Sustainability 2.0

While we expect a continued focus on environmental sustainability, we also think there will be a lot more debate about the long term sustainability of our governance and business models. What are the right set of processes, voter engagement mechanisms, funding approaches and controls required to manage a country in the 21st century? Is globalisation the right growth model for large corporations, what is an acceptable level of growth to target and what business and financing models should underpin these choices?

How to Dealing with Debt

The current– potentially temporary - respite in the financial crisis is allowing governments to take stock of the impact of rescue packages on public finances. We know that in 2010 the debt of the richer members of the G20 is expected to rise close to 100% of GDP. Tough choices will be required on how to service the interest payments and bring down the size of the debt burden. Policy options are limited and potentially unpopular. Cuts in public spending, reducing public sector workforces, higher taxes and encouraging inflation are the most likely instruments. These will have a dampening effect on the economy and slow the pace of recovery. It will be interesting to see the choices made by different nations. The impact will be severe on public sector suppliers – consultants, lawyers and other servi ce providers could experience some of the biggest cutbacks. Redundancies in these firms will be an inevitable consequence.

Facing up to Ageing

In the developed economies, lifespan estimates are increasing by up to five months every year and there is up to a 90% chance that those under 50 will live to 100. These patterns will be emulated for citizens in the developing economies as their incomes, lifestyles and health outlook improve. At the same time we know our pension systems cannot cope - they were not designed for people lasting 15 years past retirement let alone 35. In addition, with population decline in many developed economies, we know that the ratio of workers to retirees is shrinking - reducing the pool of pension funds available to serve a rising on that level of demand.Governments, businesses, the media, society and the pensions industry all have to accept that this is a crisis of our own making - it is not something that's happened overnight. We have had warnings about an impending pensions crisis for over 20 years and have chosen to do little about it. Over the next two years we think the debate will move beyond the current search for blame as people begin to realise that their pension funds won't be able to cope. We will all have been forced to think about how we can fund ourselves for a 100 year lifespan. This might mean working well into our 70's, looking at alternative financing and investment models, changing our lifestyles to reduce our spending, ensuring that we will be healthy enough to keep working and keeping our skills and capabilities relevant.