Governments and business are becoming increasingly aware of their need to cooperate if they are to meet the global challenges they face.
Enraged bank manager Henry Gatewood says at one point in John Ford's classic film Stagecoach: 'I don't know what the government has come to. Instead of protecting businessmen, it pokes its nose into business. The government must not interfere with business!'
Almost 70 years after the release of the film, this is still a common sentiment. Yet in this age of multiple threats, from war, terrorism, diseases, climate change and natural disasters, is it appropriate? Is it realistic to insist that government and business should still have nothing to do with each other? A different approach is surely needed in a global economic environment that is so fraught with risk. This year's annual report on global risks from the World Economic Forum, published in January, worryingly pointed out that there was an ever-increasing gap between the power of global risks to cause major disruption and the world's ability to deal with them. The report, published in cooperation with Citigroup, Marsh & McLennan Companies, Swiss Re and the Wharton School Risk Center, suggested that many of the 23 core global risks discussed had worsened over the previous 12 months, adding that 'institutional innovations' might be needed to create effective responses.
Such innovations could include the appointment of 'country risk officers' and the creation of flexible 'coalitions of the willing' around specific global risk issues. The first of these, the report's authors argue, would provide a focal point in government for mitigating global risks across departments, learning from private sector approaches and escaping a 'silo-based' approach. The second would allow mitigation strategies to emerge from the interplay between governments and business.
'Risks are often still viewed and dealt with in isolation,' says Swiss Re's CEO Jacques Aigrain. 'However, in today's world, global risks are tightly interwoven. To address our contemporary risk landscape, governments and enterprises need to take a holistic approach to overcome silo-thinking and acting. We need to prioritise risks effectively, improve preparedness and strengthen public-private partnerships to mitigate risks and to finance economic losses.'
CLIMATE CHANGE
One key area of risk where public-private partnerships are developing is climate change. Although business may not yet be feeling an impact, it will suffer in the future from an increasing frequency of extreme weather events and an increase in sea levels across the world.
In the UK, the government is seeking to include the business community and other stakeholders in a broad programme of action. It recently issued a draft version of a climate change bill, focusing on increased energy efficiency, increased use of renewable energy as well as reducing total energy consumption via carbon pricing. The main form of carbon pricing is emissions trading, an administrative approach used to control pollution by providing economic incentives for governments and businesses to achieve reductions in the emissions of pollutants.
UK business organisation the CBI welcomed the draft bill, and is submitting a response to the government. The CBI has also set up its own climate change task force, which includes chairmen and chief executives from some of the country's largest companies. Chaired by Ben Verwaayen, CEO of telecoms firm BT, the task force is seeking to set the agenda on how business tackles climate change and plans to produce a report later this year with wide-ranging recommendations for action.
In Germany, companies are focusing on developing technologies to generate and use energy more efficiently, and to reduce carbon dioxide. 'German industry is the global market leader in climate protection products,' says Carsten Kreklau, a member of the general directorate at the country's business association, the BDI. 'It takes the challenge of climate protection and its responsibility very seriously, and is working on long-term strategies to help effectively limit climate change.'
A total of 39 leading industrialists have already teamed up with the BDI to found the 'Industry for Climate Protection' initiative, which is being led by Klaus Kleinfeld, CEO of Siemens. Kleinfeld wants to see stable conditions for increased investment in new technologies, such as in the German car industry, which is seeking to reduce fuel consumption and increase efficiency. The initiative is also looking into the generation of energy with power plants that conserve the environment through low carbon emissions. If all German power plants were converted to modern technology, they would produce 40 million fewer tons of carbon. According to Kleinfeld, that amounts to around 5% of Germany's annual carbon emissions.
In France, the situation is less promising. Although the government led by new president Nicolas Sarkozy is preparing to hold an 'ecological summit' in October this year, the first preparatory meeting held in May did not feature any business representatives. However, business association MEDEF has created an environment committee, and its president Laurence Parisot says she wants to help develop a new, sustainable 'contract for growth'.
Then there are the campaigners who think that government should be confronting business over climate change rather than working in partnership, even claiming that governments should bring in legislation to force businesses to cut their carbon emissions. More regulations! And they claim that businesses are not doing enough, while agreeing that high carbon-emission industries such as the oil, car and aviation industries are beginning to make plenty of noise about climate change, but at the same time they are pretty much continuing with business as usual.
TERRORIST ATTACKS AND OTHER DISASTERS
The risk of terrorist attack has become much more real to most Europeans in the last five years. Although its impact on Europe's economy may be limited so far, its impact on society more widely is more pervasive. The fear of attacks, particularly since the Madrid bombings of 2004 and the London bombings of 2005, has led to increasing concerns about extremist views. As a result, there is a risk of a more divided society, where groups turn inwards and positions become increasingly polarised.
Without belief and confidence, there is undoubtedly a risk that economic growth will be hampered. Maintaining society's cohesion amid increased security concerns is critically important for the future stability of both society and the economy, and it is a task that governments and businesses are seeking to address together.
LEADERS SURPRISED TO LEARN
One area where efforts could be made is bioterrorism. In January 2005, 'Atlantic Storm', an international exercise to determine how governments would deal with a bioterrorist attack, was staged in Washington. The exercise posited a fictitious smallpox outbreak in European and US cities caused by a terrorist attack.
The assembled world leaders debated the availability of vaccines in their countries and were surprised to learn that although some countries - including the US, the UK, France, Germany and the Netherlands - had enough to vaccinate their entire populations, many countries did not. Italy and Sweden, for example, had enough vaccine for only 10% of their populations.
This has led many to ask whether Europe should follow the example of the US government, which has launched Project BioShield, an attempt to develop and make available drugs and vaccines to protect against attack by chemical, biological, radiological or nuclear weapons. The legislation provides for government funding to pharmaceutical companies to pay for research into drugs that would be effective against such attacks, and many feel that Europe needs similar legislation.
Not all infectious diseases are caused by terrorist attack. Outbreaks of SARS and bird flu have caused panic in recent years. And yet, even though cases of bird flu continue to appear throughout Europe, the European Centre for Disease Prevention and Control (ECDC) recently found that EU member states were still unprepared for a Europe-wide outbreak. According to the ECDC's report, which was published earlier this year, governments need to continue their efforts for a further two or three years to be prepared for such an outbreak. 'Cross-sectoral preparedness needs to be as broad as possible, including business, private health care providers, trade unions, civil society and other stakeholders in the society as well as non-health ministries,' the report says. The message of cooperation between government, business and others once again came through loud and clear.
LOSS OF TRUST IN BUSINESS
One risk of a rather different nature, which is often overlooked, is the 'threat' of globalisation. Although it has brought significant economic benefits to Europe, it is also driving some important changes in the relationship between business and its employees, and has loosened the emotional ties between business and broader domestic society. This has contributed to a climate of suspicion, and even though companies are now more transparent and accountable than they have ever been, trust in business - the belief that in conducting its affairs, business has the interests of society at heart - is in decline.
According to UK business group the CBI, this means that there is a growing risk that the integral role of business in generating wealth and safeguarding the wellbeing of future generations will be increasingly misunderstood, leading to pressures for 'anti-business' policies.
'This would be hugely damaging, as business lies at the heart of a healthy society,' the CBI argues in a recent paper submitted to the UK government.
'It plays the major role in the generation of wealth and prosperity - for workers and consumers, shareholders and pension holders - without which no society can prosper. A loss of trust in business would therefore have damaging consequences to broader society if it provoked policies constraining business activity unnecessarily. It is vital that society's changing demands are met in a way that does not conflict with the wealth creation process.'
SOURCE OF WEALTH CREATION
Ensuring that the role of business is well understood is not as dramatic as countering climate change, terrorism or disease, but it is nonetheless an essential job for governments and business. Politicians can help, by championing business as the source of wealth creation. But business itself must take an active role by demonstrating responsibility in areas of social concern, from the environment to the local community and international development.
'The government solution to a problem is usually as bad as the problem,' the economist Milton Friedman is believed to have said. However many people might still believe this, the scale of the challenges facing Europe and the wider world are such that they can only be met by governments, business and others working together.
