Geopolitical Shocks and Climate Change Will Remain Biggest Risks in 2025, Says EIU Report

"Hopes that the world will one day return to normal have been continually dashed since the covid-19 pandemic, and 2025 will be no different," the Economist Intelligence Unit (EIU) says in its Industry outlook 2025 report that explores the challenges, opportunities and trends to watch in the following six industries: energy, financial services, consumer goods and retailing, technology, automotive, and healthcare. The report further says: "Although working and travel patterns are normalizing, the economic and political outlook remains uncertain. EIU forecasts that real GDP will grow by a subdued 2.6% in 2025, similar to 2024 but slower than the average for the ten years before the pandemic." What is more, "The US economy will slow as labor markets tighten, but China's will accelerate slightly, amid stimulus and reviving trade. Those of the EU and Japan will also tick up, but only smaller developing markets such as India will deliver significant growth."

Geopolitical tensions and trade barriers will force more shifts in supply chains, amid subdued business growth. The EIU also presents the following predictions for 2025:

• Inflation is expected to ease, allowing for further monetary easing.
• Prices for agricultural and energy commodities will fall, but those for industrial raw materials will rise.
• Geopolitical risks will persist amid wars in Ukraine and the Middle East, while rising trade barriers between the EU, the US and China will reshape supply chains.
• Climate change will increase geopolitical tensions. National climate pledges will be updated at COP30 in November 2025, but much will depend on US leadership.
• Investment in technology, especially artificial intelligence (AI), will remain strong, but tech companies will face regulatory pressures, investor impatience and scrutiny over energy usage.

According to the EIU, "Falling inflation will allow monetary easing to continue. We expect the Federal Reserve (Fed, the US central bank) to cut interest rates by a further 50 basis points during 2025. We also expect prices for agricultural commodities and industrial raw materials to move in different directions in 2025- 26. Although agricultural prices will continue to trend downwards, prices for industrial raw materials will rise again, particularly for base metals that benefit from the green transition. As for energy commodities, prices will fall on average, but remain at risk from political shocks."

The UK-based company provides the following key global forecasts for each sector covered by its report:

• Energy: Fossil-fuel markets will continue to face geopolitical risks amid conflicts in the Middle East and Ukraine, but investment into renewables will remain strong, particularly in China.
• Financial services: Falling interest rates will weigh on bank profit margins, leading to lower dividend payouts, but the Basel III endgame will be eased or delayed further.
• Consumer goods and retailing: Global retail volumes will expand by 2.2%, helped by disinflation, but regulations around online retailing will tighten further, particularly for high-volume low-price Asian retailers such as Shein and Temu.
• Technology: More countries will start using satellite internet, but use cases will be limited to enterprise clients—military and maritime. Amazon's Kuiper will disrupt the market duopoly of Starlink and EutelSat OneWeb.
• Automotive: After a difficult few years, annual new-vehicle sales will reach a record 97.2m units in 2025. We forecast that sales of new cars will rise by 2%, commercial vehicles by 4% and electric vehicles by 16%.
• Healthcare: Global healthcare spending will outpace inflation, growing by 1.9% in real terms. The World Health Organization will make climate change the focus of its 14th four-year general program, which starts in 2025.

Companies and investors alike should take note that geopolitical shocks and climate change will remain the biggest risks in 2025. The EIU's "baseline forecast assumes that another large-scale war will not break out in Asia or the Middle East. However, the continued threat of geopolitical conflict, in addition to the continuing war in Ukraine, will lead to economic reconfiguration and policy divergence." Moreover, "The EU and the US are already raising barriers against Chinese exports in areas from  automotive and technology to healthcare. Chinese retaliation is likely to intensify in 2025 as rival blocs emerge across the world. These trends," according to the report's authors, "will reshape supply chains over 2025, and could upend our forecast of falling commodity prices and inflation."

Regarding climate change and how efforts to mitigate it will play in these political rifts, the report notes that "At COP30 in November 2025 governments are due to update their national climate pledges (NDCs), but much will depend on US leadership. The debate over environmental, social and governance (ESG) reporting will intensify as regulations enforcing disclosure come into effect in the EU and elsewhere." In addition, "EU climate regulations, due to come into force from 2026, will also have an international impact on trade by forcing multinational companies to monitor their supply chains."

While investment in technology, particularly AI, will be strong as projects gather pace, "technology companies will face pressure from several directions as regulations tighten (particularly in Europe), investors become more impatient for profits and their energy usage comes under more scrutiny." I agree with the EIU that "Companies will need to navigate these new requirements, while also trying to reconfigure their supply chains and seek out areas of growth."

What challenges, opportunities and trends are you watching as we celebrate the beginning of 2025?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

How Technology Can Drive the Transition to a Superior Future

According to a report produced by Force for Good, a project of the F4G Foundation, a non-profit limited liability company incorporated under the laws of England and Wales, "technology can provide the means to create a sustainable, secure, and superior world. It can help us finish the job of liberating the remaining populations across the world, providing inclusion for all in finance, education, healthcare, housing, dignified work, and a technology enabled world."

The report, entitled Technology Driving the Transition to a Superior Future, includes a letter authored by Ketan Patel, chair of Force for Good's advisory council. Mr. Patel points out that the 2023 "report identified 19 technologies that the largest 100 tech companies were pursuing in a bid to lead the world into a new era. We found that these companies had universally embraced ESG, were actively making their operations across the globe sustainable, and the leaders among them were making a positive impact on society at large." Mr. Patel also notes the "19 technologies identified continue to underpin the efforts of the largest and most resourceful companies. Importantly, what is clear is that a small sub-set of these technologies are the most powerful arbiters of the future, and these are AI, quantum computing, nanotech, genetics, and fusion." 

The 19 technologies include artificial intelligence, big data analytics, quantum computing, internet of things (IoT), robotics, drones, autonomous vehicles, smart grid, renewables, energy storage, next generation nuclear (fusion), eMobility, virtualization (VR, ER, AR, XR, MR), blockchain, material science, 3D printing, nanotechnology, and space technology.

Below are the report's key messages:

• Existing technologies enabled by AI can close nearly 50% of the SDG gap, if scaled and deployed globally, and can help position the world for the transition to the Information Age; this can bridge the otherwise unsurmountable capital of US$175 trillion needed for the SDGs, and a shortfall of US$137 trillion.
• The tech industry is the critical player required to take the lead given its expertise, products, influence and ability to access capital, rolling out technology at scale across the world and driving the world into the next era; three of the ten initiatives identified - universal connectivity, leveraging generative AI across the SDGs, and mass financial inclusion - together contribute to nearly 30% of the SDGs and lay the foundations for levelling up the world.
• 19 core technologies have been identified as the focus of the top 100 tech companies in competing for the future and are also the focus of geopolitical competition between countries and power blocs, and their control is increasingly seen as a key strategic asset for nation states.
• While the US has the clear lead from a macro and technology perspective, China has drawn level with the EU on key macro fronts and built a strong position in many of the core technologies, the EU has the biggest market which positions it as a rule setter for others, and India is now rising to take a position among these power blocs; US internal political divisions and politicization of the transition among other issues represent noteworthy risks to its leadership position and ability to lead the world into the next era.
• The risks of a dangerous transition including global climate, migration and socio-political-economic disasters are heightened unless the two-thirds of the world that were not material beneficiaries of the Industrial Age, predominantly in the Global South and also left behind in advanced nations are included; a post transition world, built on a more inclusive platform, can be powered by the identified core technologies, and a suite of others currently under development including fusion, gene-editing and nano-tech, creating a more secure, sustainable and superior future.

The report also presents AI's impact on each SDG:

SDG #1: No Poverty

• Predictive analytics to identify regions at risk of poverty.
• AI-driven agricultural technologies to increase crop yields for small farmers.
• Automating and improving the efficiency of aid distribution.

SDG #2: Zero Hunger

• Precision agriculture for optimizing food production and reducing waste.
• AI in supply chain management to reduce food spoilage.
• Development of AI-based nutritional planning tools.

SDG #3: Good Health and Well-Being

• AI in diagnostics to improve disease detection and treatment.
• Personalized medicine for tailored healthcare solutions.
• AI-driven research in drug discovery and epidemic tracking.

SDG #4: Quality Education

• Adaptive learning platforms for personalized education.
• AI tools for language translation to overcome education barriers.
• Analyzing educational data to improve teaching methods.

SDG #5: Gender Equality

• AI algorithms to identify and reduce gender biases in hiring.
• AI-driven platforms to support women entrepreneurs.
• Analyzing data to better understand and address gender disparities.

SDG #6: Clean Water and Sanitation

• AI for monitoring and predicting water quality issues.
• Optimization of water distribution systems in urban areas.
• AI in wastewater treatment processes for better efficiency.

SDG #7: Affordable and Clean Energy

• AI in optimizing renewable energy sources.
• Predictive maintenance for energy infrastructure.
• Enhancing energy efficiency in buildings and industries.

SDG #8: Decent Work and Economic Growth

• AI-driven job market analytics for skill development.
• Automation to increase productivity and create new job opportunities.
• AI tools for small businesses to access markets and finance.

SDG #9: Industry, Innovation and Infrastructure

• AI in predictive maintenance for industrial machinery.
• Facilitating research and development through AI-driven insights.
• Enhancing logistics and supply chain efficiencies.

SDG #10: Reduced Inequalities

• AI in financial services to provide credit access to the underserved.
• AI-driven educational tools for marginalized communities.
• Enhancing accessibility technologies for people with disabilities.

SDG #11: Sustainable Cities and Communities

• AI in urban planning for sustainable and efficient cities.
• AI-driven traffic management and public transport optimization.
• Enhancing public safety through smart surveillance systems.

SDG #12: Responsible Consumption and Production

• AI in supply chains to promote ethical sourcing and reduce waste.
• AI tools for lifecycle assessment of products.
• Automation in recycling processes.

SDG #13: Climate Action

• AI in climate modeling and forecasting.
• AI-driven solutions for carbon footprint reduction.
• Enhancing the efficiency of climate change mitigation strategies.

SDG #14: Life Below Water

• AI for monitoring and protecting ocean biodiversity.
• Predictive analytics for sustainable fishing practices.
• AI in studying and mitigating the effects of ocean acidification.

SDG #15: Life On Land

• AI in wildlife tracking and habitat protection.
• Predictive tools for forest fire prevention.
• AI-driven land-use planning for sustainable development.

SDG #16: Peace, Justice and Strong Institutions

• AI in crime prediction and prevention.
• Enhancing legal research and access to justice through AI tools.
• AI-driven systems for monitoring and preventing corruption.

SDG #17: Partnerships For the Goals

• AI to analyze and optimize international aid.
• Facilitating cross-border collaboration through AI-driven platforms.
• Enhancing global data sharing and analysis for informed decision-making.

In its conclusion, the report asserts that "Technology is the catalyst for a civilizational shift in the world. As such, competition for technology leadership has become a matter of national security. However, in the absence of raising the Global South, the continued progress of the rich nations of the Global North is at risk." Moreover, "The SDGs can be solved with existing solutions and deliver a more equitable platform from which technology can build a far superior future. In the transition to a new civilization built on information and a new generation of technologies, the world is about to enter a whole new era that has the potential to deliver peace, prosperity, and freedom to all. The tech industry has a critical role to play in building this superior future."

What are you recommendations on how technology can drive to a superior future?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Growth Prospects, Risks and Trends in Six Critical Sectors in 2024

The past few years have been turbulent for most companies as the pandemic, soaring commodity prices, high interest rates and political disruption resulted in profits for many and bankruptcy for some. A report published by the Economist Intelligence Unit (EIU) asks: Will conditions stabilize in 2024?

EIU's report provides growth prospects, risks and trends facing six critical sectors in the coming year, as inflation eases but geopolitical tensions remain high. The report argues that the biggest challenge facing businesses next year will be climate change and looks at how experimentation with artificial intelligence will give way to rapid adoption, changing corporate strategies and the nature of work.

Key findings include:

• Climate change will drive demand in sectors relating to mitigation and adaptation. Insurers, companies and governments will struggle to price in the increasing risks.
• EU and US regulations on environmental, social and governance (ESG) reporting will push companies to scrutinize their operations and supply chains. However, skepticism about ESG will harden in the US ahead of November’s presidential elections.
• Corporate concerns over taxation will increase as the OECD introduces its global minimum tax rate and individual governments try to reduce budget deficits and national debt levels.
• Geopolitical tensions and wars will complicate government and corporate responses to all of the above. Investment in supply chains, particularly for technology and the energy transition, will adapt to minimize political risk.
• Generative artificial intelligence will disrupt a few sectors, but most companies will find ways to use AI to increase productivity.

The report also provides key global forecasts for each sector covered:

• Automotive: The automotive industry will face another subdued year in 2024, weighed down by slow consumer spending, high interest rates and disruption to supply chains due to geopolitical tensions. The only bright spot will be the electric vehicles market, with sales expected to soar by 21% to 14.9 million unit as governments and consumers try to mitigate the worsening effects of climate change. The report notes that established carmakers will have to fight hard to hold off competition from China.
• Consumer goods and retail: A slowdown in inflation will bolster retail volume growth by 6.7% in US dollar terms and 2% in volume terms in 2024. However, reduced savings and high food prices, worsened by the effects of climate change, will act as dampeners. The EIU also points out that high food prices will continue to cause problems in Asia.
• Energy: Global energy consumption will grow by 1.8% in 2024, largely driven by strong demand in Asia. Despite still-high prices and unsolved supply chain disruptions, demand for fossil fuels will reach record levels, but demand for renewable energy will rise by 11%.
• Finance: High interest rates will determine the success or failure of almost every part of the financial services sector in 2024. Though painful for borrowers, banks will enjoy strong net interest margins margins and revenue flows until margins begin to narrow mildly in late 2024. Property firms and funds, however, will suffer.
• Healthcare: Healthcare spending will rise by 2% in real US-dollar terms, following two years of decline, as inflation eases. However, resources will remain constrained as governments try to bring down fiscal deficits and public debt levels.
• Telecoms and technology: Geopolitics will continue to affect technology in 2024. The tech battle between the US and China will persist in areas including artificial intelligence (AI), chips and quantum technologies. AI will continue to develop, particularly generative AI, but will encounter challenges from new regulations in the EU and other major jurisdictions, as well as complications from US-China tensions.

I appreciate how the annual industry outlook provides businesses with foresight of the critical global trends and threats that will affect their sector 2024. Which trends and threats are you watching in the coming year?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

KOTRA Silicon Valley Forum Presents Benefits and Risks of the Metaverse

Under the theme of "The Metaverse is Yours," the Korea Trade-Investment Promotion Agency (KOTRA) in Silicon Valley, a non-profit agency operated by the South Korean government that serves as one of the 127 overseas KOTRA branches worldwide, held its annual convention, K-Global @ Silicon Valley 2022, from Nov. 7th-8th in Santa Clara, Calif. The event started with an information and communications technology (ICT) forum focused on innovation which included discussions about the metaverse and its four key aspects of content, platforms, networks, and devices. After welcoming remarks from Korean dignitaries, the event featured the following keynote speakers:

• Shilpa Kolhatkar, who serves as Global Head of AI Nations Business Development at NVIDIA, talked about how the metaverse is the next evolution of the internet, the home to connected virtual worlds and digital twins, and a place for real work as well as play. She said NVIDIA's platforms provide enterprises the ability to develop physically accurate, artificial intelligence (AI)-enabled, virtual simulations that are synchronized with the real world. Ms. Kolhatkar also noted that digital twins are transforming industries and scientific discovery, as well as enabling developers, researchers, and enterprises who use them to design, simulate, and optimize products, equipment, and processes in real-time, before ever going to production.
• Heesuk "Ricky" Kang, Head of Business at Naver Z, discussed how his company's ZEPETO Studio platform features 68 million Studio items sales created by over 2.3 million creators to 300 million users worldwide. Mr. Kang said ZEPETO, which is the fastest growing avatar platform in Asia, is popular among Gen Zs who express themselves while meeting, collaborating, and creating with others.
• Jason Mayes, Head of Business, Lead Web ML & AL Developer Advocate at Google, focused his presentation on TensorFlow.js, a library for machine learning (ML) in JavaScript. He explained how TensorFlow makes it easy for beginners and experts to create machine learning models for desktop, mobile, web, and cloud. Mr. Mayes added that data can be the most important factor in the success of a user's ML endeavors and TensorFlow offers multiple data tools to help consolidate, clean and preprocess data at scale. I appreciate his assertion that TensorFlow empowers "machine learning for everyone."

The next segment of the ICT Forum focused on a panel discussion. Shawn Flynn, Principal of Global Capital Markets and host of "The Silicon Valley Podcast," moderated an insightful discussion featuring Pouneh Kaufman, Group Project Manager at Microsoft, Ray Wu, Managing Partner at Alumni Ventures, and Sean Jun, Product Manager at XL8. Key points from the moderated session included:

• The metaverse is an evolution, not a revolution. And it is one that businesses should not ignore.
• The metaverse may profoundly change how businesses and consumers interact with products, services and each other (i.e., enriching the customer experience and introducing virtual products).
• The metaverse will help support sustainability efforts by saving both time and resources used to travel to attend meetings, lectures, and social gatherings (I expect the use of the metaverse will help companies achieve their environment, social, and governance goals).
• The metaverse allows the ability to collect new data on customers.
• The metaverse will have profound benefits in various sectors including education, healthcare, and e-commerce.

Image Credit: KOTRA Silicon Valley

The panel, however, presented a number of risks associated with the metaverse which will require new strategies and methods to build trust. What is more, as with Web 2.0 (the current internet), users of Web 3.0 will need to contend with cyberbullying and harassment issues, as well as identity theft, unauthorized data collection by corporations, and cybersecurity threats from malicious actors.

Lastly, the event featured an expo featuring metaverse and AI-related small- and medium-sized enterprises from Korea that showcased their products, services, and technology. While you can view a listing containing all of the exhibiting companies here, below are a few that I found of particular interest: 

• Corevalue Ltd. is developing a service that can help everyone manage their health conveniently and easily. Accordingly, a smart camera and telehealth app were developed and the Dr. Clobo brand was launched in August 2020. Its healthcare camera can take detailed pictures of the mouth, ears and nose, and based on this, non-face-to-face medical consultation and health management.
• Grebt developed a bloodless-based diabetes measurement sensor and diabetes measurement device that eliminates the fear of blood sampling and the pain of blood collection. Its urine glucose meter measures the concentration of glucose in urine and reacts blood glucose in urine. It consists of a strip, a disposable consumable that generates an electrochemical signal.
• NdotLight is the developer of NdotCAD, a 3D/AR/VR content design tool which allows any users including non-professionals to express and share their imagination in 3D with ease. The company has lowered the hurdle for 3D content creation by making intricate 3D design process easy with increased usability while maximizing output quality by applying advanced technologies. With their 3D engine, they serve enterprise clients also by providing customizable solution to meet any B2B needs.

As we transition into the post-pandemic era, the K-Global @ Silicon Valley event provided a good opportunity to explore the future of the metaverse, AI, and other ICTs. What benefits and risks do you think the metaverse will bring to consumers and businesses alike?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

A Framework for Improving ESG Reporting in the Mobile Industry

In my previous post about a report published by GSMA on how the mobile industry is impacting the United Nations' Sustainable Development Goals (SDGs), I referenced a framework, ESG Metrics for Mobile, developed by GSMA alongside EY, a consultancy, and the Yale Center for Business and the Environment. Several readers sent comments asking for additional information about the framework, which is a first-of-its-kind mobile sector ESG reporting framework featuring ten industry-specific key performance indicators (KPIs). Featuring ten industry-specific KPIs, the framework covers a range of key material topics for the sector, from energy consumption and waste reduction to digital inclusion and data protection. The common metrics are designed to simplify and harmonize environmental, social, and governance (ESG) disclosures and complement universal reporting, by adding a crucial industry-specific lens.

A white paper authored by representatives from EY explains, "There is a critical need for more effective and consistent approaches to measuring and communicating ESG performance." Moreover, "Sustainability is one of the defining issues of our generation. Consumers, employees and regulators are increasingly vocal regarding their expectations for companies to act responsibly and to demonstrate how they create value to society."

The report also notes that "EY research has found that 90 percent of investors attach greater importance to companies' ESG performance when it comes to their investment strategy and decision making than they did before the global pandemic. Mobile operators recognize that, by placing greater focus on their ESG performance, they can build stronger relationships with stakeholders and create financial value."

The report's key findings include:

• Mobile operators currently report on most of the industry's key topics, but not always in a consistent way
• EY's proposed industry KPIs are designed to enhance consistency and impact
• The mobile industry can use the proposed KPIs to measure and improve ESG performance
• Attitudes towards ESG are shifting
• Mobile operators are uniquely placed to accelerate progress on a range of ESG issues
• Measuring and communicating ESG performance is critical

During the consultation process, five criteria were used to define the minimum requirements that a sector KPI should meet.

1. Meaningful for stakeholders: The KPI will influence the assessments and decisions of external stakeholders, including investors.
2. Decision-useful: The KPI will influence internal decision making and convey information to the mobile operator that can substantively enhance the company's ability to create value.
3. Comparable: The KPI will enable meaningful peer-to-peer comparisons across geographies, and the definitions and calculation methods are transferable to most companies.
4. Feasible: The KPI can be implemented by the company. It is simple and short, aligns to existing standards where possible, and uses standardized measurements. The underlying methods and approaches are robust and follow accepted approaches.
5. Best indicator: For the given topic, the KPI represents the best indicator of the company's ability to create value in the short, medium and long term.

In reference to the image on the right presenting the mobile industry's framework, the report explains: "Taken together, the universal and industry-specific KPIs will help create less burdensome and more meaningful data collection and reporting processes, and provide greater consistency in the information disclosed about operators' ESG performance." What is more, "This will enable operators to take a proactive position in providing relevant material disclosures, and supply the tools and setting for data preparers and data users to have a more enhanced and constructive dialogue on ESG performance."

In addressing the next steps for mobile operators and other stakeholders, the report presents "three critical steps that mobile operators and their stakeholders can take to ensure that the industry ESG framework accelerates performance across the mobile industry and beyond":

1. Align company's leadership behind the ESG KPIs. "ESG reporting should be owned by the Board, CEO and CFO — with relevant inputs from functional teams. There should be clarity around what ESG-related transformation means for corporate strategy, how investments in sustainability contribute to financial performance, and how the KPIs can help organizations measure success."
2. Raise awareness of the framework with the investment community and other external stakeholders. "Open and ongoing conversations between operators and investors will also be a critical step to refining and validating the KPIs. Operators can help investors understand which ESG issues are most material to their organization and be able to frame ESG discussions in the context of financial performance. These dialogues should also ensure that the KPIs provide the information that investors need to make assessments of the company’s long-term value. At the same time, socializing the KPIs with policymakers, partners or customers in other industry verticals can also pave the way for better alignment on cross-sector enablement metrics in years to come."
3. Adopt the metrics in future reporting, measure your performance and deliver improvements. "Operators can begin to test their ability to report against the KPIs and incorporating them into their ESG reporting cycles. This will generate the evidence, insights and experience needed to further refine the KPIs and draw better, more compelling links between ESG scores, stakeholder value and financial performance. At all stages, operators should ensure they take action where needed — whether that relates to improving KPIs themselves, or reorienting systems and processes to deliver more relevant and timely information that avoids duplication. Measuring sustainability performance is the critical step operators should take to move from ambition and strategy towards successful execution."

As operators adopt this new ESG framework, the metrics will provide stakeholders with a deeper understanding of the industry, and where its most material impacts and value are generated.

Do you support the proposed framework for improving ESG reporting in the mobile industry? Are there aspects of the framework that can be applied to other industries?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Digital Inclusion is Central to Sustainable Development Goal Progress

In its seventh annual report on how the mobile industry is impacting the United Nations' Sustainable Development Goals (SDGs), the GSMA demonstrates the industry's "continued commitment to the SDGs, while identifying areas where the industry needs to improve or accelerate its actions to deliver on the Global Goals by 2030." Moreover, the UK-based organization, which represents the interests of mobile operators worldwide, says, "This year's report focuses on digital inclusion and shows how this relates to sustainable development through four main pillars: inclusive access, inclusive planet, inclusive connectivity and inclusive business."

The report shows that, six years after becoming the first industry to commit to the SDGs, the mobile sector continues to increase its contribution to the achievement of all 17 goals. However, despite mobile operators' continued commitment to the 2030 agenda, there is still a long way to go.

The report's other key findings include:

• By the end of 2021, 5.3 billion people (66% of the global population) were using a mobile phone, while 4.3 billion people (55% of the global population) were also using mobile internet. This includes more than 3.3 billion mobile internet subscribers in low- and middle-income countries (LMICs), where mobile is the primary and, in many cases only, form of internet access.
• The 'usage gap' – those who live in areas covered by mobile broadband networks but remain unconnected – narrowed for the third year in a row, but still stands at 3.2 billion people. The mobile industry and its partners continue to tackle the reasons for the usage gap, which generally relate to a lack of affordability, knowledge and skills, relevance, in addition to safety and security concerns.
• Usage of mobile-enabled activities reached new heights in 2021, as mobile subscribers ventured further into online services.
• 3.5 billion people (67% of mobile subscribers) used their phones to make video calls in 2021. This represents an additional 330 million people since 2020, aiding remote work and other online activities.
• 2.5 billion people (48% of mobile subscribers) used their phone to access educational information for themselves or their children, representing an increase of 410 million since 2020.
• 2.1 billion people (41% of mobile subscribers) used their phone to improve or monitor their health, representing an increase of 270 million since 2020.
• Usage of mobile-enabled services remained considerably lower in developing countries. On average, the gap between the usage of mobile-enabled services in high-income countries and LMICs is 17 percentage points, underlining the importance of operator efforts to introduce more locally-relevant content and upgrade networks to enable access to services requiring a higher-quality connection.
• The mobile industry is making continued progress on disclosing climate impact data and setting targets for emissions reductions. At the end of 2021, 66% of operators by connections and 82% by revenue disclosed their climate impacts, while 34% of operators by connections and 44% by revenue had set carbon reduction targets to be net zero by 2050.
• Mobile and digital technology could enable just under 40% of the required CO2 reductions needed by 2030 within the top four largest-emitting industries. These four industries – manufacturing, power and energy, transport, and buildings – account for 80% of global emissions.
• There has been strong growth in the issuance of sustainability bonds in the mobile sector. This highlights that operators are increasingly securing funding on the basis of achieving social and environmental – rather than purely financial – targets.
• With stakeholders getting smarter and more discerning when it comes to ESG claims, an effective and consistent approach to measuring and communicating performance is more important than ever. The GSMA has recently launched ESG Metrics for Mobile, a first-of-its-kind mobile sector ESG reporting framework featuring ten industry-specific KPIs. The KPIs will allow stakeholders to gain a much deeper understanding of the industry’s nuances and contexts, and create opportunities for the industry to demonstrate its impact in a more consistent manner.

With respect to the mobile industry's SDG contributions, the report notes the industry increased its impact on all 17 SDGs in 2021, with the average year-on-year increase accelerating compared with 2020. The average SDG impact score across the 17 SDGs reached 53, up from 49 in 2020 and 32 in 2015, meaning the mobile industry is achieving 53% of what it could potentially contribute to the SDGs. Other highlights include:

• There are now eleven SDGs where mobile's contribution is over 50, compared to six in 2020 and none in 2015.
• The mobile industry continues to achieve its highest impact on SDG 9: Industry, Innovation and Infrastructure, driven by the reach of mobile networks and take-up of mobile internet services.
• The biggest improvements were recorded in the industry's contribution to SDG 1: No Poverty, SDG 2: Zero Hunger and SDG 4: Quality Education. This is due to the increasing proportion of people using mobile for life-enhancing activities such as accessing government services, applying and searching for jobs and obtaining educational information for themselves or their children.

In its concluding remarks, the report accurately explains: "As the primary mean of accessing internet for billions of people and the transforming power behind every single industry, mobile connectivity is a key platform for economic development and many other life-enhancing services." However, the report also points out that "as more activities move online, unconnected populations will be at greater risk of exclusion from digital services. As a result, the mobile industry must continue to work together with its stakeholders (including governments, other industries, civil society and the international community) to accelerate digital inclusion and unlock mobile's full potential to address global issues."

I appreciate how, as explained in GSMA's press release, "The report demonstrates how people with access to fast, reliable networks are able to stay connected to friends and family, work remotely, access education and health services, build innovative businesses, improve efficiencies and reduce carbon emissions." However, the announcement crucially points out that "[t]hose without access...are most vulnerable to economic and social disruption, and risk falling further behind as the world emerges from the pandemic, especially as online services become even more integral to society."

What do you think of the report's findings? What are your recommendations for closing the mobile internet usage gap?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Report Presents Relevant and Timely Questions Directors Should Ask in This New Era

The coronavirus pandemic has presented a company's board of directors with unforeseen challenges that tests long-held principals in governance and leadership. The balance of mitigating risks while keeping an eye of corporate growth will be a challenge for directors in this new era. Taking a philosophical approach to business strategy throughout my professional career, I support the following notion made by EY, a multinational professional services firm: "We believe that better questions lead to better answers and a better working world. Likewise, we believe that a board's most effective tool is asking compelling questions. These questions can lead to better governance and organizations that drive value for all stakeholders."

Produced annually by the EY Center for Board Matters, the 2022 report presents a list of relevant and timely questions, segmented by four themes, for a company's board of directors to consider:

Theme 1: Strategy and innovation - Strategy that positions companies to innovate and differentiate for a sustainable future

1. How is the company rethinking its definition of "long term" to maximize value while also focusing on near-term risks and opportunities? Is the strategy appropriately focused not only on where the company is going, but where it can go?
2. Are material environmental, social and governance (ESG) issues considered in the company's long-term strategic planning? How do the company's business model, practices, products, and services address urgent environmental and social challenges as we move toward a more inclusive and sustainable future?
3. What data and metrics are being used to assess the health and vibrancy of the organization's culture and its alignment with strategy? Is the culture appropriate to inspire and enable innovation?
4. Is the company's capital allocation aligned with the necessities of its long-term strategy? How is the company addressing barriers toward optimal allocation?
5. Does the board have the appropriate governance process to oversee strategic investments that seed innovation to change the game? How is it supporting the acceleration of idea generation, trialing and assessment while also encouraging appropriate risk-taking?
6. Has management appropriately considered partnerships, joint ventures and alliances, along with M&A, to accelerate the strategy, particularly with longer-term adjacent and transformational opportunities?
7. Are newer and innovative technologies, including digital platforms and cryptocurrency solutions, appropriately leveraged to accelerate goals and objectives? How can these technologies accelerate the speed to market and enhance virtual collaboration and customer engagement?
8. What is the company's transition plan for thriving in a net-zero future? Is that plan integrated with the company strategy? Does it include specific short-, medium-and long-term greenhouse gas reduction targets and related decarbonization initiatives? How is the company preparing for additional climate-related disclosure requirements?
9. How is the company investing in protecting and restoring the natural ecosystems and biodiversity on which its business relies?
10. Does the board understand the company's supply chain constraints? Is the board confident that the supply network is flexible and agile amid continued global supply chain challenges? How is it addressing increased calls from stakeholders for sustainability and less waste?

Theme 2: Talent oversight - Broader oversight of culture and talent that is prepared for the transforming labor market

1. Do scenario analyses consider an appropriate range of extreme and even improbable scenarios, including existential threats? Do they incorporate the potential compounding effects of various risks, such as supply chain disruption, talent acquisition and retention, inflation, future interest rates and an evolving tax landscape?
2. Are contingency and response plans related to material and high-impact risks, such as cybersecurity breaches and natural disasters, periodically simulated and reviewed with the board?
3. How is the company revisiting and adapting its risk management strategy and management's approach to the three lines model in response to potential changes in the external and internal environment, changes in the strategy and risk landscape, and the company's operating model?
4. Has the board considered how the organization's risk assessment capabilities are evolving, including how analytics, artificial intelligence and other emerging technologies can be used to review and validate data and information to unearth insights into enterprise risks and opportunities?
5. How has the company's cybersecurity risk management program evolved to address the current environment in which attackers are targeting a larger surface area and using increasingly unpredictable tactics? How are cybersecurity and data privacy considerations proactively integrated into all major strategy or tactical decisions, such as transactions, alliances, new products or services, and technology upgrades?
6. What types of data is the organization collecting from its customers and other stakeholders to better assess the trust, risks and opportunities related to changing preferences and needs? How is the collection occurring?
7. How is the company scanning and assessing geopolitical developments, including a rapidly changing trade and regulatory landscape and governments moving to a more interventionist policy position?
8. What is the company doing to address material social risks across its value chain, including the treatment of employees and suppliers' human rights practices and impacts on customers and the communities in which it operates?
9. How is the company assessing the impact of physical and transition climate risks on products and services, supply chains and operations that can materially affect operating costs and revenues across the enterprise?
10. Has the organization's tax planning strategy been reevaluated to address potential tax policy changes, as well as impacts arising from potential shifts in the supply chain and capitalization? Has the organization considered growing stakeholder interest in tax transparency and potential related reputational impacts?
11. Does the board understand and approve the company's data privacy and data usage policy? How is customer and employee data use managed? Are social surveillance algorithms reviewed for bias? Is data protection considered beyond cybersecurity protection?

Theme 3: Risk and resiliency - Risk management that enables resiliency amid new and evolving challenges

1. As the nature of work and employment further transforms, how will the organization adapt its talent functions to realize its strategy? Does the board spend the same amount of time with the chief human resources officer (CHRO) discussing data and metrics to assess the health and welfare of the workforce as it does with the CFO reviewing and assessing the overall financial health and stability?
2. To attract and retain talent in a hypercompetitive labor market, how is the organization implementing plans to address calls for better pay and benefits, including flexibility, the opportunity to work from anywhere, programs to enhance well-being, and funding for training and educational advancement?
3. How have the desired skills and behaviors for the organization's leaders evolved in response to the events of the last two years, and how has the board's succession planning and oversight of talent development changed in response?
4. Given that more than half of employees say they would leave their job if flexibility in their schedule and work location is not extended after the pandemic, has the organization considered how to make flexibility integral to the company's human capital strategy?
5. How is the company seizing strategic opportunities to tap into larger talent pools, diversify across numerous dimensions and expand working hours across time zones, while being mindful of work location, regulatory and legislative challenges?
6. Is the board comfortable with how the organization is nurturing its existing and future talent pools (e.g., reskilling and upskilling, educational alliances) to position the company to meet current requirements, address enterprise risks and prepare for continued strategic pivots?
7. How is company leadership enabling cross-functional collaboration and seeking input from a broader set of internal constituencies to support an inclusive culture, enhance engagement and spur innovation? How are these efforts measured?
8. Are there any efforts to identify and address disconnects between how management views the employee experience and the employee's actual experience? Are employee engagement scores, periodic pulse checks, summaries of exit and onboarding interviews, and social media data routinely reviewed?
9. With continued virtual work, how is the company addressing any impacts on employee engagement, inclusion and career development?
10. How is the company embedding diversity and inclusion into its workplace policies and human capital management programs throughout all steps in the employee life cycle to enable equitable opportunities, advancement and compensation?

Theme 4: Dynamic governance - Dynamic governance that addresses expanded and changing oversight requirements

1. How is the board adopting a continual learning mindset and strengthening its education program? Is the program sufficiently tailored to the company's and individual board member's needs, seeking diverse views from inside and outside the company that allow for challenges to status quo thinking?
2. How can the board's structure be refreshed to be more agile, future-focused and aligned to the risks and opportunities on the road ahead? Is the board considering the use of ad hoc committees made up of directors, management and third parties to address specific strategic issues?
3. How is the compensation committee evolving its charter to address oversight of broader human capital issues? How does the board hold senior management accountable for progress against related goals via incentive plans and other reward mechanisms? How is the company preparing for ongoing human capital disclosure requirements?
4. How is the company refreshing its investor engagement strategy to be more efficient and productive? Is it considering new engagement approaches (e.g., more collaborative engagement via working groups or investor days)? Is it leveraging the proxy statement and other disclosures as communication tools?
5. How is the board thinking like an activist in considering and proactively addressing the company's operating vulnerabilities? How is the board obtaining an unfiltered view of shareholder feedback on the company's strategy and pace of performance? Do select individual board members have direct dialogue with shareholders to understand their priorities?
6. Are information flows to the board being appropriately challenged to include more forward-looking and predictive insights, coverage of emerging risks, external perspectives, and corroborating data from third parties to keep pace with the evolving market, economic and geopolitical developments? Is a consent agenda used to maximize board discussion of strategic initiatives?
7. How is the board expanding its director search to maximize diversity and broaden board competencies in critical areas such as technology, human capital management, cybersecurity, and sustainability, and how are those individuals onboarded to set them up for success?
8. With increased board diversity, what changes to its protocols are being made to leverage diversity of thought, improve decision-making and create an inclusive boardroom?
9. Is the board prepared for increased accountability as ESG matters become a multi-stakeholder priority and investors increasingly embrace proxy votes against directors as their most effective tool to accelerate progress on ESG matters?
10. With growing scrutiny of sustainability reporting and stakeholder concerns around greenwashing, how is the board — particularly the audit committee — overseeing nonfinancial disclosures made in regulatory filings, sustainability reports, analyst calls and other mediums? Are internal or external assurance procedures applied to material assertions and data?
11. Is the company progressively reporting on human, customer and societal value to attract capital and meet the increasing demand of stakeholders for consistent and comparable ESG and other nonfinancial‑related data that aligns with evolving external frameworks?
12. What is the board's policy for timely review of corporate political and lobbying expenditures and any public political positions taken by senior executives? How is the board assessing the alignment of those expenditures and positions with the company's values, commitments and strategy?
13. Could the board create more effective meeting agendas and protocols (e.g., consent agendas) to increase director engagement on priority matters? Can virtual sessions augment and enhance traditional in-person meetings?

The report insightfully notes that companies will "continue to refresh their strategy to strengthen agility, resiliency and sustainability and leverage innovative opportunities that can accelerate their performance over the long term." Importantly, "Trajectories of companies that are thriving and leaning into this strategic reset are diverging rapidly from those that are merely surviving."

Moreover, "Boards have both the opportunity and the responsibility to help guide companies in this new era. They can support their companies in incorporating human and natural capital as part of business decisions and strategy, and harness risks as opportunities for innovation and a competitive advantage." I concur that this cannot "be achieved through a historical governance model. Boards should continue their own transformation to a new agile and dynamic form of governance and continuously challenge their composition, committee structure, agendas, and ways of working to position their organizations to thrive in the long term."

I appreciate how EY's report provides directors with insights and questions to consider as they engage with management on a variety of complex boardroom issues. What questions do you think directors should be asking to help companies in this new era?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Six Ways a Board of Directors Can Ensure Future-Readiness

In response to my blog post about a report published by the EY Center for Board Matters listing six key areas corporate boards of directors should prioritize in 2021, a reader recommended that I review Is Your Board Future-Ready? The Expertise You'll Need, a report that presents six ways a company's board of directors can ensure future-readiness.

Produced by Nasdaq Governance Solutions, a business of Nasdaq, Inc., a global technology company serving the capital markets and other industries, the report notes: "The competitive landscape in nearly every sector is changing rapidly. You are likely looking for ways to remain relevant and drive your company's mission while making changes to reflect shifts in society. A future-ready board adds value by augmenting opportunity identification and maintaining its duties to investors and stakeholders."

The report also asserts that a "future-ready board is diverse, socially responsible, and tech savvy, understands inclusion, and demonstrates keen awareness of how to balance profit expectations with long-term stakeholder values. A future-ready director embraces efficient technology. As the age of many directors and CEOs increases, future-ready also means understanding the needs of the company during board and CEO succession planning. Particularly, long-term investors are holding boards and CEOs accountable for taking action with regard to increasing impact on society. A future-ready board is prepared for the task ahead."

Below are the six ways boards can ensure future-readiness:

1. Balance of Profit and Purpose: Whereas profit is essential, communicate how your company effectively engages key stakeholder goals.
2. More Gender and Racial Diversity: Consider the gender, race, experience, and skillsets of minority candidates to bring diverse and unique backgrounds to your board.
3. More Age Diversity: Add younger leaders who have a pulse on today's societal and economic shifts and offer new perspectives.
4. Expertise in Technology, Risk, and Security: Assign technology and risk oversight responsibilities and activities to one board committee.
5. Experience in ESG: Build ESG into your corporate strategy, given the focus of today’s investors and stakeholders on such issues.
6. More Diverse Backgrounds: Encourage forward-looking, ongoing board member education, including an onboarding program that brings new directors up to speed quickly.

While I strongly support each one of the report's recommendations, I particularly agree how the report addresses the need for board to address gender and racial diversity. "Investors and stakeholders are holding companies accountable if they don't have a board of directors that reflects gender and racial diversity," the report says. "In order to acquire the depth of perspective that best represents the modern customer base, more diverse faces and voices need to be present."

Crucially, "However, it must be done in a way that's relevant to your company's strategy—and overall board goals. Don't ask directors to join your board solely to 'check the diversity box.' Now more than ever, the general public is more aware of tokenism and performative allyship and they will call out your business for such actions. Formalizing the 'Rooney Rule' for your corporate governance guidelines will help ensure that your board considers at least one woman or minority candidate and have meaningful interviews with these parties whenever there is a vacancy."

For those unfamiliar with the Rooney Rule, an article by Sports Illustrated provides a good explanation about the origin of the policy from the National Football League (NFL):

Adopted in 2003, the Rooney Rule is an NFL league policy that requires teams to interview ethnic-minority candidates for head coaching jobs. Since then, the Rooney Rule has been expanded to include general manager jobs. A similar rule requires that a woman be interviewed for every business front-office position that opens in the league.

The policy is named after former Steelers owner Dan Rooney, who was credited with spearheading the effort. In 2002, Rooney was approached by groups concerned with the lack of coaching and front-office opportunities in the NFL.

Variations of the rule are now in place in other industries, including in the city of Pittsburgh. Facebook and Xerox have similar company policies.

I also appreciate how the report addresses the value of age diversity for boards. While in my late 20s, I had the opportunity of meeting a mentor who encouraged corporate leaders within his professional network to consider me as a qualified candidate to serve on their firm's board of directors. Unfortunately, they did not understand how my age and perspectives would provide value to their firm as a board member. As the report explains, "The average board member age is 63, and directors aged 50 and under filled only 6% of S&P 500 board seats. Age diversity in the board is a point of contention for companies, largely because boards look for candidates who have significant experience in leadership roles. This experience takes time to accumulate."

"However," the reports suggests that "younger board members may bring expertise in cybersecurity and cutting-edge technologies, helping companies uncover new opportunities, partnerships, and business models. Additionally, because younger board members are still professionally active, they have their fingers on the pulse of best practices, employee challenges, and changing consumer expectations. These younger leaders may help you adapt your culture to societal and economic shifts and broaden the board's overall perspective of where the industry is heading."

With respect to technology, risk and security, the report says:

Many companies are comprised of a technology element today. Directors are expected to meet a minimum technology understanding threshold. For example, the global average cost of a data breach is $3.92 million—a 12% increase since 2014.

Today, data security is everyone’s responsibility. A director duped by a phishing scam puts your company at monetary and reputational risk. Unfortunately, fewer than 40% of directors say the board fully understands the cybersecurity risks facing their company, while only 36% say the board has sufficient expertise in cybersecurity.

The board should support embedding security and risk mitigation into all areas of the company and recognize that they need to invest in ongoing improvement, especially as new collaborative technologies and processes are implemented.

The board should also consider specifying who oversees technology and cyber risk. Most S&P 100 companies (88%) have already charged at least one board-level committee with cybersecurity oversight, typically the audit committee (64%) or risk committee. Consider combining cybersecurity and risk expertise into one committee.

As for the recommendation of recruiting prospective board members with more diverse backgrounds, I agree that boards should "consider taking a more comprehensive approach to director assessment, focusing on skills and areas of expertise." Furthermore, "Determine if there are redundancies in board member experiences and identify what type of candidate will help fill the gaps in the board’s overall readiness. Look for candidates—other than former C-level executives—who have the insights and skills needed.

"While an understanding of financials is generally appropriate, expanding your range of candidates to those who are well-versed in other areas of business is beneficial."

Lastly, "In order to build a future-ready board," the report concludes that "it's important to conduct annual evaluations that provide metrics and insights into composition, functioning, and performance. With these insights, the board can take the right steps forward."

Do you have additional recommendations for how a board of directors can ensure future-readiness?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

EY's Six Priorities for Boards in 2021

Many will agree with this assertion: "Following a year of global upheaval, organizations are re-evaluating every aspect of their business." Produced by the EY Center for Board Matters, the report, which lists six priorities corporate boards of directors in 2021, further says "companies and boards will face an acceleration of existing challenges" in the coming year "and be compelled to address how they are building resilience and creating sustainable value in a rapidly changing business environment."

I have published posts about EY's recommended priorities for boards for previous years. Whether serving on a board of a company that is publicly-traded or privately-held, I appreciate that this year's report recommends that when evaluating a company's existing business model, the "strategy should be inclusive of investments in strategic competencies to meet material stakeholder needs and future expectations, including those related to environmental, social and governance (ESG) matters."

Not only did the business disruption caused by the coronavirus pandemic remind corporate leaders of the important role ESG has on a company's culture and relations with its investors and customers, but the events of past year serve as a reminder that a company's most valuable asset is its workforce. The report encouragingly notes: "Boards have an opportunity to help guide workforce strategy to create competitive advantage and long-term value, and this requires the right information. This involves making the chief human resources officer (CHRO) a central board resource, regularly reviewing well-defined and robust metrics for human capital and culture intelligence, and finding opportunities to bring the employee perspective into the boardroom."

Therefore, "With increased investor scrutiny and stakeholder considerations, boards will be well served to focus on the following priorities in 2021."

1. Overseeing strategy to create long-term value

"In today's stakeholder-focused business environment, it is imperative that companies define both financial and nonfinancial value drivers and include them in strategy-setting as they consider the needs of investors, employees, consumers, society and other key stakeholders," explains the report. "Longer-term assumptions within the strategy should be developed using internal and external sources of information on megatrends, investment flows by venture capital and private equity entities, along with monitoring merger and acquisition, alliance and joint venture activity. Traditional sector and adjacent construct analyses along with external risk intelligence can provide early indicators of emerging opportunities and risks."

In addition, "Management should integrate strategy and culture with the company's enterprise risk management process and provide the board with timely updates related to strategic opportunities and risks."

The report importantly proposes that "the board and management should collectively challenge whether they have the appropriate governance processes to enable the timely review and implementation of a robust strategy across the short-mid-, and long-term time horizons. A long-term value dashboard that includes metrics to gauge financial, human, consumer and societal value should be reviewed regularly by the board and monitored by management to ensure metric credibility. Board time should also be evaluated along with the potential use of a committee or an ad hoc committee given the need to continuously review strategic assumptions over a longer term."

Key actions for directors to take in 2021:

• Balance the board's oversight of strategy and investments over the short, medium and longer terms to sustain long-term value.
• Obtain an appropriate mix of internal and external data and information to validate key assumptions and determine strategic pivots.
• Integrate ESG opportunities and risks into strategy frameworks and decisions.
• As strategy shifts, evaluate that the culture has been redefined to incorporate new behaviors required to drive the strategy over the long term.
• Create a long-term value dashboard with regular briefings to the board to ensure shareholder value improvement manifests from a balanced focus on financial, human, consumer and societal value drivers.

2. Promoting enterprise resiliency in the face of uncertainty

"Board members are playing a pivotal role in helping management adapt their organizations to the world beyond the pandemic and overseeing how resiliency is built into all aspects of the business."

Key actions for directors to take in 2021:

• Set aside more time on board agendas to challenge assumptions, review contingency plans and verify that management is incorporating low-risk/high-impact scenarios into its ERM frameworks and strategy.
• Analyze megatrends and identify key management and external advisors to regularly report to the board on material business environment developments and data points to continuously improve oversight of strategy and risk.
• Turn emerging risks into strategic value by taking a balanced approach to risk management across the three dimensions of risk: downside, upside and outside, with a greater focus on upside and outside risks.
• Review key performance indicators developed by management to measure key risks and opportunities and assess the value of material intangible assets — such as human capital and culture.
• Re-evaluate risk oversight practices and related structures to assess whether board or committee oversight changes would enhance oversight.
• Review management's conclusions and effectiveness following postmortems regarding corporate responses to the pandemic, social justice movements and other material economic and business impacts in 2020.

3. Focusing on workforce transformation and new ways of working

"Historically, many boards limited their talent oversight responsibilities to C-suite succession planning and development. Today's leading boards recognize human capital as a key driver of long-term value."

Key actions for directors to take in 2021:

• Review the board's approach to overseeing strategic workforce issues, including how related committee responsibilities are allocated (e.g., succession planning, human capital initiatives).
• Make the CHRO a central and strategic resource to the board by aligning their participation to strategy, business and disclosure discussions.
• Regularly review a comprehensive set of workforce and culture-related metrics, understanding how they are being collected, measured and controlled.
• Align decision-making related to the human capital strategy with the company’s purpose, culture and values.
• Consider how the company's investments in reskilling workers or recruiting new employees are meeting current and future skills gaps and addressing innovation.
• Assess the quality and consistency of the company’s human capital disclosures across various communication outlets and challenge how to optimize the impact on the company's brand and reputation, including with prospective employees and other key stakeholders.

4. Leading on diversity, equity and inclusion

"Making real progress on diversity, equity and inclusion (DEI) will be one of the hallmarks of 2021 as leaders implement significant changes to their recruitment and management processes and boards hold their management teams and themselves accountable."

Key actions for directors to take in 2021:

• Work with management to define and determine how DEI can help drive value for the company.
• Challenge how DEI considerations are embedded in the company's human capital management programs throughout all steps in the employee life cycle.
• Understand how the company’s human capital management programs enable equitable opportunity, advancement and compensation.
• Consider how executive incentive pay could be more directly tied to the achievement of DEI goals.
• Assess how the board’s composition and director nomination process reflect the company's commitments to DEI.
• Include DEI metrics as part of the company's long-term value dashboard for credible reporting and updates to the board

5. Guiding an ESG strategy that drives stakeholder engagement and value

"A sustainable-investing surge is underway. Driven by many forces, such as investor demand and increasing recognition that ESG factors can be financially beneficial, record-setting inflows are going to companies deploying ESG investing strategies, and significant growth in ESG-branded funds points to continued momentum."

Key actions for directors to take in 2021:

• Capitalize on ESG investing and stewardship trends.
• Understand the ESG ecosystem and developments impacting stakeholder expectations.
• Guide ESG strategy development based on a materiality assessment and oversee the identification of ESG metrics and goal setting.
• Support the integration of ESG with broader strategy and ERM.
• Consider how the company tells its ESG story through various channels and confirm that messaging is consistent and data quality is validated.

6. Challenging board composition and effectiveness

"Throughout 2021, boards should continue to enhance their own effectiveness. Board competencies, practices and committee structure and responsibilities can be continually improved to meet ongoing and emerging challenges, including the impacts of COVID-19."

Key actions for directors to take in 2021:

• Confirm the board is receiving the information it needs from a variety of sources to keep pace with external developments and challenge status quo thinking.
• Assess the board's expertise and diversity against rapidly evolving strategic opportunities and risks and stakeholder expectations. Develop individual and collective learning opportunities to enable directors to stay on top of current trends and leading practices.
• Challenge whether board and committee meeting frequency, length, format and security remain fit for purpose in a continued virtual environment.
• Contemplate using a third party to provide objectivity and facilitate or improve the board evaluation process and actionable outcomes.
• Promote ongoing board evaluation beyond the formal annual process, such as making time for reflection on performance during board and committee meetings or quarterly executive sessions.
• Enhance communications to stakeholders to build confidence in a time of uncertainty.

While very few of us predicted that the world would experience anything like the coronavirus pandemic, which has gripped the global economy in 2020, the pandemic serves as one of many external risks that may impact a company's operations and financial performance. Crises like the current pandemic or the Great Recession that occurred between 2007 and 2009 provides an opportunity for boards to reevaluate how they run the companies they serve. I encourage directors to use EY's report as a tool to help boards serve their role prudently and effectively.

Do you agree with the six board priorities?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

'Hinrich Foundation Sustainable Trade Index 2020' Presents Four Recommendations on Building More Resilient Communities in the Post-Covid-19 World

According to the 2020 version of the Hinrich Foundation Sustainable Trade Index (STI), "Sustainability was gaining more traction in the years leading up to the Covid-19 pandemic. Firms stepped up commitments to corporate social responsibility (CSR) initiatives. Investors started incorporating environmental, social and governance (ESG) issues into their asset allocation decisions. And consumers voted with their wallets to support sustainable production, purchasing goods with certified claims regarding their environmental impact and use of labor."

Commissioned in 2016 by the Hinrich Foundation, an independent charitable foundation headquartered in Hong Kong, and devised by The Economist Intelligence Unit (The EIU) in 2016, the STI "was originally created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, executives and leaders from civil society must take into account when managing and advancing international trade. That purpose remains, but we hope that governments and businesses around the world start to also view it as a tool for building resilience into their international trade policy and their economies, more broadly."

What is more, the STI constructs "an index to measure the capacity of 20 economies—including 19 in Asia, and the US as an external benchmark—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection and strengthened social capital. The 2020 edition of the index is the 3rd, following the 2016 and 2018 versions."

The key results and findings from the 2020 STI include:

• 
  "For the first time, there is a tie atop the index. Japan and South Korea both receive scores of 75.1 (out of 100), placing them five points clear of Singapore in third place (70.0) and a group of three other economies—Hong Kong, Taiwan and the US—in the high 60s. These six together have been the mainstays at the top of the index throughout the three, slightly different iterations of the STI that have now been published since 2016. But this is also the first time for either Japan or South Korea to rank first in the index; Singapore was number one in 2016 and Hong Kong in 2018.
• "The economic pillar is, in this edition, by far the most tightly packed, which was also the case in 2016. The difference in scores between the top-ranked economy, Hong Kong at 69.1, and the economy at the bottom, Laos at 44.6, is just barely over 25 points. The only consequential moves in the top half of The 2020 STI finds four key areas the pillar were by China and the Philippines. China continued its ascent up the ranks, although more because of consistency than progress. The Philippines rebounded to 9th, where it began in 2016 before slumping to 15th in 2018.
• "To the praise Taiwan already garnered this year for its effective handling of the Covid-19 outbreak, we can add the accolade of being first in the social pillar of the STI, the second time it achieved the rank. It is further recognition that the economy is getting many things right.
• "Japan registers the strongest performance in the environmental pillar (80.0), leading the same group of four—Singapore (78.7), Hong Kong (77.4) and South Korea (75.2), being the other three—that has excelled, with a few exceptions, across all three pillars of the STI from the start. Then there's a considerable drop. China and the US come next in the rankings, but are both 20 points below the top four in scores.
• "Pretty much all we can be certain of is that there is going to be another crisis at some point. Preparedness matters. The original intention behind the STI was not necessarily to serve as a tool for crisis preparation. But it has taken on that dimension. We hope that governments and firms around the world, not just in Asia, will use it as such."

In presenting its key recommendations, The EIU says: "A good start towards avoiding having to ask what if when the next crisis hits would be for policymakers, business leaders, international institutions and NGOs to address the following four areas:

Reducing inequality

"The pandemic has just exacerbated an existing trend. Unless significant steps are taken now, the gap between the rich and the poor will only widen further when the next crisis comes, making sustainable trade all the more difficult."

Improving education

"Without progress in education, many economies in the STI may find themselves left behind."

(Re)lowering barriers to trade and investment

"None of the developing economies (in the STI) have the internal demand or the capital base to grow, let alone grow in a manner that will alleviate poverty and create a middle class. Trading, and trading sustainably, are really their only paths. That means keeping their economies open and welcoming the kind of foreign investment that supports those goals."

Building on the environmental benefits of the pandemic

"Governments have an opportunity to apply the environmental lessons learned from the crisis to their policy decisions and ask themselves questions about how to retain the gains already made, such as:

• "With fewer cars on the road, and industrial demand for electricity down, how can we continue reducing air pollution when those two return to normal? Should they return to normal?
• "Similarly, how do we build upon and accelerate the drop in emissions that the world will see in 2020?
• "What can be done to ensure that the improvements in freshwater pollution levels are not lost?"

On Oct. 27th, 2020, Hinrich Foundation speakers presented the STI's key findings and discussed politics and economics in the wake of the pandemic at the Excelsia- Lumen Symposium Series. As explained by Pragya Bhatnagar, a Research Associate with the Hinrich Foundation where he focuses on International Trade Research, the virtual event entitled "Building Back Better with Sustainable Trade" "featured presentations from six experts in the fields of international trade, education, politics, technology, and culture. The speakers surveyed the post-pandemic landscape and identified key challenges – and opportunities – facing global society."

Do you find the STI a useful tool for building more resilient communities in the post-Covid-19 world? Do you agree with the report's recommendations?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.