In the world of risk analysis, the publication of the annual World Economic Forum’s Global Risks Report is like the Oscars, albeit with awards that the world doesn’t want to win. This year’s report found that ‘societal risks’ accounted for four of the top six most pressing short-term (0-2 years) concerns - with extreme weather and climate inaction completing the shortlist - and called for a holistic approach to mitigating them.
For centuries, each generation has expected better health and living standards than the last, but environmental volatility and a global pandemic is putting this at risk. According to the WEF report, Covid-19 has increased the short-term threat of infectious diseases (26.4%) and mental health deterioration (26.1%) with waning immunity and an uneven vaccination programme further boosting the likelihood of contagious variants and leading to “an additional 53 million cases of major depression globally”.
What’s more, Covid exacerbated global inequality with ‘livelihood crises’ (30.4%) and the ‘erosion of social cohesion’ (27.5%) listed as the top two short-term societal risks. The breakdown of society is a principal short-term threat in 31 countries, including five G20 nations, while widening economic disparities – for example, the pandemic is projected to push an extra 50 million people into extreme poverty – are likely to increase resentment and deepen divides within and between countries.
Smaller corporations, less skilled workers and people living in poor housing conditions will be the most seriously affected.
According to Ortwin Renn, Director of the Institute for Advanced Sustainability studies (IASS) at the University of Stuttgart, poorer people were not only disproportionately affected by the virus itself due to living in closer proximity to one another and working on location, but also “had less possibility to cope with the side effects of the protective measures, including less opportunity for home teaching, more domestic violence due to narrow living conditions, higher risk of unemployment and higher probability of income losses.”
Furthermore, the societal risk of environmental changes is not evenly distributed either.
“Smaller corporations, less skilled workers and people living in poor housing conditions will be the most seriously affected,” says Renn. “They are more vulnerable if businesses are faltering, they have less coping capacity for dealing with droughts, heatwaves or floods and they have little resources to recover once they are hit.”
Societal ruptures tend to direct attention inwards with national governments prioritising domestic threats over global challenges. But this is akin to solving the symptom, not the root cause.
According to Andrea Bonime-Blanc, CEO-Founder of GEC Risk Advisory and author of multiple books on risk resilience, “the mitigation of global risks begins with a close understanding by any given entity – business, social or governmental – of the big picture, global risk landscape. It continues with a closer assessment of which global risks affect the footprint, location, personnel profile, products, and services of a given business or entity.”
Mitigating global risks also requires collaboration, consistent reassessment, stronger global governance, and coordination with private corporations. “We are entering a new era of greater government and corporate collaboration to deal with material, pervasive, seriously damaging and potentially existential risks such as climate change, technological disruption, social instability, geopolitical shifts and economic disparities,” says Bonime-Blanc.
We are entering a new era of greater government and corporate collaboration to deal with material, pervasive, seriously damaging and potentially existential risks.
For businesses, this requires a sophisticated understanding of risks, smart management and directors that are supportive of risk-mitigation efforts.
Meanwhile, Renn believes that corporations could help the less privileged parts of society “by supporting affordable living spaces for all, assisting small enterprises in the supply chain, co-financing adaptation plans of affected communities and making sure that their employees have the capability to cope with these new challenges. Most important, however, is that they make sure that their corporation is going to become climate-neutral within a reasonable period.”
Like most of the world’s short-term risks, climate action and mitigating societal concerns are inextricably linked. For example, transitioning to net-zero straightaway would have long-term environmental benefits, but could also put millions of workers out of work and worsen societal tensions in the short term.
As such, political decision-makers and corporate directors need a coordinated approach. The last few years have shown that much can change in a short space of time, so whether it’s addressing short-term humanitarian crises, medium-term technological disruption or long-term societal migration, corporations have a pivotal role to play.
This is the first story of a 3-part series analysing the World Economic Forum’s Global Risks Report.
Read about Wärtsilä's approach to sustainability targets here.