3 Global Pressures and Economic Impacts on Business

global economy and small business

Small businesses need to be aware of economic pressures environment, social progress and cyberspace

 

Small busineses do not operate in a vacume, global pressures on the economy can drive overhead like energy bills. Social instibility can impact travel and cross boarder trade. Cyberspace instability can put data at risk. Here's a snapshot of global trends to be aware of.

1. Environment and climate shocks: It can be a threat to global security

“Natural resource scarcity and global climate change pose direct threats to US prosperity and national security,” David Reed outlines (“How climate change and resource scarcity are upending world politics” -Foreign Policy in Focus-).

Here are two examples:

A) Recent incursions by Chinese navy ships, fishing fleets and oil rigs into the territorial waters of Vietnam, the Philipines and Malaysia 

B) The growing stress on the water management agreements between the US and Mexico because of drought in the region.

Five clear challenges are identified in the book “In Pursuit of Prosperity

1) Diminished agricultural productivity will disrupt global supply chains.

2) Harsh resource constraints and degradation will spark domestic instability.

3) Declining fish stocks coupled with drought in the Horn of Africa have destabilized regional relations as piracy and insurgencies have multiplied.

4) The collapse of agricultural production, drought and failed policies have fueled internal migration in India.

5) International criminal networks and non-state threats have multiplied, as in the Democratic Republic of Congo. US prosperity and national security are directly dependent on the prosperity and stability of both partner and ally countries, such as Brazil and India, as well as of competitors like China and Russia.

There is no simple response, but two approaches may serve as strategic guideposts to governments, companies and civil society groups: identifying trade-offs and promoting resilience (FPF). “President Obama acknowledges the importance of acting on climate change and the risks to national security this global threat poses,” the White House states (“The national security implications of a changing climate).

Climate change does not respect national borders. It contributes to natural disasters and humanitarian crises, and potentially increases refugee flows and exacerbates conflicts over basic resources like food and water. It also aggravates issues at home and abroad, including poverty, political instability and social tensions: conditions that can fuel terrorist activity and other forms of violence.

Ways theses problems are being tackled:

1) The Environmental Protection Agency (EPA) will put in place standards to reduce pollution from power plants.

2) Today the US harnesses three times as much electricity from the wind and 20 times as much from the sun as it did since Obama took office.

3) Work needs to be done with the industry to phase down HFC’s and reduce methane emissions

4) Cars and buildings will become more energy efficient

5) The Department of Defense is making progress to deploy 3 gigawatts of renewable energy on military installations by 2025 (The White House).

2.  Development/ Social Progress Index: Comprehensive Inclusive Growth Gauge That Complements GDP

“The 2015 Social Progress index (SPI), created in collaboration with Scott Stern of MIT, and the nonprofit Social Progress Imperative, measures the performance of 133 countries on various dimensions of social and environmental performance,” Michael Porter tells us (“Why Social Progress Matters” -Project Syndicate-).

It is the most comprehensive framework developed for measuring social progress, and the first to measure it independently of GDP. “The world is overly obsessed by GDP statistics as a defining measure of progress. There was a need for something in addition to GDP, to give us a more holistic measure of inclusive growth, thus the SPI was born,” Steve Almond from Deloitte notes.

The SPI examines three different component parts of a country’s progress,” Bruce Rogers adds (“The Social Progress Index Seeks To Redefine Economic Success Measures” -Forbes-):

1) Social and environmental conditions, including a society’s ability to meet the basic needs of its citizens like water, sanitation, shelter and basic medical care.

2) A society’s ability to both sustain itself and provide systems and infrastructure for things like secondary schools, access to the Internet and mobile tools.

3) The level of opportunity and upward mobility a society offers:

  • Personal rights
  • Freedom of speech
  • Tolerance
  • Inclusion
  • Access to advanced tertiary education

 “In all, there are 52 different indicators across these three dimensions, and importantly, all are focused on outcomes.

It doesn’t matter how much money you spend on healthcare: what matters is how well, how healthy your citizens are,” Rogers underscores (Forbes). “The SPI offers a practical tool for government and business leaders to benchmark country performance and prioritize those areas where social improvement is most needed,” Porter explains (PS).

A striking finding is that GDP is far from being the sole determinant of social progress. Costa Rica has achieved a higher level of social progress than Italy, with barely a third of Italy’s per capita GDP. New Zealand and Senegal are far more successful at translating their economic growth into social progress than for example, the US and Nigeria.

Many of the fast-growing emerging economies, including China and India, have also not yet been able to attain the level of social progress that their economic progress enables. Focusing on social progress leads to better development strategies and builds political support for the controversial steps sometimes needed to increase prosperity.

This year, the European Commission will roll out regional SPIs across Europe. “GDP has been the benchmark guiding economic development for more than a half-century. The SPI is intended to complement (not replace) it as a core metric of national performance,” Porter concludes (PS). 

Next- 3. Rules in Cyberspace: Preventing International Conflicts 

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About the author

Luis Gallardo

Luis Gallardo is a global brand and marketing leader and expert in the areas of strategic brand management, brand engagement, brand expression, marketing, communications, business development, and reputation management. Former managing director of global brand & marketing at Deloitte, Luis provided leadership to Deloitte's member firm network of more than three thousand marketing and communications professionals. Author of the book: Brands & Rousers, The Holistic System to Foster High-Performing Businesses, Brands and Careers. Luis is the founder of Thap Group, a multinational consultancy focused on brand, marketing and communications strategy, and he sits on the advisory board of several high-growth organizations.