Seven Takeaways from the 2024 World Economic Forum

The 54th World Economic Forum (The Forum) Annual Meeting has wrapped up in Davos. Focused on the theme of re-building trust, a central tenet of sustainability reporting, there were several key outcomes that CPAs looking to lead in the sustainability space need to know.

From geoeconomics to climate change to disruptive technologies like artificial intelligence, the world is changing, and the impact these changes will have on business, and the CPA profession, in the 21st century will be profound.

Key Takeaways for CPAs

1. The short-term (2 year) global risk outlook has changed from 2023.
   • Misinformation and disinformation, and particularly the tools to disseminate   it (e.g., artificial intelligence), has surpassed the cost-of-living crisis as the number one risk cited for the next two years.
   • The Forum launched the AI Governance Alliance, which included major technology players like Google, Microsoft, IBM, Meta Platforms and others to shape AI development and its responsible usage. It is important for CPAs to stay informed about the latest “responsible usage” best practices as they incorporate these tools into their work.    
2. The long-term (10 year) global risk outlook remains the same with environmental risks sweeping the top four spots.
   • However, after the summer of 2023, the hottest summer ever recorded in the Northern Hemisphere, extreme weather events have emerged as the number one risk over the next 10 years. This is mainly due to the economic risks of extreme weather events, disrupting supply chains,  leading to reduced productivity in various industries.
   • Rounding out the top three risks over the next 10 years are: i) critical change to Earth systems; and ii) biodiversity loss and ecosystem collapse. Taken together, these risk factors reinforce the need for CPAs to carefully consider the impacts of these risks on  their businesses in the long term.  
3. PwC’s annual CEO survey, released on the first day of the World Economic Forum, cites that 45% of CEOs believe that their company will not be viable in 10 years if they stay on its current path, up 5% from 2023.
   • CEOs expect changes from climate change, technology and other megatrends to affect the future viability of their business. As a result, the drive to reinvent is intensifying, and CPAs should take note.
4. Efforts to quantify nature’s economic value is gaining momentum – and CPAs can play a key role in bringing rigor to that process.
   • Business has treated nature as a free resource, ignoring massive long-term economic and biodiversity costs from unsustainable use.
   • Over half the global economy directly depends on rapidly declining natural resources. Efforts to quantify nature’s economic value are gaining momentum as its growing scarcity is recognized. 
5. A prospectus for the planet – seed capital is needed to meet climate targets.
   • Achieving net-zero emissions and reversing nature loss by 2050 requires an estimated $3 trillion USD per year – far beyond current business and investment levels.
   • Mobilizing adequate capital requires partnering across private, public and philanthropic sectors.
   • Quality sustainability reporting, the kind that accurately measures sustainability risk and reward, is crucial to enable the large-scale investments that are needed. This is where the skills of a CPA come into play
6. Financial risks of climate change are underpriced in financial markets.
   • Insurance premiums are rising, and coverage is becoming less available in high climate risk areas as models begin to reflect the increasing frequency and severity of climate-related insurance losses.
   • Loans and other financial assets underprice climate risk as pricing models generally rely on known quantities of risk and are inherently backwards looking and do not necessarily reflect the accelerating effects of climate change.
   • The skills of CPAs are needed to improve sustainability disclosures and provide better insights into climate-related risks and opportunities.
7. Generative AI: The steam engine of the fourth industrial revolution.
   • AI has the transformative potential of the most disruptive technologies in history, like electricity and the internet. It will fundamentally reshape business, work and life.
   • Responsible AI adoption requires reskilling people to be adaptable to new AI-enabled jobs. Talent development is crucial, as is transparency on workforce impacts.
   • With protecting the public serving as the foundation of the work of a CPA, the profession can play an important role in the   development of strong corporate governance practices and standards that will serve as the “guardrails” for this revolution. 

Business leaders across the planet recognize that they must accelerate their efforts in the face of these 21st century megatrends. It’s good for business.

And as companies embark on this transformative journey, sustainability reporting offers the opportunity to tell the company’s story beyond just the numbers.

Sustainability reporting is a complementary by-product of business strategy, allowing companies to report on how it is mitigating sustainability-related risks and capitalizing on sustainability-related opportunities. And as major regulators globally begin to move in lockstep, sustainability disclosures will go from optional to obligation very quickly.

Visit Sustainability Simplified to learn more about how CPAs can take the lead in sustainability reporting and assurance.