Responding to the ramifications of the Covid-19 pandemic has dominated many management and boardroom discussions. While the management focuses on addressing how the business can recover and restart operations with the easing of restrictions, boards can steer their organisations toward more future-oriented thinking and planning in response to megatrends that have a long-term impact on the wider environment and business.
Megatrends provide a valuable basis for organisations to generate new planning scenarios, define a relevant purpose for the future and execute with urgency — with the goal of becoming a more resilient and transformative company. In particular, four megatrends will create the most impact across boards: Decarbonisation, the future of thinking, unbounded work and life, and the behavioural economy.
Decarbonisation
Businesses are increasingly expected to step up to the plate in taking action on climate issues as dissatisfaction with government progress continues to grow across the world.
Employees, customers and other stakeholders expect CEOs to lead the way in addressing growing global challenges, including climate change. Investors are moving up a gear when it comes to assessing the performance of companies using non-financial factors.
According to the 2020 EY Climate Change and Sustainability Services (CCaSS) fifth global institutional investor survey, 73% say they will devote considerable time and attention to evaluating the physical risk implications of climate change when they make asset allocation and selection decisions.
As new carbon-removal solutions emerge for decarbonising business models, the board’s role in demonstrating climate leadership will be imperative. Boards must work with the management to continue to champion climate-related considerations and ensure that they are factored into decision-making processes, including how exponential climate impacts may threaten supply chains and physical infrastructure.
To drive and measure progress, boards should consider if the management is incentivising innovation in a way that contributes to a decarbonised business model, drive the development of performance metrics that promote sustainable opportunities, and request for more frequent and in-depth reporting on such metrics.
This should not stop at the boardroom. When boards are transparent with stakeholders about what the metrics are, and regularly review and share progress on them, this will help to build trust with their stakeholders.
Future of thinking
As technology permeates virtually all domains of the workplace and gains the ability to supplement or substitute human cognition, organisations need to strike the right balance between adopting digital technologies that liberate staff for higher-value activities and preserving human-centricity.
Importantly, organisations need to ensure that the information and technologies they manage are trusted and protect against and mitigate cyber risks, including disinformation, phishing and malware. This responsibility should not lie solely with the IT function but rather, embedded into the enterprise risk management processes and company’s risk culture.
Together with the management, boards should closely and continually monitor the organisation’s approach and investment in the digital strategy and cybersecurity to ensure that they are agile, ethical and robust.
Technology is also profoundly changing how we think and behave as customers, employees and citizens. This means that human resources leaders will need new ways to motivate employees to function at their highest capacity and marketing functions will need to rethink branding and advertising if consumers’ purchasing decisions are dependent on technology. Investor relations must be vigilant against new forms of disinformation. This requires new skill sets that organisations must now strategically plan for to be future-ready.
Unbounded work and life
The boundaries that define work, leisure and learning are blurring more than ever as norms in working hours, leisure time, retirement and learning continue to evolve. For employers, this poses both opportunities and challenges that are intertwined. How do we best balance what makes for job satisfaction, productivity and a conducive work environment?
Traditionally, boards have tended to prioritise other issues over people: The EY Global Board Risk Survey conducted in late 2019 found that board directors ranked people issues as only the seventh-most important risk in the short term. With the shifting norms, boards need to elevate the people agenda and view people issues in the context of the broader organisational purpose.
Boards should work with the management to consider how to engage talent in the new, decentralised operating environment, and encourage the organisation to conduct frequent pulse surveys and make corrections where necessary. They should also review the existing employer brand promise to employees to ensure it is fresh, relevant and actionable. With shifting workplace norms and a dispersed workforce, it is even more essential for boards to advocate a culture of inclusiveness to foster belonging within the organisation.
Behavioural economy
Human behaviour is becoming a commodity — quantified, standardised, packaged and traded, as much as consumer data is today. Organisations will be increasingly using behavioural economics together with affective computing — also known as emotion AI — to measure, understand and shape consumer behaviour.
Organisations must also stay attuned to what kind of consumer is emerging and what new customer segments are being created. The 2020 EY Future Consumer Index found that 62% of respondents are more likely to purchase from companies that are doing good for society. Organisations also need to demonstrate transparency, not secrecy or defensiveness. Those that do it well will have a huge competitive advantage.
To leverage this megatrend, bringing the voice of the customer into the boardroom is key. Boards should question critically how the organisation is working to stay relevant to the customers of the future.
The use of sophisticated customer-focused techniques, such as behavioural economics or affective computing, could be useful, as is bringing behavioural expertise or subject matter experts into boardrooms to better understand evolving consumer needs.
By viewing their organisations through the lens of these megatrends, boards will be better placed to work with the management to take informed and decisive actions for long-term success. They should not consider the potential implications of each megatrend singularly but rather, interdependently, as they weave these considerations into the organisation’s strategic frameworks.
Max Loh is EY Singapore and Brunei Managing Partner, Ernst & Young LLP, knowledge partner of this year’s Billion Dollar Club, which is organised by The Edge Singapore. The views reflected in this article are those of the author and do not necessarily reflect those of the global EY organisation or its member firms.
