How Sustainability in business can increase GDP: McKinsey chief

The goals of sustainability, inclusion, and growth in an organisation can reinforce each other and create a virtuous circle and increase global GDP growth, according to Mckinsey’s global managing partner, Bob Sternfels.

During the Bloomberg New Economy Forum in Singapore, Sternfels said advancing women’s economic potential in the workforce could add US$13 trillion to global GDP growth. Growth rates for sustainable products and markets outstrip conventional ones 10 to 20 per cent in all categories.

He also said creating more inclusive health care could add half a point to global GDP growth by 2040.

• Subscribe to Digital Nation Australia's twice-weekly newsletter

“At McKinsey we’ve done some modelling, and we believe that we could have three to four percent per annum GDP growth over this decade from existing technologies. Similarly, if we look at Europe in particular, those same technologies could abate 85 per cent of the carbon [in that region] today.

“If you look at job creation, there is a scenario with substantial net job growth over this decade. It requires investment in sectors from infrastructure to health care to energy. In fact, done right, job growth can outstrip jobs dislocated through technology two to one. But it requires the right focus on upskilling,” Sternfels said.          

In his discussion, Sternfels painted two scenarios on how this decade could turn out, the first is the new age of prosperity and the other very bleak.

He said, “GDP could grow 30 to 50 per cent over this decade with a better quality of life for most people. A more sustainable future for our planet. True sustainable and inclusive growth. That’s one path.

However, the second scenario looks quite the opposite, said Sternfels.

“It has tepid economic recovery. Only 10 to 20 per cent increase in GDP growth. Less equitable distribution. It’s less sustainable, with worse outcomes for global health and the environment,” he said.

According to Sternfels if organisations and governments don’t substantially improve the net-zero commitments they have all made, they’ll have one billion people living in lethal heat by 2050.

“Seven of 10 people today live in societies with growing inequality, and we’ve seen the massive stress that places on both public and private institutions. And in terms of economic growth, the bookend scenarios have never been wider than they are today as we forecast what could be,” he said.

Driving all three—sustainability, inclusion, and growth—won’t be easy, said Sternfels as there are some “real tensions” that need to be addressed.

“As technology is implemented at an ever-faster rate, one hundred million people will need to be reskilled this decade. And energy transitions, if we don’t focus on inclusion, will be regressive.

“If I take the US alone, 60 per cent of low-income households face severe energy burdens, meaning they spend over 10 per cent of total household income on energy. Just transitions have to be a crucial component as we think about climate transition,” Sternfels said.