by Andia Rispah
COVID-19 is more than a health crisis of immense proportion, it's a catalyst for an imminent restructuring of the global economic order.
It offers a chance to individuals and organisations alike to reset and re-shape the world towards sustainability. Here’s how business leaders can hasten this vital transition.
Transform global health and development
The COVID-19 pandemic has disrupted the global health and development community. The world’s attention has shifted to organisations fighting infectious diseases, health workers, delivery of social services, and protecting livelihoods.
However, this kind of work is complicated due to challenges of access, supply chain logistics, safety, and financial stress. Every country has had to struggle with a lack of equipment and supplies to test and protect against COVID-19.
So how will the pandemic re-shape health and development institutions, priorities, and occupations? Every country will have to re-examine their supply chains for critical health and livelihood related products. There will likely be a surge in producing pharmaceuticals, equipment, and medical supplies locally. Even countries without the capability in these areas will want to develop the same.
More countries will invest in research, therapeutics, vaccines, and non-medical methods of prevention.
This could mean averting economic losses, loss of lives, and livelihoods for millions of poor people around the world.
A golden opportunity in the global supply chain
The COVID-19 pandemic has hit investment and global trade at an unprecedented speed and scale. Multinational companies faced an initial supply shock and later a demand shock as more countries ordered people to stay at home. Individual consumers, businesses, and governments struggled to procure the necessary materials and products.
The healthcare sector's scramble for protective equipment laid bare the inherent risks of inventory and single-sourcing models driven exclusively by cost control. As Chinese factories were closing down, manufacturers struggled due to a lack of flexibility in their supply base.
It forced every country to confront the fragility of the modern supply chain. To reflect on its dependence on the rest of the world to maintain its way of living.
Now countries have the opportunity to design stronger, smarter, and more diverse supply chains.
Some will want to decentralise their manufacturing capacity and consider local production. Policymakers also have an opportunity to consider whether certain products need local or regional manufacturing.
Reviving automated domestic manufacturing
Western countries relied on off-shore supplies for necessities, but now they can see the downside. Governments will certainly revise domestic manufacturing as part of their plan to build up strategic resilience after the current crisis.
Automation will be a crucial component in reviving domestic manufacturing. Advanced automation and robotics will drastically increase productivity in manufacturing processes. Automated manufacturing will replace low-skilled labour with new jobs and opportunities for digitally savvy workers.
Data infrastructure will be a strategic asset
The pandemic has made accessibility to reliable, real-time data an absolute necessity, especially when it comes to coordinating the right medical response. Data will become a more strategic resource across multiple facets of business and community.
This requires a significant investment in data connectivity, acceleration in developing the 5G networks and push for valuable insights into leading economic indicators. It means the manufacturing sector will significantly accelerate the deployment of Industrial IoT. Such advancements include sensing, data visualisation, remote collaboration tools, and AI-based insights across their operations.
Data is a strategic asset to companies and a key factor in their competitive advantage.
Digitisation will become a competitive advantage.
After the Great Recession, McKinsey analysed the performance of publicly traded companies and found that only 10% were more resilient to the crisis than their peers.
The resilient companies had created financial and operational flexibility, cut costs, and built a growth foundation to capture market opportunities after the crisis.
They had invested in software technologies, which gave them greater predictability and efficiency - giving them a competitive edge. Recent advances in AI and IoT technologies have enabled tremendous efficiencies in predictability, capacity, availability, and flexibility of supply chain and manufacturing operations. Digitisation is a fundamental element for building sturdy chains. It makes the identification and recruitment of new suppliers far less time-consuming.
McKinsey found that companies that embraced these technologies earlier were already seeing a 7% growth in revenue over their peers.
COVID-19 has caused the economic and social downturn, but it will create a much deeper divide between companies who have just started to digitise and those further ahead of the digital journey.
A shift to virtual collaboration
Manufacturers still require people to work physically on-site; operators to run machines, and maintenance staff to repair and maintain them. Contactors and external vendors need to access the site to support operations. However, social distancing measures could render nearly 50% of on-site staff jobless.
Manufacturers face this dilemma, but we will see the rapid adoption of remote diagnostic, collaboration, and management tools. It will lead to the emergence of a “virtual shift.” We’ll have a team of experts working remotely, guiding, and supporting the reduced “physical shift” of on-site personnel.
Opportunity for a greener and more sustainable economy
The threat of climate change has been gradual and devastating for people and their livelihoods globally. COVID-19 crisis presents an opportunity to learn the lessons and reset ourselves on a more sustainable path and a new trajectory of sustainable employment.
It has emphasised the importance of investing in areas such as technology and innovation.
It is time to align sustainable solutions with funding in a way that can transform the marketplace.
Sustainable investment will boost economic growth and employment opportunities.
The climate crisis opens up enormous opportunities.
This pandemic has served to highlight that the world’s most vulnerable citizens suffer the most during times of global crises.
To repair lives after the pandemic requires billions of dollars to rebuild industries, supply chains, and create conditions for a resilient financial future. However, the global response to the COVID-19 outbreak also mirrors the approach that IFC uses to manage the climate crisis: that businesses, investors, and financial institutions must lead the way to a new, more sustainable economic model.
As the pandemic re-shapes the global financial system, and as companies evaluate their diminishing returns, investing in climate-friendly strategies could boost economic growth and create new jobs.
Most importantly, companies must place sustainability at the heart of their business and investment strategies to avoid pitfalls of a business-as-usual high-carbon path. It’s a business plan that’s positive for the environment and good for people and profitability.
Businesses should redirect finances into assets and investments that deliver concrete and measurable outcomes to rebuild economies to be more sustainable and resilient.
Sustainable finance requires the private sector to take these opportunities to their full scale; partnerships, innovation, and leadership must flourish.
Prepare for the new normal
From history, we learn that a global crisis creates a fundamental shift that affects consumer behaviour, government policies, and behavioural sectors for years to come.
Countries must understand which part of their social, business, and political environment will change after the COVID-19 pandemic and invest accordingly to prepare for the new normal.
