Report An Economy in Flux

Werte / N° 21

The

Power

of

Change

Leading economists warn that those who ignore the TRANSFORMATION of society will eventually suffer the same fate as the dinosaurs. To have

a future in the era of digitisation and climate change, they will have to reinvent themselves and ensure that their activities serve a socially

relevant purpose

SOCIETY

Collaborative partnership, justice, credibility, growth: modern society is facing enormous challenges

W

hen a Group CEO refers to dinosaurs, the message is clear. Old, vast, inflexible and no longer in keeping with the times: no manager wants to give this impression of

their company. It was Siemens CEO Joe Kaeser who chose to use the image of the dinosaur as a warning. It is a neat way of saying that we are at a turning point – companies are now threatened by the same sort of epoch-making change that once wiped out the dinosaurs.

These creatures were no longer capable of surviving major transformation. Today, companies have to be ready to face all kinds of upheaval: climate change and digitisation, in particular, are revolutionising business. Society is demanding that companies are radically digital and simultaneously do a convincing job of pro- tecting the climate from the consequences of their business mod- els. Does this herald a new era of economic activity?

The rapidly increasing capacity of networked computers is part of the reason why the warming of the earth’s atmosphere is becoming clearer with each passing second. Digitisation is pervading every moment of our lives and every corner of our planet. “Dataism” (a term coined by US business journalist David Brooks) is defining our present, together with the emerging universal climate catastrophe. At the same time, consumers are attacking the economy: “The le- gitimation pressure on companies is mounting as our ecological crises take hold,” says Uwe Schneidewind, Chief Research Executive of the Wuppertal Institute for Climate, Environment and Energy. “Society is demanding accountability.” Society abhors anything that threatens it in the long term. At the same time, sales of goods and services are not declining. Just think of the smartphones to be seen at Fridays for Future demonstrations and of the streaming services on which data volumes and consumer incentives are growing ex- ponentially. Another kind of economy has long been possible, ac- cording to economist Günter Faltin, one of Germany’s most renowned professors for “entrepreneurship” – and necessary, too. “The focus must shift away from short-term profit maximisation, otherwise we will trigger a rebellion,” he says. Activists are already

exerting constant pressure on corporations, while the ecological consequences of production and goods transport are debated in- creasingly frequently at AGMs. And investors are now reacting. Faltin, who created the world’s biggest Darjeeling importer and a transparent, ecological business model with his “Tea Campaign”, suggests: “We have to dare to think beyond profit and make ecolo- gy an express element of our business models.”

Experience has taught us to be sceptical as to whether such ideas actually influence the economy. But restructuring is under way. Michael Böhmer, Chief Economist at economic research and consulting company Prognos, is in no doubt: “Climate change will result in a radical transformation of national economies.” Even though combustion engines and coal power are still hotly disputed topics, one sector after another is now essentially recognising the need for change, according to Böhmer. Although car-makers can still sell their luxury SUVs in large numbers, this will change when the EU rules take effect, he argues. Penalties and regulation have an impact on the economy and are supported by some entrepre- neurs. Family entrepreneur Jürgen Heraeus, for instance, is de- manding CO2 prices that force businesses to undertake climate- related innovation.

This does not mean that rival companies will have to increase their operating costs in a bid to save the climate. Digital technolo- gy, as well as regulation and fiscal policy, will render many cli- mate-friendlier policies – such as video conferences in lieu of busi- ness trips – a cheaper alternative. Some companies are setting a good example of their own accord. Microsoft is aiming for a nega- tive CO2 footprint by 2030, while Bosch hopes to become climate- neutral as early as this year. “The economy’s phase-out targets are much more ambitious than those of politicians,” confirms the Wuppertal Institute’s climate economist Schneidewind.

Some companies find it easier to assume a pioneering role and develop the likes of Sustainability 3.0, in which the social and eco- logical consequences of their own economic activity become part of the strategy. According to Schneidewind, a company’s shareholders have an important part to play, with an international PLC subject- ed to quite different pressure from ROI-driven investors than a family-managed SME. But the risk aspect, too, will increasingly in- fluence the CEOs of listed corporate giants. “Those who fail to keep pace with climate change risk a huge depreciation of their assets,” he says.

Prognos economist Michael Böhmer claims that an orderly, gen- uine shift towards climate neutrality will create great export op- portunities for the German economy. He believes that industry possesses the requisite qualifications and skills: “Even stronger economic growth can be achieved within the framework of a con- sistent climate policy.” But this would require immediate invest- ment in order to mitigate the consequences of climate change. Prognos estimates that Germany will need to invest between two and three per cent of its annual economic output by 2050.

The climate-friendly restructuring of the economy and compa- nies is an investment project of strategic priority. The same goes for digitisation. There is a link between the two phenomena, with digitisation playing a key role in the attainment or failure to achieve climate goals, according to Irene Bertschek, head of the Research Department “Digital Economy” at the Leibniz Centre for European Economic Research (ZEW) in Mannheim. As an industrial location, Germany is finding the transition problematic, she says, with many sectors still struggling to take a resolute approach to

digitisation. “Many are placing too much emphasis on making spe- cific technical processes more efficient – only a few are scrutinis- ing their entire business model in the context of digitisation,” ac- cording to the economist, who advises the Federal Government as a member of the Commission of Experts for Research and Innovation (EFI). “It is clearly always an advisable entrepreneurial strategy to address the potential of digitisation in some depth.”

But how does a company go digital? “Those who want to achieve successful digital operations have to think beyond digitising their processes and offering their key products online,” says Irene Bertschek. The focus is increasingly on benefit, rather than on in- dividual products and services. The car alone is no longer impor- tant: mobility is. Suddenly it is all about the provision of interfaces, the creation of platforms. Dirk Baecker, a sociologist at Wit- ten/Herdecke University who is researching the change in corpo- rate management, says that digitisation has triggered competition. Nobody wants to be left behind and everyone wants to keep pace with the times, but this can lead to the adoption of methods, that seem more effective simply because they are new, regardless of whether or not they fit the given situation: For example, he says, “although agile methods may not suit every department, they are often promoted across the board.” This type of approach can de- stroy a great deal of employee confidence in new management methods. Management in the digital age is essentially “manage- ment from outside”, rather than from above, but management first has to empower the business. “The longer companies have enjoyed success, the less they still know about the foundations for it,” Baecker suggests. In the digital age, this basis has to be reanalysed from the bottom up – and dependencies reassessed. But the organ- isation has to be knocked into shape first. “We are seeing a lack of

investment in processes, structures and, above all, thinkers,” says Prognos economist Michael Böhmer. “Those who want to survive should invest 10 euros in their people for every euro spent on tech- nology.” It’s not so much a matter of attractive salaries as of equip- ping the workforce with skills for the digital age. Recruiting and retaining highly qualified staff is a key challenge – especially in the light of demographic change. “Our working and personal lives are undergoing major transformation,” says the entrepreneur and pro- fessor Anabel Ternès von Hattburg. Companies have to be compe- tent and allow flexibility in this context. “Not only should they be able to use data analysis to predict customer requirements as accu- rately as possible, but they must have the guts to innovate with the help of lateral thinkers and creative minds.”

Some companies are driven by another factor: experts are con- vinced that more and more people are seeking a sense of purpose in their working lives – and that could be relevant to the success of both the digital and the climate transformation. In the light of cli- mate change, some employees may now be reluctant merely to manufacture and market the next luxury car, instead preferring to work on a mobility platform aimed at reducing the use of re- sources and emissions. In the words of Uwe Schneidewind from the Wuppertal Institute, “It’s about refocussing on what the econo- my is actually for.” According to this hypothesis, in future, compa- nies will only retain their staff if they create a sense of purpose as well as generating profit. Or, as Anabel Ternès von Hattburg puts it: “Companies will find it hard to be successful in future if they fail to take the issues of ecological, economic and social responsibility seriously.”

Text: Tim Farin

Illustrations: Julien Pacaud

ECONOMY

Digitisation is pervading every aspect of our lives, and sooner or later every sector will have to undergo change or modernisation

The legitimation pressure on companies is mounting as

our ecological

crises take hold

UWE SCHNEIDEWIND,

Wuppertal Institute

POLITICS

The topic dominating the agenda is climate change. It is determining the pace of transformation

Even stronger economic growth

can be achieved

with a consistent climate policy

DR. MICHAEL BÖHMER,

Prognos

Entrepreneurs must have the guts to innovate with the help oflateral thinkers and creative minds

ANABEL TERNÈS VON HATTBURG, SRH Berlin University