The new economic reality dawns

The WEF's ethos is that progress without social development is not sustainable, and that social development without economic progress is not achievable

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The World Economic Forum (WEF) is an independent, international organisation based in Switzerland. Its principal aim is to build world-class corporate governance systems   based on core social values.

The WEF has three key goals: To be the leading organisation which builds and energises leading global communities; to be the biggest creative force in the shaping of global, regional and industry strategies; to be the leading catalyst for world communities when undertaking global initiatives to improve economic and social conditions worldwide.

The WEF believes that the challenges facing the world today cannot be tackled by governments, the business community or civil society alone, but rather a strategy to address global issues is best developed through forging close working relationships with those individuals who have the greatest knowledge and experience in the areas to be addressed. To this end, the WEF coordinates with world leaders across global communities, providing them with strategic insights and working with them to establish a series of initiatives in order to help them improve and address issues.

About the annual meeting
Since 1971, the WEF has held its annual meeting in Davos-Klosters in Switzerland. Between January 26-30, 2011, key world leaders, including stakeholders from the business community, global governments, science, the media, religion and the arts – as well as members of civil society – will convene to discuss and form initiatives to address the most critical issues facing the world.

The theme for the 2011 annual meeting is ‘Shared Norms for the New Reality’, which represents the concerns of many world leaders. It encapsulates the problems faced by living in an increasingly complex and interconnected world where shared values and principles are seemingly diminishing.

The annual meeting provides a forum to consider the mechanisms of existing ways of operating, as well as to examine potential new strategies that can have positive effects for the global community. The 2011 meeting will place particular emphasis on addressing the question of ‘how’ – that is to say going beyond theoretical debate by creating tangible ideas and feasible solutions to key challenges.

Specific aims of the 2011 meeting
The theme for the World Economic Forum Annual Meeting 2011 is founded on four main pillars:
i) Responding to the new reality
The ‘New Reality’ can be defined as a world with many centres of power, characterised by a high degree of volatility and the frequent entrance and exit of players in an increasingly competitive global market. It also embodies rapidly-changing patterns in social behaviour, a worldwide dearth of commodities and natural resources, the changing nature and the role of governments, as well as new social and environmental demands on business.

There is a genuine need to anticipate and identify changes in the global balance of power. Furthermore, as economic interdependencies continue to deepen, business models mature and new and disruptive technologies are devised, there is an increased pressure on global leaders to find ways of handling these challenges. Attendees of the 2011 annual meeting will gain a keen insight into these issues and – more importantly – will be given the opportunity to shape aspects of this ‘New Reality’.

ii)  The economic outlook and defining policies for inclusive growth
Whereas the world is currently in economic turmoil, nonetheless a total meltdown of global financial and economic systems has been avoided. There remains, however, much uncertainty as the world continues to pay the price for pre-crisis exuberance and irresponsible behaviour. Economists and industry commentators alike are uncertain as to whether inflation or deflation will be more damaging for the global economy. Also, the old question of a double-dip recession still hangs like the sword of Damocles. Finally, now we are more used to the term ‘trillion’ than we are ‘billion’ when discussing the state of the global economy, there is growing concern for the fate of our future generations.

iii)  Supporting the G20 agenda
The future impact of the G20 depends upon its ability to safeguard the recovery and build the foundation for sustainable and balanced growth. There is also a pressing need to make international financial systems more resilient to risk. Overcoming these issues, together with ensuring that a clear set of values is shared amongst global communities, is a crucial step in building a more stable society. The G20 is one of the most important institutions in existence today when it comes to defining a new governance and multi-national leadership model following the global crisis.

Critical to achieving success in these areas also requires participation from economies outside the G20, specifically from those industries that play a major role in the creation of employment opportunities and market stability. Therefore, the G20 agenda should also look at the need for greater inter-dependence between the business community and governments and there is a great deal of work to be done to rebuild a partnership between business and governments.

Such initiatives are important to ensure global business remains innovative, enterprising and is able to sustain its ability to generate jobs. Similarly, they are essential in ensuring that governments do not become too engulfed by internal issues and constraints that they do not have the capacity to perform their key role of exercising global leadership. To this end, the 2011 annual meeting plays a major role, not only in promoting the issues on the G20 agenda, but also ensuring a high degree of public awareness of these vital issues.

iv) Building a ‘Global Risk Response Mechanism’
In an increasingly globalised society, it is impossible to avoid systemic and natural risks, but it is vital that global leaders are better prepared when it comes to risk-responsiveness, risk-awareness, preparedness and risk mitigation. Now, more than ever, it is crucial to share ideas and insights if the world is to respond effectively to these challenges. The understanding of systemic weaknesses can help bridge the gap between emerging risks and the ability to understand and respond to these risks.

Today, there is no formal system in place that offers the opportunity to share the best expertise and experience globally, so that all nations can make the best possible decisions when faced with a crisis. In order to help create such a system, the 2011 annual meeting will launch what will be known as the Global Situation Space, which will hopefully help all nations better understand and respond to endemic risks.

The wider agenda
In addition to these specific aims, the 2011 annual meeting will also place a number of ongoing points high on its agenda:

i) Energy Poverty Action
A joint initiative of the World Business Council for Sustainable Development (WBCSD), the World Energy Council (WEC) and the World Economic Forum, the Energy Poverty Action (EPA) partnership was launched at the WEF’s 2005 annual meeting and remains an ongoing concern. The EPA’s aim is to help develop scalable solutions to energy poverty and to cater for energy demand in areas that are currently not plugged into utility grids.

The inability to access sustainable modern energy services is something that affects many under-developed nations and in fact acts to constrain their growth and development. Globally, it is estimated that around three billion people have a lack of access to sustainable and affordable modern energy, with the majority still dependent on traditional fuels – which in itself further diminishes the world’s natural resources and undermines the sustainability of rural communities.

Energy poverty affects poor people in every world region but nowhere more than in central and southern Africa. Here, in urban areas, access to electricity is limited to just 25-30 percent, but more strikingly, in rural areas, this figure is just six percent. To put this into perspective, almost three-quarters of Africa’s 700 million people live in the rural areas of Africa.

The EPA’s approach to tackling these issues is to invest in local entrepreneurs and communities, providing them with both technical and financial resources to enable them to build and manage sustainable community-based energy companies. The EPA’s strategy is to encourage private investment to establish energy sources, especially for communities.

Following this, public financing can be sourced to cover the ongoing costs required for technical assistance and the development of additional capacity. The EPA partnership has to date achieved three key objectives. It has:
– Established a not-for-profit company that – alongside governments – jointly identified energy programmes and provides professional services to help implement each programme.
– Implemented a pilot electricity project in Lesotho, South Africa, and has rolled out additional programmes in the southern regions of Africa.

– Created a private-public funding model that can leverage public resources to tap into significant pools of private funding.

All told, if it is possible to demonstrate the commercial viability of such schemes, the EPA hopes to be able to encourage more entrepreneurs to come on board to help fund further initiatives. In short, the problem of access to energy supplies in rural areas is too big to be handled purely by public resources, and as such the intervention of the private sector is vital.

ii) The SlimCity Initiative
Launched at the 2008 annual meeting, the SlimCity Initiative aims to create a global forum wherein city governments and private sector  organisations can exchange ideas on best practices in order to deliver resource efficiency within global cities. The focus of this exchange is firmly on the sustainable development of all aspects of a city, in order to achieve a reduced carbon footprint and increased resource efficiency. The initiative has a particular emphasis on the energy, mobility, engineering and construction, chemicals, real estate and IT industries. The four cornerstones of the SlimCity Initiative are:

Smart grids: Smart grids offer huge benefits in terms of energy efficiency. They are also integral to the development of renewable energy, electric vehicles and new energy services. The so called digitisation of electricity looks set to become the core of the energy solutions and the low-carbon economy of the future.

Re-powering transport: The objective of the WEF’s Re-Powering Transport project is to enable the adoption of clean and secure energy sources for the purpose of transportation.

This project brings together executives from the WEF’s Industry Partnership programmes across three of its defined sectors, namely; mobility (automotive, aviation and logistics), energy (oil and gas, utilities, alternatives) and chemicals. The project also looks at related areas including alternate fuels, energy efficiency, and electric transportation.

Retrofit financing and investment:

Commercial and domestic buildings represent 40 percent of the world’s energy requirements, but with the world’s building stock currently turning over at a rate of only five percent per annum, and with new construction having been put virtually on hold, achieving reductions in   energy use and carbon emissions largely depends on retrofit investment. A concept born out of the WEF 2010 annual meeting, the Retrofit Finance and Investment project aims to encourage collaboration between all parties within the construction industry to engender reduced emissions via retrofit.

Housing for all: This project gives industry leaders and experts the opportunity to voice their opinions on what they believe to be the most pressing current challenges and opportunities facing the world’s lower-income housing market. The WEF’s aim is to raise awareness of the issue of sub-standard housing within the global business community, track the issue on both a business and an economic level, and to report on suggested best practices and proposed government policies – principally those that create incentives for the private sector to become involved.

The SlimCity Initiative has an ongoing obligation to raise awareness and encourage communication in the field of urban sustainability and best practices between cities and the private sector. To date, the initiative has registered some key successes, such as the » development of SlimCity knowledge cards to identify key trends and best practices in the areas of smart energy, urban mobility and sustainable construction. These cards have been employed to enable high-level city workshops on urban sustainability across the world, in Chicago, San Francisco, Melbourne, London, as well as at global level discussions at the ICLEI World Congress 2009 and the World Bank Dialogue on Cities and Climate Change, 2009.

iii) The Disaster Resource Partnership
The number of natural disasters occurring globally each year has more than doubled in the last 30 years, due to a number of factors including climate change, a growing population base and increased urbanisation. As a result, it is estimated that in excess of 250 million per annum are affected by natural disasters. In response to this, it is predicted that over the next few years the humanitarian response to such disasters will dramatically increase to a point where it becomes extremely difficult to manage. The recent earthquake in Haiti has highlighted the increasing importance of humanitarian assistance to natural disasters.

In recent years there has been a marked shift in the perception of the private sector in dealing with natural disasters. It has been one from donating money to help reduce the suffering in the aftermath, to one that actively helps deal with the consequences of the event. The private sector also has a great part to play in helping mitigate the risk of disaster both through prevention and preparation.

Examples of ways in which the private sector can help include:
– In the immediate aftermath of a disaster, a construction company already operating in the affected area is well placed to contribute labour, materials and equipment, and can also draw on networks and supply chains that can save lives.
– Following a natural disaster, the engineering and construction industries have specialised knowledge and technical expertise that is essential to the reinstallation of key infrastructure in the affected areas. Also, these industries can provide services such as damage assessment and seismic surveys in addition to helping with the project management of the rebuilding procedure.
– Finally, involving engineering and construction firms early on in the relief and recovery processes means that they can contribute strategically to future planning and reconstruction, hence playing a critical role in minimising the effects of potential future disasters.

The WEF appreciates that one of the key things required is a revitalised understanding of the crucial role that the private sector can play in responding to natural disasters. As such, the WEF has established the Disaster Resource Partnership, a body that helps maximise the core strengths and existing capacities of the global engineering and construction community, so that resources can be rapidly deployed in the event of a crisis.

Equal billing
‘Shared Norms for the New Reality’ is a fitting maxim for the WEF’s 2011 annual meeting, as it seeks to bring together the shared values required to embrace a changing world that for the last 12 months has had its hatches battened firmly down as it tries to weather waves of economic turmoil. Davos 2011 will not just focus on the current global financial crisis, and its enduring spirit of ‘Entrepreneurship in the Global Public Interest’ assures us that the perennial global issues of poverty, energy and natural disaster relief will also take centre stage.