Business in a Changing Society E-Book

• Herausgeber: Neue Zürcher Zeitung NZZ Libro
• Kategorie: Sachliteratur, Reportagen, Biografien
• Sprache: Englisch

Seitenzahl: 437

Veröffentlichungsjahr: 2014

Beschreibung

On the occasion of Peter Brabeck-Letmathe's 70th birthday a group of his friends invited 31 authors to contribute to this festschrift, honoring his great achievements in providing business leadership and contributing to public dialogue on important issues. Leaders from politics, academia, civil society and business who know Peter Brabeck draw a fascinating, multifaceted picture of the quality, speed and nature of the ongoing and often accelerating change taking place in society, technology and markets. It is a change that is not only relevant for him as chairman of Nestlé, but also for citizens and businesses around the world today, and in years to come. With Contributions by: Patrick Aebischer Robert E. Black Günter Blobel John Briscoe Lester R. Brown Paul Bulcke Jin-Yong Cai Vittorio Colao Tsakhiagiin Elbegdorj ¦ Julio Frenk Francis Fukuyama Orit Gadiesh Vitor Gaspar Ray A. Goldberg Franz B. Humer Muhtar Kent Walter B. Kielholz Andreas Koopmann Mark R. Kramer Christine Lagarde Doris Leuthard Maurice Lévy Peter Maurer Edna Molewa Luis A. Moreno Lubna S. Olayan Michael E. Porter Benoît Potier Klaus Schwab Barbara Stocking Rex W. Tillerson Herman Van Rompuy

Leseprobe

Business in a Changing Society

Festschriftfor Peter Brabeck-Letmathe

Edited by Andreas Koopmann1st Vice Chairman Nestlé SA

Neue Zürcher Zeitung Publishing

Graphic design TGG Hafen Senn Stieger, St. Gallen

© 2014 Neue Zürcher Zeitung Publishing, Zurich The content of this ebook corresponds to the first printed edition 2014 (ISBN 978-03810-012-6)

This book is protected under copyright law. All associated rights reserved, particularly those pertaining to translation, reprinting, performance, use of illustrations and graphics, radio broadcast, reproduction on microfiche or other media and storage in data processing systems, whether in whole or in part. Regardless of the circumstances, this book may be reproduced either in whole or in part only within the limits of the legal provisions set out by currently valid copyright law. Such reproduction is in principle subject to a fee. Violators are liable to penal provisions as set out under copyright law.

ISBN E-Book 978-03810-046-1

www.nzz-libro.chNZZ Libro is an imprint of Neue Zürcher Zeitung

Foreword and Introduction

PAUL BULCKE

CEO Nestlé SA, Vevey, Switzerland

On 13 November 2014 Peter Brabeck-Letmathe celebrated his 70th birthday. Earlier in 2014, I discussed with a number of people and came to the conclusion that a festschrift (celebratory publication) in the German tradition would be the appropriate gift: a book not about him but about change relevant for business and relevant for his own role in it. It is the collection of thoughts and ideas on “Business in a Changing Society” that you are holding in your hands.

Personalities from the fields of politics, business, civil society and academia who know and respect Peter, many of them as friends, have contributed 28 papers. Andreas Koopmann, Vice Chairman of Nestlé S.A., was kind enough to accept signing as the editor.

The result is an overview of a fascinating time where so many things happened, articles about a period of fundamental change, about the power of ideas, from and about people who have made an impact. This book is by no means about the past. It looks at changes and challenges in economy and society that are ongoing and / or still highly relevant today, changes that affected Nestlé during Peter’s outstanding career (a short CV can be found at the end of the book), and continue to affect the company and the sector today in the period of his ongoing role as Chairman of the Group.

When he became CEO in 1997 he took over a strong, highly competitive company from his predecessor, Helmut Maucher. Both Peter and Helmut knew that companies have to change continually in order to continue being successful — also and in particular in response to developments as described in this festschrift. In the first years, the change he implemented was about setting the sails of the corporate “ship” a bit differently, to optimize all the existing structures and strengths, before moving in the following years to more fundamental change in the form of a strategic transformation, to make the company fit for the coming decades: transforming the big tanker into a fleet of agile boats, and focusing Nestlé on Nutrition, Health and Wellness. Paraphrasing Orit Gadiesh and her contribution to this book: his achievements demonstrate that business is the fastest channel through which ideas change realities. The positive results of the transformation speak for themselves, and Peter insists that change in the company has to continue, in response to a continually changing world and building on the inherent dynamics of the change since the early 1980s. Change is not something happening to us, but something we must drive.

Beyond the company Peter has also been actively involved in the public policy dialogue, shaping the context we live and work in. Several of the articles in this festschrift reflect this, directly and indirectly. He listens, and people listen when he presents his views on concerns about broad economic and societal themes. He has also made sure, through the concept of Creating Shared Value, that societal concerns are better reflected in our own corporate approaches and reporting. Gaining respect by focusing on what he considers as essential for the long term rather than following the fashion of the day has allowed him to have significant impact on shaping agendas — his work on the risks of freshwater overuse and ways to overcome it in a relevant and cost-effective manner is a case in point.

As a festschrift for a personality with broad interests and impact, this book befittingly covers a fairly broad range of themes. These themes are organized in seven large chapters.

The first chapter is about major global shifts and their drivers, and it starts with Europe and its industry. Benoît Potier, CEO of French Air Liquide — he just took over as chairman of European Round Table of Industrialists — designs a sketch of economies that must find ways to reverse the trend towards the deindustrialization of Europe. He says what some may have forgotten: “There will be no European prosperity possible without industrial competitiveness.” He stresses the importance of affordable energy, and this is where Rex Tillerson provides the context. As in history, and now in the new millennium too, energy impacts every part of modern life and modern business — opening up trade and transportation, improving health care and sanitation, and expanding education and individual opportunity. Muhtar Kent outlines three keys to the bright future ahead: young people and creating jobs for them, women, making sure they have an equal opportunity to learn, develop and succeed and, last but not least, technology and innovation. One of the most spectacular drivers of innovation has been digitalization, and Vittorio Colao shows how it challenges both companies and societies at large, reminding us that whilst there has been immense change in the last 30 years this revolution has only just begun. As Maurice Lévy also underlines, digital blurs all the old boundaries — be it between business and leisure, between consumption and content creations or between the media and the platforms. Last but not least, ongoing change is very much about developing and emerging economies taking a much stronger position within the world economy and its institutions. But this is not about some sort of coherent bloc, it is about individual countries. Lubna Olayan describes this in her vision for Saudi Arabia. If there is one challenge in common for many of these countries, it is, as she shows in her article, education and jobs for the rapidly growing number of young people. Finally, Walter Kielholz looks into another important driver, namely urbanization. As its impact — positive or negative — depends very much on government policies, we included it in section seven of the book.

The second chapter looks into corporate change, how it influences global shifts and responds to them. President Herman Van Rompuy takes up the theme of Benoît Potier − competitiveness of companies − linking it to employment, with the need for more jobs for young people as one of the most urgent challenges facing Europe today. Klaus Schwab stresses the need for new models of engagement between (and among) government, civil society and business. Franz Humer focuses on corporate culture, defining it as a product of its own past and of the individuals who have led it, but also very much as a product of place, reflecting the culture and history of the company’s country of origin. And his recommendation to business, particularly in times of accelerated change, is to stay humble, stay grounded. Finally, Michael Porter and Mark Kramer outline the need for a better understanding of business in society, for creating new economic and social value — shared value — rather than merely redistributing wealth already created.

The third chapter addresses the, in my view, most powerful driver of change: ideas. Orit Gadiesh underlines that it is very much about business: no matter where an idea comes from, until business starts making the “things” or providing the “access” at affordable prices, fundamental change in society is unlikely to happen. There is also the world of politics, with Francis Fukuyama writing against too much pessimism that might come up when looking at events of the last several years. He is convinced that in the realm of ideas, liberal democracy still doesn’t have any real competitors. And he too sees business as a driver: “Once societies get on the up escalator of industrialization, their social structure begins to change in ways that increase demands for political participation.” Finally, the Mongolian President Tsakhiagiin Elbegdorj shows the realities of a very successful transformation from a centralized communist structure into a freemarket economy and democracy, without global media having taken notice. This is a very positive story, adding to Fukuyama’s optimism.

The fourth chapter is about another increasingly important group of actors turning ideas into change, Oxfam as a non-governmental organization and the International Committee of the Red Cross (ICRC), an organization of its own kind. They implement new solutions, but, as Barbara Stocking writes, while they can make a contribution, the underlying problem is often bigger than they are. When non-governmental organizations such as Oxfam realize that the problem cannot be solved through their own efforts, but that some sort of change in policy at local, or national government, or even global level is needed if real change is to happen, they become part of the public policy dialogue. Throughout history, this was and is also valid for the ICRC. Peter Maurer goes a step further; as he writes, his organization must increasingly interact and cooperate with multiple players and work in partnership on the local, national, regional and global level so that an emergency humanitarian response translates into a long-term, lasting impact.

The fifth chapter is about change and challenges in global nutrition and health. And it starts with a topic highly relevant for stakeholders beyond our own industry, particularly the two humanitarian organizations presented in the preceding chapter, namely food security. Lester Brown, a pioneer of the environmental movement, and one who whilst defending the environment never lost sight of human needs, emphasizes the geopolitical effects of fast-rising grain prices. He notes that the biggest threat to global stability is the potential for food crises in poor countries, also caused by water overuse, which could bring down civilization. Ray Goldberg takes a perfectly complementary view to the one expressed by Lester Brown: he asks for better recognition of the importance of the food / nutrition system in the global economy, about 10 % of global GDP, and goes a step further towards the understanding of the global and local food systems as economic and social development tools (with reference to the need to create shared value). Nutrition and health are closely linked subjects, through the need for access to basic calories and proteins, the availability of micronutrients, the understanding of balance and active positive contributions of nutrition to wellness and wellbeing. Julio Frenk stresses, rightfully in my mind, the need to reestablish a positive understanding of healthcare not as sickcare, and the positive approaches known to some of the wisest ancient civilizations of the past. This new balance will be needed in order to meet the challenges of the 21st century in health, and indeed also nutrition, in a rational manner. Robert Black stresses this as well in his paper, since child malnutrition, which has adverse effects on mental and overall development as well as significant effects on mortality, remains highly prevalent in low- and middle-income countries. He and Günter Blobel are convinced that science-based innovations will increasingly offer solutions to today’s challenges as well as contain embryos of solutions for tomorrow. Most spectacular and still little understood by many, as Patrick Aebischer writes, are the needs and the progress in personalized brain health. Here, contrary to other organs, the “spare parts” method is not conceivable, and other ways such as well-researched healthy nutrition to protect against cognitive decline are needed.

Section six is on water, an area where Peter developed a globally recognized thought leadership. Minister Molewa shows the causes and consequences of water overuse and a further deterioration in water security due to increased water demand in agriculture to grow food, in industrial uses as well as the increased municipal water demand by a growing middle class. John Briscoe suggests an approach to close the growing gap that combines economic principles such as ensuring that users take financial and resource costs into account when using water with pragmatism because solutions need to be tailored to specific, widely varying natural, cultural, economic and political circumstances. Ultimately, the art of reform is the art of the possible. Finally, Jin-Yong Cai puts the water challenge into the perspective of overall global infrastructure needs, with a daunting price tag of nearly USD 60 trillion between now and 2030. All types of partnerships will be needed, with partners actually contributing to sustainable, i.e., also cost-effective, solutions. And he mentions the 2030 Water Resources Group as an example.

The seventh and last chapter includes challenges that mainly but not exclusively need a response from governments. Walter Kielholz describes urbanization as an engine of economic growth. But he underlines that only urbanization that is well managed by governments will actually be able to drive higher incomes. Luis Moreno takes a broad view at this need of good management by governments; he writes that it will have to go beyond supplying infrastructure and basic services and take into account institutional, social and environmental factors. After World War II, a similar drive for more efficiency came from global liberalization, mainly within the General Agreement on Tariffs and Trade and the World Trade Organization, as Doris Leuthard underlines. While we can be proud of what has been achieved, she rightfully states that we are still a long way from Adam Smith’s global economic ideal of free trade among nations. The final paper takes a look into a more long-term future, but with conclusions highly relevant already today. Christine Lagarde and Vitor Gaspar from the International Monetary Fund write about one of the biggest challenges for governments, taking a look at a very long-term issue with repercussions on medium-term policies — namely the accelerating increase of age-related payments (pensions, homes and, in particular, healthcare). They remind us that it is about the implications of a very positive development, i.e., the remarkable gain in health and life expectancy over the preceding decades. And they are not drawing a pessimistic picture, talking about gradual change in pension and fundamental health care reform, linking implicitly to section five of the book. But time is of the essence, because as the number of older people increases it is quickly gaining weightage in the democratic process.

Let me close by thanking sincerely all the authors for participating in the project; it has turned out to be a fantastic collection of deep thoughts, a combination of papers on important topics society is faced with today. I am confident that reading them is greatly enriching. A memorable quote from John F. Kennedy may summarize the perspective provided by our authors: “Change is the law of life. Those who look only to the past or present are certain to miss the future.” And change is an opportunity. This is not only the perspective of the authors of the festschrift, it is also clearly one of the main characteristics of the way Peter Brabeck-Letmathe sees things and acts in business and society.

I

Major Global Shifts and Their Drivers

Industry Renaissance: Reindustrializing Europe

BENOÎT POTIER

Chairman and CEO of Air Liquide, Paris, FranceChairman of the European Round Table of Industrialists, Brussels, Belgium

The share of industry to GDP in the EU has declined sharply over the last decade, from 18.5 % in 2000 to 15.2 % in 2012. At the same time, stark differences between EU Member States remain. Today Germany’s manufacturing share of GDP is 22.4 % whereas in France it is 10 % — less than half of Germany.

The EU is on a pathway of further deindustrialization as energy prices in the EU continue to increase, US-based companies gain a significant cost-competitiveness advantage resulting from the shale gas revolution, and global competition intensifies.

There will be no European prosperity possible without industrial competitiveness. European industry contributes significantly to employment (i.e. a quarter of private sector jobs), innovation (i.e. two thirds of EU R&D expenditure) and trade (i.e. three quarters of EU exports). Industrial competitiveness also affects the whole EU economy. For each new industrial job two new jobs are created in other sectors, like services.

ERT supports the political objective proposed by the European Commission to raise European industry to a share of GDP of at least 20 % by 2020, bringing about an industrial renaissance in Europe.

The EU therefore needs to build on its strongest asset, the Single Market, and bring back a sense of urgency to its completion. Without economic integration and consolidation of EU markets, EU companies cannot be competitive globally. This also requires that the EU takes a more long-term and strategic approach to the application of EU competition rules to support the international competitiveness of its industries.

Conversely, the current focus on “perfect” competition within small national markets, in the absence of a genuine Single Market, does not match the economic reality of global competition for EU companies. The current application of EU competition rules, in a more technocratic than strategic spirit, hampers EU companies’ competitiveness in global markets and increasingly even within the internal market.

Faced with growing global competition, the EU’s comparative advantage will more than ever be built on innovation, productivity and the economy’s transition into higher-tech and higher-value-added activities.

Against this backdrop, the EU needs to take decisive actions to enhance the digitalization of the EU economy if it wants to keep up with global competitors. This requires the political prioritization of the creation of a Single Digital Market, supported by effective policy alignment between and within EU institutions and EU member states.

The objective to reindustrialize Europe will not become a reality if, in crucial sectors such as Energy and ICT in particular, the Single Market is not achieved. These sectors are decisive enablers in promoting cross-sectoral competitiveness and growth and therefore maintaining Europe as an attractive investment location.

A reorganization of EU governance structures is needed to bolster a strategic and integrated approach to energy, environment, innovation, telecommunications, competition and trade policies in order to improve the international competitiveness of the EU industry.

Rapid Implementation of the Single Market Acts I and II

Today many EU industries face increased global competition, while markets within the EU often remain fragmented. Progress on the completion of the Single Market has been much too slow. Political action is needed to bring back a sense of urgency for the completion of the internal market. This is particularly true in key growth sectors including energy, services, pharmaceuticals, defense, telecommunications and the digital economy.

The economic integration and consolidation of EU markets is necessary for EU companies to be competitive globally. However, in the absence of a genuine Single Market, EU competition authorities continue to focus on “perfect” competition within smaller national markets, which are dwarfed in size internationally. This does not match economic realities for EU companies. It hampers their competitiveness in global markets and increasingly even within the internal market. As a result, EU markets often have too many players as compared to the US, for example in the telecom sector.

Our Recommendations Are:

Prioritize growth and competitiveness

The European Council should give strategic directions and set out priorities for the implementation of measures to restore EU industrial competitiveness, growth and jobs. It should evaluate progress annually, based on reports from the European Commission and the Competitiveness Council.

The Competitiveness Council should move from coordination of Member States’ industrial policies to the implementation of common EU policy initiatives and legislation that support industrial growth in the EU. It should have the right to veto new EU initiatives that may dilute the competitiveness of the European industry.

The Commission President should personally oversee and lead this agenda and be advised by an “industrial competitiveness coordination group.” The clustering of Commissioners under the leadership of Vice Presidents could be used to coordinate and push progress in a number of key priority areas.

Reinforce an evidence-based approach to EU decision-making

It is important to establish an independent impact assessment structure outside the European Commission.

Competitiveness proofing should become an integral part of ex ante impact assessments of all newly proposed EU legislation. This exercise should systematically take into account the cumulative effects of different rules on specific sectors and should be applied throughout the co-decision process.

Impact assessments during the consultation stage should be published. This will give stakeholders early opportunities to address shortcomings in the assumptions and methodology of impact assessment, as well as to raise sector-specific considerations and thus to contribute to better-informed EU decision-making.

The systematic use of science in EU policy-making should be ensured, with a view to better apply the precautionary principle and avoid needless limitations on the innovation capacity of EU industries.

Formal powers should be provided for the Chief Scientific Adviser of the European Commission for reviewing the use of scientific evidence in risk management legislation, regulation or administrative decisions and to look for further scientific assessment where appropriate.

Establish an EU regulatory framework fit for growth

The European Council should introduce a “global regulatory benchmark test,” comparing the regulatory environment of EU industries with those in main competitor markets.

It should extend regulatory fitness checks of existing legislation to a larger number of industrial sectors, beginning with those under competitive pressure, and ensure that follow-up actions are implemented.

Existing Single Market rules in Member States must be fully and consistently implemented, as divergent transposition of EU legislation causes a significant burden on companies and society.

The new Commission should bring forward to the Council a target for reducing administrative and regulatory burdens for EU companies, to be achieved within its five-year term.

Re-prioritize completion of the Single Market

The establishment of a Single Market for the energy and ICT sectors needs to be prioritized, as they are decisive enablers of cross-sector competitiveness and growth.

A Single Digital Market also depends on the establishment of an internal market for underlying services.

The Single Market for industrial and business services should be strengthened through implementation of the Services Directive and additional EU-level initiatives should be considered for those services not fully covered.

The integration and interconnectivity of transport infrastructure also needs improvement.

It is important to establish a Single Market in financial services and an effective banking union to restore confidence in the banking system and ensure affordable access to funding for companies throughout the Single Market.

Adopt an EU competition policy that supports Europe’s strategic interests

A long-term perspective of the application of EU competition rules needs to be adopted to fully recognize the dynamic nature of global markets. The capacity of non-EU potential competitors to challenge market positions in the EU, albeit through market entry, import or innovation, should be assessed over a longer period of time.

A strategic approach to EU competition policy also needs to be adopted, considering the capacity of European industries for long-term investments and innovations in competition decisions. An exclusive focus on the pricing dimension of competition needs to be avoided and consumers’ benefits in the long-term considered.

It is important to ensure coherence between the competition decisions and strategic policy priorities of the European Commission.

Ensure a secure and affordable energy supply

The EU’s energy and climate ambitions have to be aligned with its industrial ambitions.

Any climate or energy policy must be adapted to ensure that the goal to increase industry’s share of EU GDP to at least 20 % by 2020 is respected. The EU should advocate an ambitious international climate agreement that ensures a global level playing field for European industry.

The EU should focus on reducing worldwide greenhouse gas emissions generated by EU societal consumption patterns. There is no benefit for the global climate when reductions in EU CO2 emissions are outweighed by an increase in the amount of CO2 emissions of imported products consumed in the EU.

The EU’s 2030 target to reduce CO2 emissions must be shared among all sectors of the economy, public as well as private. Cost consequences of unilateral EU climate policies should be limited as much as possible for industries exposed to global competition.

The Energy Impact on EU Industrial Competitiveness

The total cost of energy production and supply must be managed. This includes making intelligent use of existing assets, including nuclear where they exist, and operating under safe conditions.

Stable and predictable regulatory frameworks for both production and networks are key to minimizing capital costs for the energy industry, thus improving competitiveness across the whole value chain and attracting investments in energy-intensive industries.

Diversification in energy supply is also important. Europe should prioritize natural gas within the energy mix and allow the exploration of indigenous resources under safe and environmentally appropriate oversight.

Energy technologies that are subsidized must demonstrate that they have a credible pathway to a sustainable future. Subsidies must be shifted towards innovation in second and third generation technologies.

Energy efficiency is critical and requires continued investment and innovation for the benefit of governments, industry as well as consumers.

Substantial investment in technology innovation is necessary. Existing technologies can be applied outside the EU with better achievement of economic results.

The EU should accelerate progress towards a harmonized regulatory framework and a truly open Single Market for energy.

It should coordinate the development of energy infrastructure allowing for the diversification of its energy supply, actively supporting interconnection of networks.

Address the Growing Skills Gap

EU Member States should establish national STEM platforms (science, technology, engineering, and mathematics) to facilitate business-education interactions at the regional level and to promote best practices. National targets to increase the percentage of students studying STEM should be set and entrepreneurial education should be integrated in national curricula across the EU.

Member States and employers should promote lifelong learning, which is the best employment protection for individuals as it enables them to prepare for job and career transitions. Member States should continue to support the rapid modernization to work-based vocational training, bringing education providers together with business and industry.

Member States should put in place targeted programs to immediately boost the number of ICT knowledge workers and fill available jobs. Basic ICT skills must be taught in all schools, in vocational training programs and be integrated into lifelong learning programs.

Enhance the Digitalization of the EU Economy

Investments in digital infrastructure must be increased through a roadmap for deregulation of the telecom sector, facilitation of market consolidation and the creation of a genuine telecommunications Single Market.

A Single Market approach to digital services must be adopted, including cloud-based services, to ensure the cost-effective development and uptake of innovative services.

An appropriate and consistent EU data protection framework must be established that reduces administrative burdens related to the management of personal data, and achieves both better protection and free movement of data within the EU.

Cyber-security of critical infrastructures and digital services must be ensured to establish the trust needed for the development and uptake of new, connected technologies.

Secure Global Innovation Leadership

The EU must ensure adequate public funding of R&D, particularly at the initial stages of development of new technologies, and support close-to-market activities including the financing of demonstration and pilot projects to speed up the commercialization of EU R&D.

It must improve the risk capital financing of industrial research and innovative companies through the establishment of a genuine and deeper EU venture capital market, greater risk-sharing finance facilities of the European Investment Bank and support of national R&D tax credit systems.

It must also build innovation clusters and networks of diverse companies and research institutes to pool together skills, know-how and funding for large innovation projects.

Member states should use public procurement as a strategic tool to stimulate demand and markets for innovation.

They must ensure a coherent policy approach on innovation across the European Commission including DG Enterprise, DG Internal Market & Services, DG Research & Development and DG Competition.

Pursue Opening of Foreign Markets

The EU must remain committed to multilateral trade liberalization negotiations, and consider plurilateral sector agreements that can help to promote the multilateral process.

It must conclude an ambitious Transatlantic Trade and Investment Partnership (T-TIP) including full industrial tariff elimination, effective regulatory cooperation in targeted sectors to reduce nontariff barriers, and greater access to public procurement markets.

It must also maintain a high level of ambition in EU Free Trade Agreement (FTA) negotiations with Japan, Eastern European countries, key emerging partners such as India, Mercosur and several ASEAN countries.

Maintain a Global Level Playing Field

The EU must include WTO+ issues such as competition policy, intellectual property rights and investment protection, and greater access to public procurement markets in EU Free Trade Agreements with strategic partners, to pave the way for a modernization of the WTO-rules-based trade framework.

It must secure reliable and undistorted access to raw materials, through the full or partial ban of export restrictions and duties, as part of strategic bilateral trade agreements between the EU and third countries. If necessary, it must consider the application of bilateral trade policy instruments and the WTO dispute settlement process, where possible jointly with other interested parties.

It must also consider appropriate use of EU trade defense instruments to address unfair foreign state aid leading to competitive distortions in the EU.

Conclusion

It is the view of the European Round Table that Industry Renaissance has to become a goal for Europe. The European Commission in its new composition to be approved by the end of 2014, the Council and the European Parliament will have to concentrate their efforts on this goal to restore growth, prosperity and employment in the EU.

Energy Leading the Way: From Investment and Innovation to 21st Century Economic Transformation

REX W. TILLERSON

Chairman and CEO of Exxon Mobil Corporation, Irving, Texas, USA

Safe, affordable, and reliable energy has the power to transform the world for the better. From the discovery of fire by early humans to the oil and natural gas that are now the primary fuels of the global economy, energy is a major driver of “business in a changing society.”

In the new millennium, energy will continue to touch every part of modern life and modern business — opening up trade and transportation, improving health care and sanitation, and expanding education and individual opportunity. Simply put, energy is the lifeblood of economic growth and technological progress.

As we consider the evolution and change taking place in the 21st century, we can better appreciate both the importance of energy and its central role going forward. In fact, over the past three decades, it has been the advances in energy production that have created an historic moment — one that is accelerating the pace of change in a way that is unique in human experience.

It is also clear that the global transformation underway is likely to continue for decades to come, driven by three main forces: increases in population; economic expansion and urbanization; and growing trade and development. Together, these ongoing trends will not only revolutionize the day-to-day lives of billions of people around the world, they will also increase global energy demand by about 30 percent between now and the year 2040.

This rising demand in energy will create significant challenges in the years to come. For policymakers as well as the public, there will be a fundamental need to recognize that there is a humanitarian imperative to expanding energy supplies. Consider these facts: According to the latest figures on global energy poverty, about one in five human beings still has no access to electricity. And about two out of five people must rely on biomass such as wood, charcoal, or animal waste for basic cooking and heating needs. The costs in terms of human lives lost are steep. The World Health Organization estimated that in 2012 more than 4 million people around the world died from household air pollution.

Such statistics are often startling to individuals who are fortunate to live in relative wealth and security. But they are much too real. The key to lifting people out of this poverty is to expand the availability of affordable, modern energy systems. Such energy systems can expand economic opportunities, create jobs, improve the environment, and raise standards of living for hundreds of millions of people.

In the 21st century, it will be the joint responsibility of government and the energy industry to find ways to meet these growing human needs. We will need to pursue all sources of energy, wherever and whenever they are economically competitive. We will need every sector of industry to invest, innovate, and relentlessly advance the technologies and techniques that promote energy efficiency, improve environmental performance, and reduce the growth of greenhouse gas emissions associated with increased energy use. And just as important, industry and government will need to work together to build sound and farsighted energy policies — policies that promote not just access and the expansion of energy supplies, but continuous improvement in performance and environmental stewardship.

Spread of North American Innovations

The good news is that history shows that the global energy industry can meet these challenges. Over the last three decades, through investment, innovation, and cooperation, the energy industry has taken on extraordinary challenges in North America, and through its success has brought new supplies of energy to the world. Take just three examples. The energy industry has succeeded in deepwater and ultra-deepwater frontiers. It has developed new techniques to unlock so-called unconventional oil and natural gas. And the energy industry has expanded on historic achievements in the Arctic and sub-Arctic to provide growing supplies of energy to the global economy.

Not long ago, most experts believed that substantial production from deepwater and unconventional resources would never be attainable, at least in an economic way. And yet, new technologies and processes — conceived and developed through human ingenuity — solved those challenges and made the impossible possible. The story of the 21st century will be written in large part by the spread of these innovations to new parts of the world.

North America has also shown the value of energy efficiency. Energy efficiency makes existing resources more productive and reduces the environmental impact of energy usage. Taken together, as government and industry experts anticipate technological changes in the decades ahead, energy efficiency is poised to become the world’s No. 1 source for “new” energy.

Going Deeper: Pushing the Boundaries Offshore

Of course, understanding how energy can create a brighter future starts with understanding the successes that have led to new supplies of hydrocarbons. One of the energy industry’s most extraordinary advances in recent years is deepwater exploration. The advanced technologies that were pioneered in North America have enabled unprecedented offshore exploration and production. And the speed of their deployment has been striking.

When I was a young professional in the energy industry, my generation of engineers worked at drafting tables, using hand drawings of design specs for drilling rigs while geoscientists manually interpreted seismic data. Today, the industry uses sophisticated supercomputers, powerful software, and 3D imaging to find resources and design rigs that can operate in water depths of more than 3,000 meters — and drill wells 8,000 meters below the ocean floor.

With each passing year, the industry continues to improve these technologies and processes so that it can drill deeper, more quickly, more accurately, and more safely than ever before. Each incremental improvement has built upon what came before to make us more effective and more efficient. And eventually, these improvements enable us to solve challenges that previously were seen as insurmountable.

As a result of these enhancements, it is projected that worldwide deepwater production will grow 150 percent by 2040. And the share of deepwater contributions to the global supply of crude oil and other liquid hydrocarbons will rise from 6 percent in 2010 to 12 percent in 2040.

Oil Sands: Reducing Environmental Footprints

It is no exaggeration to note that the energy industry’s offshore capabilities now represent some of the greatest engineering marvels in human history. But these technological achievements have been accompanied by striking advancements in other parts of the industry.

For example, in North America, human ingenuity has made it possible to economically develop Canada’s vast oil sands resources, giving us access to a resource base of approximately 170 billion recoverable barrels — enough energy to fuel today’s North American personal vehicle fleet for about 45 years.

Oil sands development is made possible by next-generation technologies that are increasingly safe, secure, and more efficient. And because technology has enabled us to reduce the environmental footprint of oil sands production, we can produce much-needed energy with significantly less impact than in the past.

One of the most important areas of improvement has been in water stewardship. At the Kearl oil sands project in Alberta, Canada, Imperial Oil (an ExxonMobil affiliate) is using an innovative water storage system to sustain production during the low-flow periods of winter, when withdrawal from local water sources is restricted.

At its Cold Lake operations in Alberta, Imperial has shown how long-term investments and continuous research can lead to state-of-the-art water recycling processes. Over the past three decades, water requirements have dropped to about half a barrel for each barrel of bitumen produced — 88 percent less fresh water per unit of production than in the mid-1970s. Cold Lake today recycles about 95 percent of the water used in oil production, and research and pilot projects continue to develop new techniques that will reduce freshwater use even further.

ExxonMobil and Imperial researchers are continuing their work on new technologies that could result in production processes that significantly reduce the need for water, eliminate tailings ponds, and reduce greenhouse gas intensity. While these technologies will take time to develop and test, they could be deployed at future oil sands projects.

Tight Oil and Shale Gas: Changing the Energy Landscape

Perhaps the most consequential change in the global energy landscape has come on the so-called unconventional front. Like deepwater and oil sands, tight oil and shale gas — resources found in dense rock formations — were once considered uneconomic and unattainable. But thanks to creativity, investment, and innovation, unconventionals have become an important component of the North American energy mix.

The industry’s integration of hydraulic fracturing and horizontal drilling has made it possible to develop North America’s bountiful unconventional resources. Consider that between the end of 2005 and early 2014, U.S. production of crude oil and natural gas has risen by close to 70 percent and 45 percent, respectively, reflecting growing tight oil and shale gas production. In 2014, the United States became the world’s No. 1 producer of oil and natural gas based on energy content. In less than a decade, technology breakthroughs have enabled the industry to not only stem a long decline in domestic production, but to catapult the United States into the top spot.

The success in North America is already helping contribute to a stronger and more optimistic global energy marketplace. Other countries are still working to understand how the United States achieved such a turnaround, and what the implications will be.

Economic and Environmental Benefits of North American Energy

What is beyond debate are the benefits being felt by the United States. The energy industry has provided a tremendous multiplier effect in terms of its economic contributions. Across North America, vast, new supplies of energy are spurring economic growth, creating jobs, and strengthening international trade and competitiveness. The unconventional boom has brought profound economic benefits to energy-producing states — such as Texas, Pennsylvania, North Dakota, and Oklahoma — as well as across Canada. And the positive economic effects are rippling out and are being felt in America’s non-energy-producing regions as well.

For example, one of the major beneficiaries of the industry’s investment and innovation is American manufacturing, which is undergoing a dramatic rebirth across the country. Reliable, affordable supplies of natural gas are allowing energy-intensive industries to expand existing manufacturing plants or plan new ones. In many cases, manufacturers are actually bringing production back to the United States from overseas facilities.

The contributions from the energy industry are not limited to economic revitalization. They are also proving that investment, innovation, and a commitment to operational integrity make it possible to safely expand energy supplies and reduce environmental impacts at the same time.

For example, abundant and reliable natural gas has helped reduce U.S. carbon dioxide emissions to levels not seen since the 1990s. The International Energy Agency recently reported that the United States has achieved the largest reduction in emissions of any country or region in the world, due in large part to the shift from coal to natural gas in the power generation sector. These reductions in emissions are impressive, especially considering that the U.S. economy is 50 percent larger than in the 1990s — with 50 million more energy consumers.

Global Impact: Energy Security

While the benefit of these technological advances is most obvious across North America, there is a global impact, as well.

The industry’s success at bringing new supplies online, safely and affordably, has positioned the United States to join Canada and Mexico as a significant energy exporter. Taken together, North America is helping provide the world with the energy diversity and flexibility that increase reliability, affordability, and energy security. New supplies of energy have already begun to benefit nations in the Asia-Pacific region by enhancing the reliability and affordability of global energy supplies.

With this newfound abundance, North America is also reminding the world of the fundamental importance of energy and the extraordinary contributions our industry can make in individual nations — and lives. Even today, the industry is pursuing opportunities to apply and expand many of these technologies and risk-management techniques to regions outside North America.

Governments and industry continue to assess the size of the global endowment of unconventional natural gas. At ExxonMobil, we are optimistic about areas for potential development in Asia, Latin America, Northern Africa, and parts of Europe. We are still in the early days, but analysis from Cambridge Energy Research Associates suggests recoverable shale gas in the rest of the world could be between four and 14 times greater than the sizable amounts in North America.

The energy industry is also optimistic about the promise and potential of the Arctic — one of the world’s largest remaining regions of undiscovered conventional oil and natural gas resources. The Arctic is not unfamiliar territory; it has been a major oil and natural gas producer for decades. Ninety years ago, in fact, ExxonMobil first entered the Arctic in the Northwest Territories of Canada.

In the ensuing decades, the industry has pioneered new technologies and best practices all across the energy chain from the Prudhoe Bay field on Alaska’s North Slope to the construction of the Trans-Alaska pipeline, from man-made gravel and ice-spray islands to the first iceberg-resistant gravity-based structure at the Hibernia field offshore Newfoundland and Labrador. And ExxonMobil, partnering with Russia’s Rosneft and other international coventurers, has successfully produced oil and natural gas offshore Russia’s Sakhalin Island in arctic conditions for more than a decade, setting horizontal drilling records while upholding a world-class safety record.

The industry has since proven, in North America and beyond, it can develop these resources safely and responsibly, managing the unique challenges of the Arctic. In addition, by applying extensive scientific research and by making operational accommodations, the industry has shown it is possible to expand supplies of energy from the Arctic and sub-Arctic while protecting those regions’ unique wildlife and biodiversity.

The Need for Sound Policy

The lessons learned in North America — of the importance of innovation and technology in delivering economic growth through energy abundance — can be applied around the world. For leaders in South America, Africa, Asia, and Europe, the North American experience is a reminder that government policy is of great consequence to the success of human innovation.

We know from experience that government can best help by providing access to resources, a transparent regulatory framework, and accountability through the rule of law. Such efforts are integral to maintaining a level playing field for competition, which benefits individual consumers and the broader economy. Governments around the world can learn from North America by establishing sound and stable policies that enable investment, cooperation, and risk management. And government leaders must work to ensure there is incentive for the investment, research, and deployment of evolutionary and revolutionary energy technologies.

With sound policies, the energy industry can continue to apply its new technologies and techniques to unlock cleaner-burning natural gas in new places. And as industry does so, the world can meet growing power generation needs while reducing greenhouse gas emissions levels. In addition, with sound policies in place around the globe, industry can help develop even more technologies to use oil more efficiently — especially in the transportation sector, where oil is so critical to advancement.

The Future of Energy

The energy challenges ahead will not be easy. Government and industry experts who study global supply and demand agree that in order to meet future energy demands the world will need to pursue all economic sources of energy. Even by mid-century, oil and natural gas will still supply the majority of our energy needs, so new resources will be critical to meeting that demand while keeping energy costs affordable.

North America’s vast new supplies are already helping to reshape the global energy landscape for the better. The innovations that have led to expanded supplies have the further potential to usher in a new era of strengthened trade, investment, and international cooperation. These historic developments are likely just beginning — and they are yet another reminder of how energy and human ingenuity are destined to play an integral part in building a brighter future for billions of people all around the world.

Three Keys to the Bright Future Ahead

MUHTAR KENT

Chairman and CEO, the Coca-Cola Company, Atlanta, USA

Ours is a world of great challenges but even greater opportunities. Over the next quarter century, we are poised to witness and, more importantly, help build a future that is brighter, freer, healthier and more prosperous than ever — if we are able to unleash more of the vast potential of the youth generation, women and innovators.

Challenges, of course, tend to dominate the headlines, just as they always have. New prosperity is placing new strains on resources. New technology is putting new strains on employment and work as we know it. Nations, communities and businesses are struggling to solve the calculus for sustainable growth. And there are other challenges, from AIDS to energy, human rights to the environment and many more besides.

And, yet, if we take a break from the everyday news, we can’t help but come to the conclusion that there has never been a better time, a more exciting time, a more promising time than our own. The human condition, despite all manner of contrary forces, has made great and growing progress in recent decades.

Since 1970, life expectancy has risen from age 59 to age 70 on a global basis. Meanwhile, global school enrollment has boomed over the same period, going from 55 percent to 70 percent. And worldwide per capita GDP has doubled. In 25 years, infant mortality has declined 40 percent. Discrimination is down, acceptance and diversity are up. Extreme poverty is on the wane, and nearly a billion people are expected to join the global middle class in this decade.

Access to information has exploded in a way that very few people — if any — could have imagined just a generation ago. The average person in a mature economic market like Europe, Japan or the United States has exponentially more access to information in his or her pocket than a research librarian had on the job in 1990. And technology is also making it easier for people to connect with and collaborate with people across town and around the globe.

To be sure, Peter Brabeck-Letmathe and Nestlé have done their part — and more — to make today and tomorrow brighter. As chair of the 2030 Water Resources Group of the World Economic Forum, Peter has been a tireless advocate for strategic and thoughtful water management, partnering with the World Bank’s International Finance Corporation and others to help ensure the availability of this precious resource grows rather than shrinks. I’m personally honored to have worked alongside him in this and other endeavors.

Indeed, Peter is the kind of businessman who understands that industry must take a leadership position in fostering sustainability and building a sustainable future. He also knows how to reach across sectors to work with government and civil society institutions like universities and NGOs. And he has built a large and lasting legacy, one certain to endure for decades to come.

Where do we go from here? I believe there are three essential reasons for optimism about the next quarter century: 1) the promise of the Millennial generation, 2) the vast potential of women as entrepreneurs and professionals, and 3) the quickening pace of innovation to fuel growth.

Growth, ultimately, is what is required as the world strives to overcome the challenges of our time. And I mean growth from the most granular level to the broadest: individual growth, community growth, national growth and economic growth that stretches from the smallest startups to the largest multi-national corporations.

Clearly, we cannot expect today’s economic output to meet tomorrow’s needs. The same is true for agricultural output, energy, medicine, educational resources and so on. Fortunately, the past half-century has utterly disproven all the simple Malthusian projections of the 1950s and 1960s. We now know that the future is not a zero-sum game.

The keys to that future start with young people. There are 7 billion people on the planet, and half of them are under 30. Millennials — those now in their late teens to early 30s — are today’s largest generation. As a generation, they are connected, demanding and hopeful. They believe they have a responsibility to change the world for the better, and they believe they have the tools to do so. By 2018, their earnings will eclipse those of the Baby Boom generation.

But there is also a critical challenge in the need to create jobs and economic opportunity. Youth unemployment — about 16 percent in the U.S. and approaching 60 percent in some countries — is a slow burning crisis that, as we’ve seen, can easily flare into social instability. This challenge is also an economic opportunity. Research indicates that for every percentage point of sustained improvement in global youth employment, worldwide economic consumption increases by USD 72 billion a year.

The second transformative force for the future is women. Right now, women represent nearly half the global work force, and studies indicate they control USD 12 trillion of the USD 18.4 trillion in global household spending.

Businesspeople like myself have seen their abilities first hand in our companies, in our competitors and the industry at large and in our communities. And we know from this experience that women tend to invest the results of their success in their children, families and communities, where those investments can do the most good.

Organizations and nations that wish to grow — both now and in the future — must make sure women have an equal opportunity to learn, develop and succeed. For my business, this remains a journey. But we have made it a priority to enable women both internally and externally. Indeed, outside the four walls of our business, we’ve made a commitment to empower five million women entrepreneurs by 2020.

The third transformative development is technology. The future belongs to the innovators — the dreamers and doers who have created the world we know today and who will profoundly shape the world of tomorrow.

Technological change does not happen at a steady pace or in a linear way. Instead, history shows that the rate of technological improvement accelerates over time. And we are now entering a new age of technology unlike any other.

Consider the 20th