The New Equation — One year of helping clients build trust and deliver sustained outcomes in a dramatically disrupted world
It’s been a year since PwC launched The New Equation, our formula for delivering real-life outcomes that create value for our clients and the world. As anniversaries often cause reflection, so I have been contemplating what has happened in the world over the past year and why trust and sustained outcomes became even more critical for society, institutions and business.
Over the past year, the world has had to face crisis after crisis. The second year of the Covid pandemic, supply chain disruptions, inflation, market fragilities, the Great Resignation, and, of course, the war in Ukraine. You may argue that the world has survived more severe pandemics, worse supply chain failures, much higher inflation, more significant workforce revolutions, and deadlier wars. But never in the history of humanity have so many of these crises happened at the same time — with climate change continuing to accelerate and causing more extreme activity. And never have the crises the world is experiencing been the direct manifestations of fundamental, systemic long-term issues that we as a society are aware of and yet have been unable to resolve.
The current high level of inflation, for example, is a manifestation of many of these long-term issues, including climate change (e.g., rising energy costs due to the need to cut greenhouse gas emissions), wealth disparity (e.g., supply chain failures due to shortage of truck drivers who quit given difficult work conditions and looming prospects), polarization (e.g., imposition of tariffs and localization of supply chains due to geopolitical tension), demographic changes (e.g., increased demand for services geared toward the elderly that can’t be covered by the existing workforce). Those long-term issues — if not addressed — will continue to dramatically accelerate the pace at which such short-term crises happen and increase both their number and their severity.
The world is stooped under the load of these long-term issues that we at PwC summarized a few years ago as ADAPT: Asymmetry of wealth and opportunity, Disruption wrought mainly by technology and climate, Age disparity and the various stresses caused in countries where average age is very low or very high, Polarization leading to the breakdown in global and national consensus, and the loss of Trust in the institutions that underpin and stabilize society. And those issues have become even more acute over the past year. To illustrate:
● the share of the world’s household wealth held by global billionaires has reached 3.5% in 2021 — never has it been larger in modern times;
● the latest report by the World Meteorological Organization estimates that there is a 50:50 chance of the average global temperature reaching 1.5 degrees Celsius above pre-industrial levels in the next five years;
● the 2022 Democracy Perception Index report finds widely differing views around the world of the war in Ukraine;
● the general population’s trust in the institutions that underpin society remains at very low levels (though the war in Ukraine seems to have brought people together and helped build trust in the countries part of the Western coalition against Russia — at least in the short term);
● and with recent climate events starting to paint a picture of what future generations may have to confront and with public debt exploding as a result of COVID creating an insecure retirement future, generations seem more divided than ever over political priorities.
Addressing these issues will require massive transformation. Massive transformation of what we as humanity do and how we do it. Massive transformation of institutions, businesses, and individuals. Massive transformation that needs to happen all while managing the short-term crises we’re currently experiencing. And massive transformation that has to happen fast.
Change of such scale and scope is only possible when the entire approach is renewed for the 21st century. Requiring an immediate gain from a certain transformation should not be the primary goal; organizations need to be focused on delivering outcomes that will sustain over time and that will ensure organizations fulfill their purpose, are financially successful and at the same time enable the world to address the systemic issues described above — what PwC calls sustained outcomes. Pursuing sustained outcomes also means that organizations must analyze the possible unintended consequences of the transformation for a diverse and ever increasing set of stakeholders. A consumer company launching a new product, for example, will need to include sustainability considerations along the entire product lifecycle — from development to reuse and disposal; a hospital implementing new electronic medical records will need to ensure that documentation needs do not get in the way of nurses’ passion for caregiving; a professional services company looking to address the Great Resignation will need to revise its legacy hiring criteria to be attractive to people from disadvantaged communities. In all their undertakings, organizations need to be clear about why they’re actually doing this and how it impacts the stakeholders that matter to them.
An additional complication comes from the fact that most of the issues the world is struggling with are too complex for any organization to tackle on its own. Just think about all the elements that need to be remade in order to recreate our energy system to one that is more sustainable or reimagine how we move from one place to another or build or grow things. Or what it takes to create employment opportunities for the millions of people in emerging economies who are ready for their first job. All of these issues take a concerted effort by many constituents — public and private — and therefore require an unseen level of trust.
With trust now being more urgent than ever before, involving more stakeholders, and extending into more domains, organizations need to rethink how they can — and must — build trust in this new world. How can they demonstrate that they are meeting their major stakeholders’ expectations — not just their investors’ financial expectations, but customers’ expectations, for example, around product safety, communities’ expectations around carbon emissions, people’s expectations around data privacy, employee’s expectations around equal pay, and many more? Distrust and skepticism in society have reached a point where people need to be assured that the organization’s plans are solid and results will be, or have been, achieved, in the areas that matter to them. But that’s not all. Organizations also need to build trust with all the constituencies who are critical for the massive transformation that is required for success in this new world — their customers, investors, regulators, employees, ecosystem partners, and many more — making sure all these important constituencies believe in, support, and help drive the transformation to ensure its success. And they need to put in place the right structures and processes to ensure they manage trust systematically and in line with the key asset it is, baselining how trusted they are, defining what sustained outcomes to focus on, putting in place the right governance that helps them balance the many, potentially conflicting, stakeholder requests, etc.
Over the past year PwC has been working with thousands of organizations to help them build trust and deliver sustained outcomes. The task ahead is massive but never have we had a more important one. I am deeply proud of PwC’s intentional choice to be a contributor to this incredibly important work.
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