The top takeaways from this year’s World Economic Forum

Phew! That captures how many attendees at this year’s World Economic Forum meeting in Davos feel right now after a particularly frenetic summit. This year’s event was notable for being the first summit since Covid-19 to have drawn crowds on a pre-pandemic scale. Another striking aspect was the degree to which geopolitical and tech debates drowned out many of the traditional conversations around the economy — and climate change.

But there have been frantic debates away from the headline events about the future of sustainability — not least because the corporate leaders I met all seem to be pushing ahead with decarbonisation measures and mindful of the need to reduce social inequality. “The top question from our clients this week has been about AI, but the second is usually about sustainability,” said Jack Azagury, head of Accenture’s strategy and consulting business. So what are the top themes of the week? Below are my top six takeaways.

1. AI needs DEI

The spectre of a “Hal” — the evil AI character in the movie 2001: A Space Odyssey — hangs heavily over Davos this year, amid fears that artificial intelligence will not only unleash existential risks (ie computers outsmarting humans), but concentrate power in a way that increases inequalities. Worse still, as Alex Tsado, co-founder of the non-profit group Alliance4ai told me, voices outside rich nations have so far been largely excluded from the development and deployment of AI. Alliance4ai, however, is fighting to rectify this in Africa. And while diversity, equity and inclusion (DEI) is out of fashion at some businesses amid a political backlash, Big Tech companies know they need to offset criticism around the biases in AI.

Meanwhile some observers, such as will.i.am, the rapper, are promoting the idea that AI can also have a levelling effect, instead of fuelling inequality. Yann LeCun, chief AI scientist at Meta, told me that in order to achieve any democratisation of AI at least three things are needed: subsidised computing power for institutions outside Big Tech, open-source AI research, and regulation that does not prevent new entrants from competing in this field. Here is hoping.

2. Digitisation for good

Another hot topic this week is how to use digitisation to promote sustainability goals. Microsoft co-founder Bill Gates, for example, was touring Davos this week with an AI-enabled ultrasound gadget that he thinks can improve maternal health in the developing world. Will Marshall, chief executive of the Planet space group, announced that his company is collecting satellite data that is being analysed with AI to support carbon markets and ascertain whether solar panels are being installed effectively (he said many are not). Katie McGinty of Johnson Controls told me that AI is delivering a net zero footprint in buildings by fine-tuning the deployment of renewable energy. “You can’t get to net zero in a building without [AI],” she said, citing Princeton University as an example of an institution that has cut its carbon footprint by about 70 per cent and its utilities bill by 60 per cent by using these measures.

But the most memorable tale for me involves aircraft toilets: I was told that the US government is deploying machine learning systems to analyse waste water samples when planes land at airports to scan for new viruses. Think of this when you next fly.

3. A regulatory ‘tipping point’

Anyone working in climate knows about environmental tipping points. However, Emmanuel Faber, chair of the International Sustainability Standards Board, said we now face a “regulatory tipping point” too. The reason is that while new measures are being introduced to promote sustainability reporting, they are not all being implemented in the same way across regions. That means the world is either heading towards increased fragmentation, which will be hard for companies to navigate, or momentum may emerge for a more unified model.

No prizes for guessing which Faber wants to see — and he told me that the new European sustainability rules are (thankfully) roughly aligned with ISSB, in environmental terms. The recent measures embraced by California, forcing large companies to report Scope 3 emissions — from their supply chains, and the use of their products — are similar too. But the Securities and Exchanges Commission is backing away from Scope 3 rules. That might not matter since most big companies operate in California and thus must meet those Scope 3 standards. But the jury is out.

4. Critical minerals are hot

Everyone in green tech is obsessed with the periodic table these days: extensive sources of minerals such as lithium and nickel are needed to make renewable energy fly. And the fact that supply chains around these are so China-focused is a source of endless angst on many corporate boards — not to mention western security institutions. A hot topic at this week’s meeting was whether it is possible to diversify sourcing. A large delegation from Ukraine was in town, members of which were keen to point out that there are enormous reserves of the most critical minerals sitting in their country; investors tell me they have a putative worth of between $4-12tn and could easily supply Europe if the infrastructure can be developed. They also told me that Chinese officials are making overtures to get access to this — even as Russia tries to grab them too.

However, while the war rages on in Ukraine, most of the chatter was about how many deposits might sit in places such as Chile or Scandinavia — or under the oceans — and (perhaps most crucially) where the messy refining plants could be placed. This will run and run.

5. Partnerships are also hot

At the start of the week, the WEF released its annual survey of global risks which suggests that the Davos delegates have a surging appetite for public-private partnerships, along with intra-industry alliances. It is easy to see why: the sustainability challenges that haunt the world today are too difficult and costly for any single company to solve. Moreover, operating as a group provides more political protection against any backlash — and can reduce costs.

Take Pepsi, the drinks company that has traditionally been in such intense rivalry with Coca-Cola that its chief sustainability officer, Jim Andrew, joked that this is the big “red and blue” divide in America, after politics. However, Andrew said that companies such as these two are now actively hunting for ways to collaborate around issues such as regenerative agriculture and water supplies, and this is likely to swell.

6. ESG is barely heard

Even if companies are engaged in sustainability drives, most executives are reluctant to use the acronym “ESG” now, particularly if they are in America. Indeed, it was conspicuous by its absence this week. Blame that political backlash. The one exception that I encountered was Takeshi Niinami, chief executive of the Japanese drinks group Suntory, who told me that his company still happily uses the term since it remains widespread in Japan — but it increasingly refers to social issues (such as alleviating poverty) as well as green initiatives.

What this means is that anyone advocating for sustainability in a company now needs to present this to colleagues and shareholders as an initiative about resilience-building and reputation-building — rather than just doing good. “It’s still happening — but we have to show how sustainability will help the bottom line. You can’t take anything for granted,” one chief sustainability officer told me. Which, of course, is one reason those CSOs are in Davos.

Smart read

For the past three years, BlackRock’s annual “engagement priorities” document has included a line on companies aligning with a scenario “in which global warming is limited to well below 2C”. That language was missing from the latest text, published yesterday, report Patrick Temple-West and Brooke Masters. It did however appear in the asset manager’s broader “global principles” for investment stewardship, also published yesterday.

The “smart read” section of this article has been amended to clarify that the cited language on global warming appeared in BlackRock’s “global principles” for investment stewardship.