that may also negatively impact national economies and international trade flows.

The UN body’s global trade outlook also noted that “many economies, including those in the European Union”, continue to face COVID-19-related disruption which may affect consumer demand in 2022.

Semiconductor stress test

In addition to the “large and unpredictable swings in demand” that have characterized 2021, high fuel prices have also caused shipping costs to spiral and contributed to supply shortages.

This has contributed to backlogs across major supply chains that could continue into next year and could even “reshape trade flows across the world”, UNCTAD cautioned.

Geopolitical factors may also play a role in this change, as regional trade within Africa and within the Asia-Pacific area increases on the one hand, “diverting trade away from other routes”.

Similarly, efforts towards a more socially and environmentally sustainable economy may also affect international trade, by disincentivizing high carbon products.

The need to protect countries’ own strategic interests and weaknesses in specific sectors could also influence trade in 2022, UNCTAD noted, amid a shortage of microprocessors called semiconductors that “has already disrupted many industries, notably the automotive sector”.

“Since the onset of the COVID-19 pandemic, the semiconductor industry has been facing headwind due to unanticipated surges in demand and persisting supply constraints…If persistent, this shortage could continue to negatively affect production and trade in many manufacturing sectors.”

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Small Businesses Adapting to Rapidly Changing Economic Landscape

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The World Economic Forum has long been at the forefront of recognizing the strategic importance of sustainable value creation objectives for business. While interest has mostly focused on how large corporations contribute to the global economy and sustainable development objectives, small and mid-sized enterprises (SMEs) are often overlooked as major drivers of economic activity, as well as social and environmental progress around the world.

A new report released today finds factors that previously disadvantaged SMEs can lead them to new opportunities. Nine case studies from multiple industries and regions highlight what SMEs can do to increase their future readiness.

Developed in collaboration with the National University of Singapore Business School, the University of Cambridge Judge Business School and Entrepreneurs’ Organization, the report also finds that SMEs are lagging behind in terms of societal impact. Although there is a clear need to operate in line with sustainability goals, many SMEs have yet to include explicit strategies and performance measurement centred on societal impact.

The top challenges cited by SME executives include talent acquisition and retention (for 52.5% respondents), survival and expansion (43.8%), funding and access to capital (35.7%), non-supportive policy environment (21%), the difficulty of maintaining a strong culture and clear company purpose and value (20%).

SMEs can leverage their size, networks, people and the strengths of technology to support their goals of sustainable growth, positive societal impact and robust adaptive capacity. While it is essential for SMEs and the wider economy to increase their future readiness, they can thrive only insofar as the necessary supporting infrastructure and regulatory frameworks exist.

“We hope this will inspire and encourage SMEs and mid-sized companies to harness their potential in becoming a major driver of sustainable and inclusive economic growth and innovation by focusing on several core dimensions of future readiness,” said Børge Brende, President, World Economic Forum.

“Through this report, the Forum aims to highlight the significant role SMEs can play not just locally but also globally. The New Champions Community is a step towards bringing these smaller companies into the forefront of global discourse around socioeconomic development and engaging them in a community of forward-thinking companies from across the world,” said Stephan Mergenthaler, Head of Strategic Intelligence and Member of the Executive Committee, World Economic Forum.

The report aims to develop a deeper understanding of organizational capabilities and orientations needed for SMEs to successfully generate lasting financial growth, affect society and the environment positively, and develop high levels of resilience and agility.

It relies on robust research methods and combines rigorous primary and secondary research. The takeaways and conclusions presented in the research have been derived from an analysis of over 200 peer-reviewed articles and engagement of more than 300 CEOs and founders of SMEs through surveys and in-depth interviews.

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