Assessing Progress toward Sustainable Competitiveness
Margareta Drzeniek Hanouz
World Economic Forum
One of the key developments in the policy space over the past decade has been the advancement of concepts related to environmental sustainability and more recently inclusive growth. Such conceptual schemes comprise social, economic, and environmental components of sustainability, and they provide an intellectual basis for societies around the world to coalesce around the principles of sustained and universal levels of prosperity.
The emergence and widespread acceptance of the principle of social inclusion in the public domain has both a cultural origin and an economic one. Its cultural origin can be traced back as far as the 17th-century idea of egalitarianism, an idea that became embedded in cultural norms and then evolved into a widely held value system in international politics that provided a common rhetoric about human development. In the aftermath of World War II, this concept was translated into the universal declaration of human rights.1 Its economic origin is rooted in the unprecedented economic development of Western economies since the mid-20th century. During this period, high standards of living were achieved by large swaths of the populations of these economies, with the expectation that these standards would remain high and expand globally over time.
In a similar fashion, the concept of environmental sustainability has evolved from two ideas: ecologism—the idea that the non-human world is worthy of moral consideration2—and environmentalism, a broad-based movement concerned with protecting the environment, and in particular with the effects of environmental damage on the health and well-being of both humans and the environment.
Over the past decades, these ideas have become prominent in the global discourse and have helped to create a public expectation of growing prosperity that goes hand in hand with social justice and environmental protection. Yet the possibility of achieving this vision within the boundaries of the prevalent growth model has been called into question as increasing pressures on the environment have become evident, and as concerns voiced over the distribution of the benefits of economic development have grown more forceful. The mounting social and environmental pressures observed in rapidly growing developing and emerging economies suggest that these dimensions are strongly intertwined and therefore should be addressed as part of the economic development process. And because environmental and social sustainability are simultaneously inputs and outcomes of the growth process, they should not be considered in isolation, but rather as integral parts of the economic growth process.
Despite increased awareness about the urgency of social and environmental issues, progress toward a more sustainable future is slow. On the environmental sustainability side, although concrete improvements have been achieved in many countries on specific issues such as the regulation of hazardous substances,3 progress on broader issues has been patchy. Pollution and biodiversity loss are of growing concern, while climate change and its unpredictable consequences remain substantially unaddressed. The world is also facing an increasing scarcity of water, energy, and mineral resources, for which demand continues to climb. These developments signal that—despite growing awareness about the risks related to unsustainable resource and environmental management—the world is not moving toward a more sustainable path and concrete results are yet to be achieved.
On the social sustainability side, there appears to be a trend toward more polarized societies. Although part of this trend can be traced back to the slowdown following the financial crisis, research also finds a structural decline in the share of GDP accruing to labor, mainly driven by skill-biased technological change related to globalization.4 There is a concern that this trend may result in a high concentration of wealth similar to that experienced by Western economies in the earlier stages of industrialization. According to Thomas Piketty’s recent analysis,5 the widespread gains in prosperity to which Western societies have become accustomed and that emerging economies aim to achieve were realized only in the first decades following World War II.6
The recent interest in social inclusion and socioeconomic inequality is linked, in large part, to its potentially socially destabilizing effect. Research shows that more polarized societies may undermine trust in democratic and market institutions, leading to greater political instability.7
Taken together, the limited progress in addressing environmental and social concerns could undermine the prospects for worldwide shared prosperity. In the absence of economic growth, any effort toward a more equal distribution of income would do little good for the millions of people in developing countries who remain at low levels of income and human development. Therefore, while enhancing competitiveness remains a fundamental prerequisite to raising prosperity, it should be accompanied by transformations that adapt to the new technological, geopolitical, and ecological reality to ensure that progress translates into higher human development for all. At the same time, sustainable competitiveness should be at the heart of the thinking about sustainability because competitive economies tend to be more innovative, more resilient, and better able to respond to external shocks and thus maintain high levels of prosperity going forward.
Attaining higher levels of sustainability requires that governments, businesses, and civil society work together to address the emerging challenges. Progress on these challenges requires high levels of multi-stakeholder collaboration—for example, on environmental regulation, where a balance with productivity needs to be ensured, and on social inclusion, which can be achieved only if businesses contribute to human capital development. Such collaboration is needed to achieve more pragmatic progress and allow countries to transition to more sustainable models of growth.
Even though the number of studies on sustainability has grown significantly over the past decades, the detailed linkages between sustainability and competitiveness remain to a large extent uncertain.
To fill this gap, the World Economic Forum has engaged in a series of activities to expand its knowledge of sustainability and of the relationship between sustainability and competitiveness, and has been at the forefront of the discussion on environmental sustainability. This work aims to shape the agenda by catalyzing public-private platforms that help governments draw on their joint expertise to identify and implement solutions to the most pressing issues facing the global community. Issues of economic, social, and environmental sustainability have been showcased and discussed at many of the Forum’s regional and annual meetings. Since 2010, the World Economic Forum—in collaboration with a multi-stakeholder Advisory Board of international experts (Box 1)—has embarked on an effort to integrate the concept of sustainability into its competitiveness work. The Forum continues its efforts to build a more robust narrative of the concept of sustainable competitiveness.