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The VUCA world and the future of globalization

4. Oktober 2022

The 2020s were meant to be a decade of change. It was supposed to be the great social upheaval toward sustainability and climate protection. We are now actually experiencing an upheaval, but not as planned. Wars and crises have consumed the global sense of unity.

Climate change, Covid-19, wars, supply chain problems, hunger, mass migration from the east and south – the world as we know it is changing rapidly. Much optimism has been burnt in the process in recent weeks and months. The idea of shaping the future as a continuation of the present has faltered, and with it, the political and economic architecture of an era that began with the fall of the Berlin Wall in 1989.

“We are experiencing a decade of crises and setbacks. The future is ‘VUCA’ – volatile, uncertain, complex, and ambiguous. And so is globalization,” says the publisher of the Global Goals Yearbook, Dr. Elmer Lenzen, who points out seven trends for the years to come:

  1. Geopoliticization instead of economization
  2. Block trade instead of world trade
  3. Availability instead of efficiency
  4. Democracies vs. autocracies
  5. Multipolar instead of multilateral
  6. China as an additional regulatory power
  7. The populists’ finest hour

Sustainability is more important than ever in the face of global crises. There are global challenges such as climate change, demographic change, post-Covid reconstruction, and many other development goals that require decisive action. The resulting social and economic transformation is epochal. It is about nothing less than the transition to a new age (a collective farewell to Bretton Woods, the Washington Consensus, and the Industrial Age). At the same time, the attainability of the SDGs is receding into the distant future. The 2020s were supposed to be a “decade of action,” a new beginning. Instead, we are living in a decade of crises and setbacks.

What’s next?

Hyper-globalization is dead, says Robert Kuttner. It was killed by the rise of China, the supply chain crisis, the Covid-19 pandemic, and Russia’s invasion of Ukraine. Global trade will continue, but under different rules. Might a new trade regime give more weight to climate goals, labor rights, public health, or the public provision of goods? And where does China fit in? These are the questions Kuttner asks in his contribution.

He argues in reference to Dani Rodrik’s recent Harvard paper, “How to Construct a New Global Order,” of a geopolitical bipolarity between the United States and China, “where they compete on a number of fronts, continue to trade with and invest in each other’s economies, [and] do not challenge the legitimacy of each other’s domestic systems.”

Most nations became more unequal over the past half-century. But the global economy has become more equal, largely because China’s development policies have lifted hundreds of millions out of poverty. “We may be on the verge of a different form of globalization that could produce gains for social justice, conceived globally as well as nationally, and not just for rampant capitalism,” Kuttner concludes.

There are industries, such as for solar panels, in which China dominates the entire supply chain as well as the supply of finished products. The textiles industry is another example. “[The] supply chain of US textiles providing material for Central American apparel is an example of regional trade arrangements with modestly better social standards. Such regional deals are likely to expand, as the dystopian idea of universal free trade fades.” Kuttner says the US government is also trying to use industrial policies to reshore industries and jobs. At the same time, China’s Belt and Road Initiative could benefit from emerging economies in the Global South.

Corporate sustainability in a world running out of time

As the corporate world is the most economically and environmentally impactful bloc on the planet, “voluntary corporate action is essential for the preservation of the biosphere,” say Adam Carrel, Tanya McKenna, Lauren Jones, and Tara Duane, authors of the article “Enough – A Review of Corporate Sustainability in a World Running out of Time.”

Market-oriented solutions are considered a path to decarbonization. In fact, during COP 26 in Glasgow, investor commitment toward decarbonization and ESG were considered critical to avoid climate and other catastrophes. “Many organizations consider sustainability strategic for their business. But they need an alternative business model that decouples economic growth from environmental decline and social inequality,” say the authors.

Sustainable businesses should be, at a minimum, in a net neutral position in relation to the environmental thresholds. But…

  1. Should these thresholds be based on materiality?
  2. Against what criterion should this assessment be made?
  3. Should corporations be self-assessing their impacts, or should an independent scientific entity play a role?
  4. To what degree of accuracy should assessments of value chain sustainability be made?
  5. Business models and value chains are very dynamic. How should this be accommodated by organizations looking to maintain a permanently sustainable footing?

Maybe we need to reconsider the term “sustainability.” The authors wonder whether we should be talking about impact, or evolving to regeneration, or to something else. “We have to take into account that sustainability cannot be achieved with a focus on one ‘topic’ at the expense of another,” the authors conclude. “We need to wire corporate sustainability into the wider network of scientific agencies, civil society bodies, multilaterals, and institutions to retrieve it from being a silo of half measures and make it part of a unified effort to restore the long-term health of the biosphere.”