Recent international developments and changes in the internal dynamics of countries require organizations in both the private and public sectors to produce policies that are flexible, sensitive to rapid changes, and based on continuity. It has become necessary for governments and companies to strike a balance between managing short-term crises and building long-term policy goals. While companies try to keep up with the suddenly changing economic and geopolitical atmosphere in the international arena, on the other hand, they have to adapt to the changing regulations and legal environment within the countries. On the side of the public sector, institutions aim to protect and observe the balances in the domestic market while implementing changes and updates that adopt a principle to increase competitiveness and, at the same time, protect the strategic interests of the countries in their areas of dominance.
Organizations within the institutional structure, both in the private and public sectors, carry the risk of missing essential details regarding establishing sustainability at the policy-making stage. With the roadmap to be revealed, it will be possible for governments and private sector players to plan their investments strategically and implement policies that focus on sustainability.
Governments & Public Sector
Governments worldwide should combat rising inflation rates and develop policies to control and reduce social inequality due to the current crisis environment. In this respect, one of the most critical tests facing governments is to control inflation rates without causing an economic recession. The increase in interest rates, the high inflation rates, and the public debt levels make governments uneasy, especially developing country governments. This situation makes developing countries more dependent on export revenues.
Another challenge governments are facing is maintaining the long-term growth trend. Through their fiscal policies, governments try to keep the balance in the domestic market and establish long-term growth. In line with the International Monetary Fund (IMF) forecasts, the expected medium-term global growth rate for 2021 is 6.1%, while the predicted global growth rate for 2022 and 2023 is 3.6%. The anticipated decline in the global growth rate is pushing governments to a critical crossroads. Governments should not abandon long-term sustainable development goals to increase short-term growth rates. Developing a long-term and sustainable new economy vision is possible using fiscal policy instruments. To create long-term employment and establish sustainable and green growth, governments should determine critical sectors to provide financial incentives to accelerate R&D activities in these sectors. Policies should be implemented, and, if necessary, governments should incentivize foreign direct investments (FDI) to be made in the specified sectors. Thus, international private sector players can realize new and long-term sustainable investments with low carbon emissions.
On the other hand, governments can reduce subsidies provided to carbon-intensive and high pollutant business lines, and agricultural subsidies can be delivered to overcome the global grain supply crisis with the resource to be saved, and resource transfers in sustainable industrial areas can be possible. However, when examined, it can be said that countries around the world have accelerated the use of fossil fuels in order to overcome the energy crisis.
Russia's reduction of natural gas to Germany via Nord Stream 1 by 60% capacity and the consequences of this development can be given as an example. As a result of the decrease in gas supplies to Europe, countries such as Germany, Austria, and the Netherlands are reopening their previously shut down coal-fired power plants, as well as increasing the generating capacity of the coal plants they already have. Decisions taken can be met as reasonable and understandable up to a point. On the other hand, it is necessary to balance long-term sustainable policies with short-term crisis management in the conditions in question. With the worldwide energy crisis losing momentum, it can be predicted that the importance given to carbon-intensive sectors by governments will decrease over time. Therefore, in the future, the support and incentives currently given by governments to fossil fuel production should be gradually reduced. In addition, with the overcoming of the energy crisis, it may be possible for governments to focus entirely on sustainable and long-term energy policies by increasing subsidies for renewable energy.
Private Sector
The Covid-19 pandemic and the geopolitical crises that developed after the pandemic reveal the necessity of adopting flexible and open-to-change policies for companies. In this respect, company managers have to ensure that the units within the company work simultaneously and in a coordinated manner to not be harmed by the changing economic and political ecosystem and even to turn the crisis environment into an advantage. In this direction, it would be beneficial for companies to establish strategic planning units that will follow global economic and political developments and analyze the impact of these developments on the investments that the company currently has and plans to implement in the future.
Companies should set parallel targets similar to the net-zero targets set by governments by focusing on sustainable and green investments. In this way, they can adapt to the long-term and sustainable economic vision of the countries in which they operate. Then, as sector representatives, they can play a role in helping countries achieve their sustainability goals of countries by working in coordination with governments. In this way, they can eliminate the uncertainties in front of their investment plans by adopting the governments' long-term and sustainable new economy vision.
Companies using the Environmental, Social, and Governance (ESG) reporting system can meet market confidence by demonstrating concrete will to implement sustainable policies. Private sector executives should take precautions by understanding their company's environmental, social, and governance risks by turning to the rising trend of ESG reporting. In this way, companies meet new regulatory requirements. They can also make investments as a company that meets the expectations of investors and stakeholders.
The steps taken by governments to keep up with the arduous economic and political environment have the potential to change market conditions. Companies must be prepared for sudden new government regulations to maintain and increase their competitiveness. Therefore, in addition to having a solid legal and advisory staff, companies can purchase services from experienced consultancy firms that follow developments in various sectors and business lines. In this way, private sector players can be informed about the new regulations in advance and can quickly adapt to the latest market conditions.
Since the issue of sustainability is becoming a trend day by day, inevitably, the regulations implemented should also take care of the issue of sustainability. In this respect, another advantage of benefiting from professional consultancy service emerges. Professional consulting and law firms have recently focused on sustainability and have specialized in the requirements that companies must meet their sustainability goals. Therefore, it has become effortless for companies to eliminate their legal problems regarding sustainability by obtaining consultancy services.
In short, governments and companies must not compromise on short-term crisis management and long-term, sustainability-focused goals. A balance should be adopted between crisis-oriented short-term policies and sustainability-based long-term policies. In this direction, both public and private sector players should act in a planned and careful way by adopting a comprehensive roadmap to adapt to the long-term and sustainable new economy vision.