Germany 2030: Creative Renewal – On This German Farm, Cows are in Charge. Or at least Co-equals – Economic Resilience Is Built on Societal Well-Being

Today, we at TextileFuture do let you have again three different items of actuality in this Newsletter.

The first feature “Germany 2030 -Creative Renewal” is based upon a report of McKinsey and will you allow an insight into the future of Germany. including the challenges to be mastered.

The second item is an article from the New York Times entitled “On this German Farm, Cows are in Charge” written by guest author Melissa Eddy and it is an actual feature to what would be the normal in the future of agriculture. It will also help to think about what we do with animals that seldom take a revenche, but animals are also creatures that need respect and care, even a lot more than nowadays is customary.

The third item “Economic Resilience Is Built on Societal Well-Being” shows the value of human beings to advance Economic Resiliance. It is based on an article published by guest authors from the Boston Consulting Group. Their findings should be taken serious by the top management of companies, but it impacts all of us.

Germany 2030: Creative Renewal

About the author(s)

Dr. Fabian Billing is Managing partner of the German and Austrian McKinsey office. Dr. Eckart Windhagen is senior partner in the Frankfurt office at McKinsey. Dr. Graciana Petersen is partner in the Hamburg office at McKinsey.

Academic Advisor

Prof. Hans-Helmut Kotz, Resident Fellow at the Center for European Studies, Harvard University, Cambridge, MA, and Senior Fellow at SAFE, Leibniz Institute for Financial Research, Frankfurt, Germany

Currently, our society is facing a number of high demands: prosperity at least at today’s levels, the participation of everyone in progress and opportunities, and the management of climate change.

Germany’s model of the social market economy, which has guaranteed prosperity, stability, and social security for decades, is clearly a strength. But the factors that have particularly promoted our success in the past are visibly losing steam. Germany must identify a sustainable response to the upheavals in technology, demographics, and the global economic fabric as well as to new social requirements – particularly emissions and sustainability targets – and the juxtaposition of man and machine. Why this comprehensive “creative renewal” is indispensable, what it promises, and what should happen to make it a reality is explained in this publication.

The following core themes summarise our analyses and recommendations.

Germany’s economy – a global success story. The model of the social market economy has made Germany a winner in globalization: with an average per capita growth of 1.1 % in the years 2000 to 2019, it is at the level of the United States (1.2 %). In addition, Germany is in the leadership group in terms of sustainability, as measured by the Sustainable Development Goals (SDGs) of the United Nations. Compared to the US, the income distribution in Germany is more balanced (Gini coefficient 1 29.7 versus 41.4), CO2 emissions per capita are 45 % lower, and social progress is higher (rank of 11 versus 28 in the Social Progress Index of 163 countries).

Shift with three striking disruptions. The speed of exponential developments in technologies such as artificial intelligence (AI) is now high enough to enable leap innovations in biotechnology and automation, for example. The creative renewal of the economic actors creates a growth model that will continue to be effective in the next epoch and will make it possible to meet our overall demands for a sustainable society. The number of potentially employed people has, to a large extent, passed its historic highs in Europe and will continue to fall. Efforts to limit climate change to 1.5 degrees above pre-industrial levels are a new social priority and are leading to a fundamental reassessment and transformation of economic activities. In addition, further uncertainties arise from the tensions in global trade relations regarding the German model, which is characterized by export success. The vast majority of Germans expect a profound change and at the same time, want to maintain at least the high status quo.

The solution: creative renewal. The disruptions of the epochal turn require and reward disruptive, radically new solutions. Leap innovations pay off – continuous incremental improvements of high-end products (Germany’s primary recipe for success over many decades) are no longer enough. It is not preservation of the status quo, but rather the new departure and new opportunities associated with it that will enable everyone to participate in progress and opportunities in the sense of the social market economy in the future. The creative renewal of society enables an economic growth model that will remain efficient also in the next shift and makes it possible to meet our overall demands for a sustainable society. For the transition to an economic model based on the principle of creative renewal, six fields of action must be addressed: on one hand, the transformation in all segments of the economy (fields of action 1 to 3) and on the other hand, the further development of critical framework conditions – the “operating system” – for creative renewal (fields of action 4 to 6).

Thus, creative renewal can accelerate the average and high-value GDP growth to 2 % by 2030: this doubles from the 1.1 % per capita growth average of the last 20 years. Since the efforts described below in the six fields of action have a particularly medium-term effect, even higher-growth dynamics will be possible at the end of the decade.

Realising creative renewal of the industry – transformation in all segments

Field of action 1: Top companies – transformation into high-growth areas

The importance of top global companies – with their above-average share for research and development (R&D) and as anchors for entire industrial clusters – has continued to grow in recent decades. In 2017, some 87 % of R&D expenditures in Germany were made by larger companies (> 500 employees). But only one in four DAX and MDAX companies comes from a sector with high-growth momentum. Top German companies can lead the transformation to more growth momentum: in traditional core sectors such as automotive, mechanical engineering, and chemicals with successful renewals of business models, in product offerings and manufacturing processes, and in sectors with high momentum due to more top companies in business areas such as information and data, software, and pharmaceuticals. In a more dynamic portfolio focused on Germany’s strengths, annual GDP growth in 2030 can be increased by 0.2 to 0.3 percentage points as a result of this increased “momentum.”

Field of action 2: SMEs – from product specialist to ecosystem player

German SMEs are world champions in the manufacture of highly specialized hardware products. More than 90 % of the leading medium-sized companies come from hardware production. Now, the existing pure hardware producers must additionally develop software and integrate the new products into the Internet of Things in order to continue playing an essential role in the future overall system. In Germany, 0.4 percentage points of additional growth are possible by 2030 solely through the extensive use of AI and automation. In the broad SME sector, digitisation is the most pressing issue: during the pandemic, most smaller companies saw their digital investments decline, while the top companies accelerated. Resuming digitization now and making it a success over the coming years is a priority.

Field of action 3: Start-ups “scaled from Europe” – strengthen commercialisation and scaling

The number of company founders has been on the rise in Germany for a decade – venture capital funding increased tenfold between 2010 and 2020, and there are currently 18 “unicorns” in the country, i.e., young innovative companies with a market valuation of more than USD 1 billion before going public or an exit. More than half of the 20- to 40-year-olds surveyed by McKinsey in Germany would be willing to become entrepreneurs and one in 10 would even like to start their own business. The main obstacle cited is a lack of equity capital and too much bureaucracy. As a basis for successful business start-ups, an even better link is needed between researchers and entrepreneurship, the promotion of a comprehensive start-up culture (e.g., recognizing failure as a learning step), and even more knowledge about access to capital.

Creating critical framework conditions for creative renewal

Field of action 4: Investing in technology leadership – doubling R&D spending.

The number of active world-class patents has increased sevenfold globally in the last 20 years. Those who fall off in technology leadership will sooner or later also fall off in terms of value creation. McKinsey has categorized more than 40 technologies and prioritized them according to technical maturity, industry impact, and dynamics. The result shows Germany’s relative strengths in research on automation, sustainable energy, materials 2.0, and the bio-revolution, but also critical weaknesses in areas such as applied AI and next-generation computing. For example, the number of German world-class patents in applied AI and next-generation computing is clearly below the fair share, which quantifies the share of the total number of world-class patents, taking into account the economic size ratio to the front-runner, the US. And this is critically taken into account the role of these future technologies for growth. In addition, scientific breakthroughs in these areas too rarely achieve commercialization or scaling; the translation of ideas into products and services often falls behind. A doubling of private and public investment in R&D and a targeted, strong expansion of (digital) infrastructure are estimated to increase GDP growth by 0.5 percentage points by 2030. In addition to investments in R&D, there is also a need for more knowledge and transparency regarding technology for users. Less than half of 20- to 40-year-olds surveyed by McKinsey in Germany believe that technological progress has a positive effect on the economy and society. More than half are not open to innovations. This scepticism must be met openly.

Field of action 5: Transforming the future of work – organising the transformation of 10.5 million jobs

By 2030, around 4 million employees will have to switch to other occupational fields – just under 10 % of the workforce. In addition, more than 6.5 million will have to develop new skills to a considerable extent – just to implement the advancing digitization. A new (continuing) education system geared towards lifelong learning will qualify the workforce for the working worlds of the future, which will continue to develop dynamically. Germany can use proven systems such as dual training, universities of applied sciences, and universities. Newly developed curricula will define the required technological and social competencies of tomorrow’s workforce.

Field of action 6: The state as a results-oriented partner

As described in the 4th field of action, the state, with its ability to assume long-term, high risks, plays an important role in investing in critical infrastructure and enabling technologies. In addition, the state plays a crucial role in setting the framework for accelerating the dynamism of the economy. Two priorities are in the forefront. The first is to ensure planning security for the energy transition. We got a head start in the 1990s, but the turnaround is faltering, in part because private investors have no clarity about long-term regulation. The second priority is more results-oriented regulation and administration. Most major digitization programs are moving forward. In addition, the administration needs a cultural change from process-oriented to results-oriented leadership. In regulation as well, the principle of results orientation could support the acceleration of activities.

Start creative renewal now

The COVID-19 pandemic has shown what changes companies, the state, and society are capable of making in the shortest possible time. For instance, we saw a 20 to 25-fold higher digitisation speed achieved in companies as well as the development and approval of new vaccines within months. This dynamic must be maintained if a Herculean task such as limiting anthropogenic climate change while maintaining prosperity can be successfully addressed. The pandemic has also shown how big changes increase the risk of splits between “winners” and “losers” (in 6 out of 7 indicators of productivity growth, fewer companies are developing than before during the pandemic; e.g., prior to the pandemic, 73 % of companies in Europe increased their R&D investments, while currently, this number is only 41 %).

The successful tackling of the challenges in the six fields of action creates the conditions for a sustainable model in which the existing options are used. Standing still, on the other hand, would not only amount to renouncing these new opportunities, but would rather endanger our prosperity in the medium term.

Download the full report in German (PDF-8MB)

www.mckinsey.com

On This German Farm, Cows Are in Charge. Or at Least Co-equals

Melissa Eddy

By guest author Melissa Eddy from the New York Times. Melissa Eddy is a correspondent based in Berlin who covers German politics, social issues and culture. She came to Germany as a Fulbright scholar in 1996, and previously worked for The Associated Press in Frankfurt, Vienna and the Balkans.

Kristina Berning, 21, holding her cow Ellie with her sisters Celine (left) and Michelle, (right) sitting next to them.Credit…Lena Mucha for The New York Times (all captions and graphic courtesy by the New Yotk Times)

BUTJADINGEN, Germany — Tom will lay his head in the lap of anyone who sits down to rub his neck, while Tilda prefers just to nuzzle her young son. Cuddles aren’t really Chaya’s thing, but if she’s in the mood, she’ll play pugnaciously with a bale of hay as if it’s a giant ball.

On any other farm, these three friends would no longer be alive. Tom was too small, Tilda too ill and Chaya too aggressive to survive on a modern industrial farm. Each was condemned to the slaughterhouse.

Instead, the trio found their way to Hof Butenland, an ex-dairy farm turned animal retirement home that offers sanctuary to cattle, pigs, a few horses, chickens, geese and rescue dogs.

No animal is there to serve a human need; all coexist as equals with Hof Butenland’s human residents and workers.

“We need to think about how we can live differently and we need to leave animals in peace,” said Karin Mück. She and her partner Jan Gerdes, both in their mid-60s, run Hof Butenland on the windswept flatlands of Germany’s Butjadingen Peninsula, which juts into the North Sea.

The idea of shifting away from meat and dairy products may sound revolutionary in a country better known for juicy bratwurst and Frisbee-sized schnitzel, along with afternoon indulgences of coffee topped with frothy milk and cheesecake.

But Germans are consuming less meat — last year only 126 pounds per person, the lowest amount since 1989 — while the number of vegans has steadily increased to two million.

Increasingly, even Germans who eat meat are purchasing vegan products as concerns over how livestock is kept are encouraging people to turn away from animal products, said Ulrich Hamm, a professor of agricultural sciences at Kassel University, who has studied trends in food consumption for decades.

For the humans at Hof Butenland, the turn away from animals as commodities is not only a question of human morality but of planetary survival, given the role that industrial farms play in contributing greenhouse gases to the atmosphere.

“For me it is clear, if we want to save this planet, then we have to stop using and consuming animals,” Mr. Gerdes said over coffee, with a splash of oat milk. “We have the economic power to enact change, but we have to want it.”

Mr. Gerdes took over Butenland from his father and introduced organic practices to the region in the 1980s. But even on an organic farm, he could not avoid what he called the “brutality” of how dairy cows are treated to produce milk: removing newly born calves from their mothers, who for years are inseminated again and again.

His discomfort with the process — and decades spent listening to calves cry out for their mothers — ultimately led Mr. Gerdes to quit the dairy business and adopt a policy of total egalitarianism for all the species calling the farm home.

Now, the animals are free to roam from the red brick barns built in 1841, down the tree-lined lane to the nearly 100 acres of grass-rich pasture and back again, at their own pace and on their own time. There are no milking hours to be met and the pigs, buried deep in a pile of straw, regularly sleep long past noon.

  Kristina Berning leading Lily out of the trailer to the stable.Credit…Lena Mucha for The New York Times


Kristina Berning leading Lily out of the trailer to the stable.Credit…Lena Mucha for The New York Times
Karin Mück and Jan Gerdes siting in their kitchen at night.Credit…Lena Mucha for The New York Times
An employee of Hof Butenland feeding one of the pigs that spent seven years in an animal testing lab.Credit…Lena Mucha for The New York Times

One of the pigs is Frederick, whose stall opens onto a shady yard with a muddy pond that he and three other swine friends share with the geese. He was found after tumbling from a trailer packed with piglets bound to become suckling pigs. The driver, contacted by police, scoffed at the idea of turning back for one lost animal, so he was brought instead to Hof Butenland.

Now he snores snout-on-snout with Rosa-Mariechen, rescued seven years earlier from the corner of a feedlot, suffering from pneumonia and infected wounds from rat bites. Their stall mates, Eberhard and his son, Winfried, were rescued from a university research lab where experiments left them nearly deaf and blind.

Lab animals have a special place in the heart of Ms. Mück, who spent weeks in solitary confinement in 1985 on suspicion of building a terrorist group, after she was caught breaking into a lab to free animals being used for experiments. Alone in her cell, she had a revelation.

“One day I realised, it is the same thing that happens to the animals,” she said. “You don’t see the sun, you are separated from your friends, you have no idea what is going on around you and you have no control over your own life.”

After 20 years working as a psychiatric nurse, she met Mr. Gerdes just as he was preparing to quit farming and sell off Hof Butenland, including his herd. But when a trailer came to collect the cattle, a dozen didn’t fit.

Mr. Gerdes turned them back out to pasture and decided to leave them there, undisturbed, for good. The sanctuary was born.

To finance their undertaking, the pair initially rented out vacation apartments. Many guests wanted to donate to help support the animals, leading Mr. Gerdes and Ms. Mück to set up the Hof Butenland foundation that now serves as the financial backbone for their operations.

Karin Mück visiting her geese.Credit…Lena Mucha for The New York Times

Social media channels are filled with videos of Chaya playing, other cows dozing in the sun and Hope, the gander (originally believed to be a goose), picking through Ms. Mück’s pockets. These clips have drawn a loyal fan base of donors, and the funds are enough to cover monthly vet bills, two workers and overhead costs. Electricity is generated on-site from a 1980s-era wind turbine.

Packages arrive at random, addressed to a cow, or to Omic, a Pekingese mix recently rescued from Romania. They hold feed bowls, treats and handwritten notes in envelopes that often include a 20-euro bill. Sponsors can sign up for group tours held twice a month, but uninvited visitors usually don’t get past the gate.

“We are called a retirement home for cows,” Ms. Mück said. “You don’t show up at a nursing home to pet the grandmas, why would it be any different here?”

A neighbour, Henning Hedden, 60, is a second-generation farmer who now rents his land to a young man running a conventional dairy with 90 cows. He has come to accept the Hof Butenland project and regularly stops by for a coffee and a chat, although he insists: “I’m still going to eat meat.”

Many neighbours who maintain working dairies argue their cows are healthy, well-treated and still able to meet the country’s still enormous demand for dairy.

Some also view the farm’s philosophy as a threat to their livelihoods.

“If we just cuddled the cows, it would be OK,” said Ms. Mück. “But what the other farmers don’t like is that we criticize the system.”

Each week, dozens of people telephone, asking the sanctuary to rescue a farm animal. But the waiting list is long.

Kristina Berning, 21, didn’t know this seven years ago, when she gathered her courage and called to ask if they would let her bring Ellie, a cow from her father’s dairy farm she was trying to save from slaughter. Initially, Ms. Mück refused — they didn’t have room — but the girl’s love for Ellie wore her down.

A cow stable on a conventional dairy farm in the neighborhood of Hof Butenland.Credit…Lena Mucha for The New York Times

In 2015, Ellie joined the herd.

In June, Kristina and her sisters drove Lily, another cow who had become a family pet, five hours north to Hof Butenland. Ms. Berning burst into tears when Lily bounded out of the trailer and began rubbing her back on a grooming brush in the barn.

But tears of joy turned to tears of sadness two days later when Ellie, 13, collapsed and had to be euthanized. Kristina spent the night in the pasture stroking the cow and saying her final goodbye.

“I’m just glad that I could be with her,” she said. “I think it was important, for both of us.”

Economic Resilience Is Built on Societal Well-Being

By guest authors Christian Schwaerzler, Abhishek Gopalka, Qahir Dhanani, Nikolaus Lang, Vincent Chin, and Dwaa Osman from Boston Consulting Group.

This article is the first in a series providing insight on why government leaders need to look beyond economic development and prioritize the overall well-being of citizens. The second article will explore how leaders can approach and tackle inequality, and the third will cover direct actions governments must take for the short- and long-term development of countries and their citizens.

One of the biggest lessons COVID-19 taught governments is that societal well-being makes countries more resilient. Nations that invest across a range of development dimensions—such as education, health, infrastructure, and governance—have been better able to cushion the socioeconomic fallout from the pandemic. Our analysis shows that countries with improved abilities to convert wealth into well-being as well as those with high overall well-being tended to mitigate drops in economic performance and limit the growth of unemployment rates during the first year of the pandemic. In contrast, countries with lower levels have fallen further behind, particularly in GDP growth and employment. This aligns with our previous research that shows countries better at converting wealth into well-being were able to recover more quickly from the 2008–2009 financial crisis.

Since 2012, BCG has ranked countries according to a proprietary economic development tool called the Sustainable Economic Development Assessment, or SEDA. (See “A Comprehensive Measure of Well-Being.”) A consistent finding from our research is that the more traditional metrics of economic development, which focus on GDP and other macroeconomic indicators, are not sufficient to gauge the true state of development in any society. Rather, countries need to take a more comprehensive and sustainable approach that incorporates and optimizes societal well-being. Viewed through this lens, SEDA analyses have shown that some lower-income countries are actually better off than high-income countries because they look beyond economic metrics and invest in well-being more broadly. COVID-19 brought in a new dimension—an opportunity to observe how such efforts make countries more resilient in a crisis.

Economic Resilience Is Built on Societal Well-Being

Launched in 2012, BCG’s proprietary SEDA tool looks at a range of economic and societal data for 141 countries to track how well governments turn wealth into well-being. It aggregates public data on ten dimensions in three broad categories.

  • Economic metrics, including income levels, economic stability, and employment
  • Investments in education, health, and infrastructure
  • Sustainability in terms of governance equality, civil society, and environment

SEDA is primarily an objective measure (combining data on outcomes, such as in health and education, with quasi-objective data, such as governance assessments). It is also a relative measure that assesses how a country performs in comparison to either the entire universe of countries or to individual peers or groups. SEDA offers a current snapshot as well as a measure of progress over time and complements purely economic indicators like GDP.

Explore BCG’s of National Well-Being

Even as countries continue fighting the pandemic, they need to think long-term and make investments today that will lead to faster and more sustainable progress during the coming recovery. Specifically, we believe that three overarching themes have the potential to generate positive change across multiple well-being dimensions: accelerating actions to slow climate change, investing in digitization, and strengthening social protection systems to ensure inclusive and equitable growth. Each of these themes should be a priority for governments.

The Pandemic’s Lasting Impact on Development

COVID-19 has left an unprecedented mark on global development. The United Nations Development Programme’s simulations of the pandemic’s real-time impact suggest that the Human Development Index fell in 2020, for the first time since measurements began in 1990. Similarly, the UN’s Sustainable Development Goals are expected to be significantly disrupted and many of the historic gains over the past several decades could be reversed, at least temporarily.

At a country level, the pandemic revealed the way that all realms of society are interconnected. Evolving from a health crisis to an economic and education crisis, COVID-19 has led to rising social tensions, high unemployment, and failing health systems, even in high-income countries. In low-income and developing countries, inequality has increased across several realms.

  • Income. The International Monetary Fund (IMF) predicts that income inequality for emerging-market and developing economies will rise to levels not seen since the global financial crisis of 2008–2009, essentially wiping out a decade of development in these regions.
  • Health. Disparities in access to health services—due to factors such as income, race, gender, and resident status—have widened the gap in life expectancy, accentuating the vulnerability of disadvantaged groups within poorer countries.
  • Education. According to UN data, close to 1.5 billion students have been affected by COVID-19-related school closures. Inadequate internet penetration has hampered lower-income countries’ ability to pivot to distance learning and likely exacerbated education inequality both within and between countries.

The pandemic has reinforced the need for governments to look beyond income growth and GDP and focus on the broader goal of overall well-being.

Well-Being Stabilised Countries During the Crisis

It’s too early to measure the full response of any country to COVID-19, but early indications suggest that countries with high SEDA scores—indicating higher levels of societal well-being—will suffer less of an impact. Indeed, well-being served as a form of stabilizer, enabling countries to absorb the shock and potentially positioning them to bounce back more quickly once the crisis ends. In our analysis, we looked at two leading economic indicators: economic growth and employment.

In terms of economic growth, countries which improved their ability to convert wealth into well-being since the global financial crisis, saw a smaller drop in their real GDP growth rate in 2020, while countries that have experienced a deterioration in their ability to convert wealth into well-being saw a correspondingly larger drop. (See Exhibit 1.) This reveals that investing in well-being enhances long term resilience and can further enhance a nation’s ability to withstand future crises. Notably, the countries that experienced the biggest drop in GDP also underperformed significantly in SEDA measurements of governance and civil society, suggesting that these are key dimensions in fighting the pandemic’s economic repercussions. Governance is critical because it boosts transparency and accountability, leading to greater public trust in government and increasing participation and engagement of citizens. Civil society matters because it helps countries deal with the unequal fallout from a crisis—for example, providing support and aid to those who are disproportionately affected.

The positive correlation between wealth, as reflected in per capita income levels, and SEDA scores should come as no surprise. After all, income affects well-being in many ways. At the same time, well-being is not simply a function of income. Many countries at similar income levels have significant disparities in well-being.

In terms of employment, we saw a similar effect. Countries that had high SEDA scores were better able to cushion the blow of COVID-19 and limit the growth of unemployment. (See Exhibit 2.) Many of these countries already had measures in place to increase the resilience of labour markets—such as unemployment safety nets and job retention schemes. Even in cases where the labor market policies needed to be adjusted, doing so was a faster process than creating them from scratch. A stubborn question remains as to whether retention schemes will lead to a stronger labour recovery once the pandemic ends; to some extent, that depends on whether they support jobs that have been temporarily at risk but are still viable in the long term.

Capitalising on the Post-Pandemic Recovery

Even as countries continue to face immediate priorities in addressing the crisis, they must reset their ambitions for the future. In fact, severe shocks like COVID-19 present a real opportunity to spring forward and introduce broad reforms toward the goal of overall societal well-being. Regardless of their past performance, governments should seek to leverage the current hardships to reimagine and realign policy imperatives across the full range of SEDA dimensions. From our analysis, we believe that three themes can have a multiplier effect in increasing well-being and thus should be at the top of government agendas.

Accelerate Actions to Slow Climate Change

The pandemic is estimated to have driven a 5% to 10% drop in CO2 emissions in 2020. That may seem promising as a temporary relief, but compared with the change in trajectory required to slow global warming, it is a mere blip. As the economic cycle resumes momentum, governments and societies have a unique opportunity to accelerate climate-related actions and build a green recovery. Previous recessions have led to an increased adoption of renewable energy sources and battery technologies. In fact, citizens expect governments to tackle climate change as part of COVID-19 recovery efforts. In a BCG survey of more than 3,200 corporate leaders, 77% of respondents say that companies receiving public aid or grants due to the pandemic should take on additional environmental responsibilities and commitments. A recent analysis by the International Energy Agency and the IMF found that a well-structured green recovery plan could lead to an increase in global GDP of 3.5% over the next three years and create 9 million jobs over the same period.

Indeed, some nations are intensifying their investments in environmental well-being. While countries that are already leading in SEDA environmental performance tend to be doubling down on a green recovery, other countries that are not environmental frontrunners have also passed recovery packages with a substantial share of investments targeted at environmental objectives. (See Exhibit 3.) This suggests that these countries see the crisis as an opportunity to accelerate their sustainability efforts.

For example, India’s green stimulus measures include investment in biogas and cleaner fuels, incentives for high-efficiency solar, and advanced battery production. South Korea’s “New Deal,” in addition to focusing on digitization, prioritizes initiatives that support a green transition, including investments in renewables and R&D funding for electric vehicles (EVs) and batteries. China’s green efforts entail substantial funding for EVs and related infrastructure, railway infrastructure development, and electricity transmission. In addition, China—the world’s largest emitter of greenhouse gases—recently pledged to achieve carbon neutrality by 2060 and the European Union has strengthened its commitments under the Paris Agreement by pledging to cut greenhouse gas emissions by 55% by 2030.

Despite these promising early signs, further action will be required. To stay on track to achieve the goal of limiting global warming to 1.5°C above preindustrial levels, roughly 1% to 3% of global GDP will need to be allocated to climate-change initiatives. To build a green recovery and accelerate actions to slow climate change, governments should focus on four actions.

  • Hardwire sustainability into stimulus spending. Focus investments on both decarbonizing existing sectors (for example, industrials and energy) and spurring growth in new green sectors such as green hydrogen. Include incentives and regulatory standards, such as sustainability targets and carbon disclosure requirements, in stimulus packages.
  • Create green jobs and prepare for job transitions. Prioritize investments and programs based not on their absolute job creation potential but on the number of jobs created in the green sector. Manage an equitable transition of the workforce toward a zero-carbon economy. Actively invest in reskilling programs to train workers who are displaced.
  • Partner with the private sector. To alleviate fiscal constraints, access private funding through structures such as public-private partnerships. Capitalize on the growth in environmental, social, and governance (ESG) investing and integrate ESG factors into investment processes.
  • Coordinate across borders. Partner with other national and regional governments on climate initiatives to make faster progress. The UN’s COP26 climate conference, which has been rescheduled for November 2021, will be a key milestone in monitoring progress toward the Paris Agreement. With representatives from nearly 200 countries, it also provides an opportunity to step up global momentum in forwarding a green recovery from the pandemic.

Invest in Digitisation as an Enabler and Amplifier of Well-Being

Done right, digitisation can help countries manage shocks in the short term and keep economies running. In the medium to long run, it can help developing and emerging economies leapfrog developed nations, accelerating human capital development, industry competitiveness, and access to global markets. Indeed, our previous analysis shows that digital infrastructure increases the ability to convert wealth into well-being at lower income levels; that is, its spillover impact on other well-being dimensions such as employment, education, and governance is particularly significant for developing countries.

Several countries have successfully integrated digital technologies into their crisis response; for example, by using mobile apps to trace transmission chains, register populations for vaccines, increase collaboration, and provide community support. Looking ahead, the pandemic has made clear that the future will be even more digital than previously imagined. Many of the behavioural shifts we are experiencing today, such as online grocery shopping and working from home, are expected to endure beyond the crisis.

Specifically, countries should focus on the following priorities.

  • Bridge the digital divide. As evidenced by those who have been disproportionately affected by school closures and the move to telework and telehealth, digital inequality tends to exacerbate existing social inequality. At the foundational level, countries need to ensure the provision of universal, reliable, and stable connection to the internet. Equally critical to safeguarding connectivity is bridging the access gap. COVID-19 has exposed the hardware divide, in which availability of devices (smartphones, PCs, laptops, tablets) and peripheral services (apps and subscriptions) dictates the extent to which people are able to leverage critical digital services such as e-learning. Furthermore, digital inclusion policies need to be multidimensional—promoting digital literacy, enhancing technological competence, and fostering the effective use of technologies to promote fruitful participation in the digital economy. As Exhibit 4 shows, there is a correlation between a country’s digital inclusion performance (as measured by the Network Readiness Index) and how well it converts wealth into well-being.
  • Leverage digital to build more resilient cities. Curbing the spread of COVID-19 has tested the capabilities of urban environments. City resilience will continue to be the main buffer against inevitable shocks, particularly as the 70% the world’s population will live in metropolitan areas by 2050. Big data’s role in smart city platforms will be essential in responding to future disasters in real time.
  • Digital government. Governments must continue to expand their digital capabilities with a citizen-centric mindset, as delivering simpler, more seamless, and faster government services becomes increasingly important. By harnessing both the human and technological elements of their organisations, governments can provide positive outcomes for citizens.
  • Strike the right balance between data accessibility and privacy.COVID-19 has shown the enormous potential for governments to use and leverage citizen data. Yet this raises important ethical and legal questions. Governments need to safeguard information while instilling high ethical standards for its utilisation. For instance, by creating data-sharing frameworks that put in place data use guardrails, governments can support accessibility and adoption without compromising privacy.
  • Establish Social Protection and Welfare Systems to Ensure Sustainable and Equitable Growth.
  • Social protection systems can dramatically mitigate the impact of crises like COVID-19, particularly for vulnerable populations who have been disproportionally impacted. Since the beginning of the pandemic, the number and scope of social protection initiatives has been unprecedented. Overall, as of December 2020, approximately $590 billion (or nearly 1% of worldwide GDP) had been pledged toward more than 1,500 specific measures in 209 countries. More than half of these were for new programs or benefits. (See Exhibit 5.) Many countries prioritized benefits for workers and their dependents along with benefits for poor or vulnerable populations.

Despite these efforts, however, many social protection schemes still fall short. According to research from the UN’s International Labour Organization, 55% of the global population has no form of social protection. About 40 % of people have no access to health insurance or national health systems, and only 20% can count on unemployment benefits.

There is a clear need for future-proof welfare systems, which should not only act as an immediate cushion during a crisis but also make countries more resilient and equip them to transition to more sustainable economic growth. It is crucial, therefore, that governments treat the COVID-19 pandemic as an opportunity to rethink their approach to social protection. Rather than a safety net for vulnerable populations, these programs should serve as a trampoline, empowering citizens to be more socially and economically adaptive. The right approach will reduce inequalities, strengthen human capital, and contribute to long-term productivity.

To that end, governments should focus on the following priorities in revamping social protection systems.

  • Institutionalize successes. Identify which of the programs launched in response to COVID-19 functioned best and make them permanent. Cut or modify other programs as needed.
  • Increase financial sustainability. Look beyond one-time stimulus spending packages to make programs—particularly basic protection measures—that will be viable over the long term.
  • Collaborate across stakeholders. Design programmes to draw on support from government, business, and citizens.
  • Use digital delivery channels that are fast and cost-effective in interacting with participants and delivering benefits.

The pandemic has served as a forced experiment in testing countries’ resilience, and as our analysis shows, the results are clear. Societal well-being not only helps countries during good times; it also makes them more resilient during crises. The SEDA framework is a powerful tool for governments to assess and track their progress in this realm and identify specific policy interventions that will comprehensively improve the well-being of their populations. By focusing on the three overarching themes we identified—slowing climate change, fostering inclusive digitization, and enhancing social protection—countries can capitalize on multiplier effects and accelerate overall progress.

www.bcg.com

Newsletter of last week

EU Action Plan triggers sustainable consequences https://textile-future.com/archives/71792

The highlights of last week’s NEWS, for your convenience, just click on the feature to read.

Challenge

Launch of UBS Future of Finance Challenge 2021 https://textile-future.com/archives/71856

Companies

Breaking News – Rieter Updates Outlook for First Half Year 2021 https://textile-future.com/archives/71994

ISKO launches ISKO™ World – the next step in the company’s mission to shape the future of the industry https://textile-future.com/archives/72022

Morrisons  GBP 6.3 billion takeover prompts call for crunch meeting https://textile-future.com/archives/72119

Data

European Availability of CT and MRI units in hospitals https://textile-future.com/archives/71851 

May 2021 compared with April 2021 Industrial producer prices up by 1.3 % in the Euro Area,  and by 1.4 % in the EU https://textile-future.com/archives/71887

European Household saving rate up to 21.5 % in the Euro Area – Business profit share increases to 41.2 % https://textile-future.com/archives/71973

First quarter of 2021: EU current account surplus EUR 116.5 billion, EUR 33.1 billion surplus for trade in services https://textile-future.com/archives/71997

Education and job type affect over-55s’ employment https://textile-future.com/archives/72042

May 2021 compared with April 2021 Volume of retail trade up by 4.6 % in both the Euro Area and the EU https://textile-future.com/archives/72053

Summer 2021 European Economic Forecast: Reopening fuels recovery https://textile-future.com/archives/72094

European Manufacturing down by 8.5 % in 2020 https://textile-future.com/archives/72128      

European Rents up by 15.3 %, house prices by 30.9 % since 2010 https://textile-future.com/archives/72136

U.S. Job Openings held at Record Level headed into Summer https://textile-future.com/archives/72160

First quarter of 2021 compared with first quarter of 2020 European House prices up by 5.8 % in the Euro Area, in the EU up by 6.1 % https://textile-future.com/archives/72166

The latest McKinsery week in Charts https://textile-future.com/archives/72205

OECD –  CLIs continue to expand steadily https://textile-future.com/archives/72324

Demography

European Demographic data visualised https://textile-future.com/archives/72174

Digitisation

We need to lead, not follow, in the digital age https://textile-future.com/archives/72012

Divestment

Lonza Completes Divestment of Specialty Ingredients Business https://textile-future.com/archives/71920

Events

ITMA Asia + CITME 2021 in Shanghai, China, was a complete success for Groz-Beckert https://textile-future.com/archives/72086

Expansion

McKinsey expands its Digital Capability Centre in Italy, powering tech-enabled operations excellence in European industry for the next normal https://textile-future.com/archives/72241

Fashion

What’s in fashion now https://textile-future.com/archives/72252

How to Dress Like an Olympic Legend https://textile-future.com/archives/72258

Footwear

Effekt Footwear – the world’s most rubbish sneakers https://textile-future.com/archives/72178

G20

Tackling global challenges at the G20 summit https://textile-future.com/archives/72255

Indemnification

Topshop administrators pay Lady Tina Green GBP 50 million https://textile-future.com/archives/72123

Learning

Adult European Lifelong Learning dropped slightly in 2020 https://textile-future.com/archives/71878

Partnering

DSM and Fibrant significantly reduce Greenhouse Gas emissions for Akulon® PA6 with EcoLactam® https://textile-future.com/archives/72109

SONGWON and SABO extend their long-standing partnership https://textile-future.com/archives/72116

Personalities

The European Commission appoints a new Head of Representation in Portugal https://textile-future.com/archives/72036

New Products

Suominen launches BIOLACE® Ultrasoft, a plant-based nonwoven for sensitive skin https://textile-future.com/archives/71896

Retailing

Shareholders boot JD Sports remuneration director amid row over chairman’s pay https://textile-future.com/archives/71914

Harvey Nichols launches its first ever childrenswear range https://textile-future.com/archives/72156

Shopping

Shopping for High-End Brands Is Harder Than It Looks—Even if You’re a Luxury Giant https://textile-future.com/archives/71909

Silk Road

China’s Quanzhou to build significant gateway city of 21st Century Maritime Silk Road https://textile-future.com/archives/71883

Sport

Iceland renames Wembley store in support of England football teamhttps://textile-future.com/archives/72146 

Solar Technology

Solar technology from Synhelion to receive Innosuisse funding – A next step towards climate-friendly fuels  https://textile-future.com/archives/72030

Success Stories

Perswall heralds a Wallpaper Renaissance with the Installation of Xeikon’s CX500 dry toner press https://textile-future.com/archives/71923

Wülfing gets much MORE from Monforts https://textile-future.com/archives/72016

Sustainability

Creating a waste-free future: Mexican social enterprise wins Nestlé Creating Shared Value Prize https://textile-future.com/archives/71964

Recover, Happy Punt and Hansae partners to achieve circular fashion for all https://textile-future.com/archives/72198

Switzerland

Switzerland takes over the presidency of Intra-European Organisation of Tax Administrations  https://textile-future.com/archives/71848

Technologies

11 Hottest Tech Trends in 2076 https://textile-future.com/archives/71935

Trade

USFIA Virtual Washington Trade Symposium will Cover Updates from the Hill, the Administration, and Key Issues for Compliance https://textile-future.com/archives/72236

Webinars

Webinar: Digital Knitwear Development with k.innovation CREATE https://textile-future.com/archives/71900

WIPO: International Seminar on “Harnessing Public Research for Innovation in the Time of COVID-19 and Beyond – The Role of Knowledge Transfer Policies” (July, 20, 2021) https://textile-future.com/archives/71969

Worth Reading

Worth Reading – OECD: Perspectives on Global Development 2021 https://textile-future.com/archives/72249