How can digital combine value to industry and society?
In the face of huge societal challenges, how can the digital transformation of industries make a positive contribution?
The digital transformation of industries is generating a fierce debate among policymakers, economists and industry leaders about its societal impact. As digitalization disrupts society ever more profoundly, concern is growing about how it is affecting a wide range of issues, including jobs, wages, inequality, health, resource efficiency and security.
Within this context, the Digital Transformation of Industries program has explored three questions: what impact is the digital transformation projected to have on key challenges facing society? What challenges need to be overcome if digital transformation is to make a positive contribution? And what practical steps can businesses take in the near term to ensure that this is the case?
To help begin a new, evidence-based debate on the future impact of digital transformation, we have conducted a detailed quantitative analysis of the value at stake from the digitalization of four industries (automotive, consumer, electricity and logistics). In each case, we have calculated projections of the potential value of digitalization to the industry itself and emerging sources of value for society, as measured by an intentionally narrow set of indicators (for more information about our methodology please see here). Over time, this approach may be broadened and refined.
So how can the digital transformation of industries make a positive contribution to society? In the first year of the DTI initiative, we have focused on three key areas:
- Employment and skills. Current estimates of global job losses due to digitalization range from 2 million to as high as 2 billion by 2030. There is great uncertainty about the overall impact of digital transformation on jobs, with concerns also about its impact on wages and working conditions.
- Environmental sustainability. We have so far failed to decouple economic growth from emissions growth and resource use. The historic trend holds that for every 1% increase in global GDP, CO2e emissions have risen by approximately 0.5% and resource intensity by 0.4%.¹ Current business practices will contribute to a global gap of 8 billion metric tons between the supply and demand of natural resources by 2030; translating to $4.5 trillion of lost economic growth by 2030.²
- Trust. Social media, radio frequency identification (RFID) tags and user-generated websites such as TripAdvisor have all been instrumental in increasing the transparency of businesses and overcoming information asymmetries. However, according to the Edelman Trust Barometer, trust in all technology-based sectors declined in 2015, with concerns over data privacy and security a key factor. Beyond privacy and security concerns, broader ethical questions about the way organizations use digital technology threaten to erode trust in those institutions.
While these are hugely complex challenges, our analysis suggests that digital transformation has the potential to make a positive contribution:
Value to society greater than industry?
Our value-at-stake analysis has focused on a limited sample of industries and a narrow range of indicators (including jobs, carbon emissions, lives saved and consumer benefits) that have served as a proxy measure for emerging value to society (see Figure 1). However, in aggregate terms, these represent a cumulative ‘combined value’ opportunity of $21.2 trillion for both industry and society between 2016 and 2025, with potential gains to society ($12.7 trillion) exceeding the potential value for industry ($8.4 trillion). Scaled up beyond the industries analyzed, this could mean a potential value opportunity of as much as $100 trillion by 2025 on a cumulative basis. As we move forward, these projections will be tested and refined further in the interests of stimulating an evidence-based conversation about the impact of digital transformation on society; we welcome any contributions to that endeavor.
Of course, the potential value of digital initiatives to society and industry will not automatically be realized. A number of questions need to be addressed by both business leaders and policymakers if they are to maximize the combined value of digital initiatives for both industry and society.
- Are you aware of the value multiplier for society from your digital initiatives? Are you able to measure and track the socioeconomic impact of your future digital initiatives?
- How can you incubate digital initiatives that could in future deliver a high value to society and your business? Is your corporate affairs/social responsibility function suitably aligned with your corporate strategy team?
- To what extent do you understand how industry-led digital initiatives could help you achieve specific policy objectives and targets? What policy tools could you use to incentivize industry toward digital initiatives that deliver value to society?
- Are you taking sufficient steps to digitize your own organizations? Do you have the right digital skills and talent in place? How can you learn and exchange lessons from the experience of private sector organizations?
1. GeSI: ICT Solutions for 21st Century Challenges
2. Accenture Waste to Wealth, Palgrave Macmillan, 2015
3. Trends in Global CO2 Emissions: 2014 Report
4. CAGR taken from 2010 to 2030 to calculate 2025 global emissions forecast. Centre for Climate Change Economics and Policy and Grantham Institute. Policy Paper, May 2015
Societal implications is one of four cross-industry themes (along with digital consumption, digital enterprise, and platform governance) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth analysis of the societal implications cross-industry theme is available in a white paper, which can be downloaded here.
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