Business Futures ‘Whatdoes thefuture

‘What does
the future
hold for us?’
‘What will
the world
be like in 2034?’
BusinessFutures
Image © JR Eyerman /Getty
BusinessFutures
Looking into the future
Predictions about the future are rarely accurate but, barring global
catastrophe, we can be sure the world’s population will continue to
grow rapidly. We know demand for water will increase. We know more
people will live longer. We know government debt will continue to grow.
We know the global race will be won by the most-adaptable and besteducated workforces.
What we don’t know is how individuals, businesses, governments and
countries will react to these and other trends.
However, we can use our skills, experience and judgement to develop
informed speculation on specific topics. We can then go on to offer
suggestions for ways to make the most of these trends or avoid their
worst impact.
That is what we are doing with BusinessFutures.
Four panels have explored four issues that will impact businesses,
governments and individuals over the next two or three decades:
• changing education needs;
• demand for water;
• ageing population; and
• changes in tax regimes
We have consulted widely among our 142,000 chartered accountants,
many of whom are dealing with some of these issues every day, and
made some suggestions about the direction that needs to be taken
to secure the future.
Of course, whatever direction we set sail in, we may well be blown
off course by ‘unknown unknowns’ or by the unforeseeable impact of
trends we already know about. Technological developments or a new
global rapprochement between governments could have far-reaching
implications on anything from taxation trends to water shortages.
Still, we know enough to make some reasonably accurate predictions.
Today’s businesses need to be braced for what tomorrow may throw
at them. Forewarned is forearmed.
I do hope you will continue to work with us as we continue
this project and encourage others to do so as well.
Liz Rylatt
ICAEW Executive Director,
Finance, Operations and Members
BusinessFutures
1
BusinessFutures
A postcard from the future
Professor Richard Scase is a leading
writer and speaker on how global
mega-trends will impact business
opportunities and personal futures.
He reports on the world of work in
2034 – what are the difficulties and
where do the opportunities lie for
businesses and employees?
Energy crisis
The year zero hour
Back in the earlier 2000s, the Chief
Scientific Adviser to the UK Government
pronounced that 2030 would herald
the coming of a perfect storm. By this
he meant the pessimistic forecasts
of the destruction of the world’s
resources predicted by economists,
environmentalists and many politicians
would be validated.
We now live in a truly global
environment. Advances in internet
technologies continue to have major
impacts on how businesses, both large
and small, operate.
Today, in 2034, this appears to be the
case – but only partly so.
Oil and gas reserves are rapidly
diminishing and an acute energy crisis
is afflicting all continents. Shale fracking
offered some respite but only for a
short period of time. Wind and solar
technologies are failing to meet everincreasing global demands.
Water, which in Europe and the United
States was previously regarded as
cheap and abundant, is now expensive.
Household users are metered and highly
taxed. Just 10 countries own 80% of the
world’s reserves. Companies are now
legally obliged to include their water
use, as well as their use of other energy
sources, in their annual audits.
Population crisis
The pressure on resources is being
compounded by an increasing global
population – now 8bn and likely to grow
to 10bn by 2050 – and exacerbated
by rising living standards adding new
demand for diminishing resources.
In the 2010s, secure career jobs were
disappearing. Today these forces are
even more pronounced. Men and
women expect to be on zero-hour
contracts, offering services through
agencies that negotiate rates of pay and
working conditions for defined periods
of time. These range from a few hours
to several months or years depending
on workplace demands.
Individuals now need to update their
capabilities continually so they are
attractive in the marketplace. This has
had ramifications for all aspects of
education.
Degree of difficulty
Twenty years ago universities were
failing to meet the demands of the
marketplace. Since 2015 there has been
a dramatic reinvention of further and
higher education.
Governments and international bodies
face increased pressures to regulate the
way businesses use raw materials as
well as how they deal with waste
emissions and other factors affecting
climate change.
The online availability of knowledge has
led to the contraction of universities.
Today only 5% of school-leavers attend
university, compared to around 50%
not so long ago. Only those with
‘exceptional skills’, as identified by
school examinations, go to global
highly-branded universities.
World of opportunity
Going socially mobile
The increase in population is not all
bad news. We are witnessing a huge
increase in urban populations in the
world’s emerging markets. This is
creating opportunities for the provision
of transport infrastructure, housing,
education and health, welfare and social
services. The growth of the urban middle
classes is creating demand for luxury
goods and services, traditionally a feature
of mature markets.
Earlier in the 21st century there was
considerable debate over issues of
personal opportunity and social mobility.
Western companies that used to stick to
strategies aimed at Western consumers
have been compelled to reinvent
themselves – today there are more than
450m affluent consumers in India and
China alone.
2
‘Corporate elephants’ and
‘entrepreneurial fleas’ constantly shift
and change according to business
opportunities as these emerge and
disappear. This has a major impact on
job opportunities and working lives.
The latter part of the 20th century
witnessed a decline in the rate of social
mobility. New technologies are now
eliminating tiers of middle management.
Bureaucratic hierarchies are disappearing.
There is a shift to decentralised units
with slimmed-down structures through
strategic outsourcing. These sweeping
corporate changes have resulted in us
reassessing our notions of social mobility.
Today entrepreneurial success and
enterprising professional behaviour
determine personal success. For the great
majority of the working population,
achievement is no longer measured by
upward movement within corporate
hierarchies.
BusinessFutures
Post-industrial age
However, there is a global elite that sells
its talent in a corporate marketplace,
almost stating their own remuneration
packages, while enjoying low taxes in
hidden corners of various jurisdictions.
The implications of ageing populations
are broader than welfare and pension
provision.
In the business world, a generation gulf
has emerged leading to resentment
among young people. Because of
the insecure nature of their jobs –
many of which demand geographical
mobility between cities, regions and
countries – most young people cannot
afford to buy their own homes. They
are living longer in parental homes
and, after that, are compelled to rent
accommodation.
As a result there are both skill shortages
and excessive labour capacity.
Despite the reinvention of education
systems over the past 20 years, there
remains a shortage of ‘employable’
talent in forms required by employers,
sub-contractors and agencies. Those
with enterprising, adaptable soft skills
are in very short supply.
Moving on
On the other hand, growth in the
number of highly-educated young
people, as well as other population
pressures in developing countries,
has led to a huge increase in the
number of global economic migrants.
In the 2020s governments in the
OECD countries introduced widespread
measures to limit flows of inward
migration despite skill shortages in
their own countries.
Retirement retired
Because of demands on state pensions,
governments have shifted the emphasis
from state funding to personal
responsibility.
During the 2020s most governments
in Europe abolished the retirement
age so most of us now work beyond
the age of 70. The ageing of the
population has imposed such demands
on the state that many of the taken-forgranted welfare benefits provided 50
years ago no longer exist.
BusinessFutures
‘During the 2020s most
governments in Europe
abolished the retirement
age so most of us now
work beyond the age of
70. The ageing of the
population has imposed
such demands on the state
that many of the taken-forgranted welfare benefits
provided 50 years ago
no longer exist.’
At work, many feel opportunities
are being restricted by older people
hanging on to their jobs instead of
taking early retirement or quitting in
their mid-sixties. In response, many
companies have introduced flexible
working allowing older people to
relocate to less demanding activities
thereby creating vacancies for
younger workers. Older employees
are encouraged to go onto part-time
contracts and sell back their services
as short-term consultants.
The tax squeeze
These uncertainties of working life,
together with the geographical
mobility of business operations, have
major ramifications for tax gathering.
Technologies allow companies to
register and operate in diverse fiscal
regimes, enabling them to reduce
their tax liabilities. Equally, high earners
register their incomes in various parts
of the world to minimise their tax
demands.
It is easier to tax consumers than
globally-mobile corporations and so the
‘squeezed’ middle classes around the
world are subject to demands for more
tax revenue.
During the 2020s there was a shift to
more indirect taxes as part and parcel
of ‘interventionist’ health and lifestyle
policies. In the past, these were levied
on alcohol and tobacco. Today taxes are
raised on a wide range of other goods
affecting obesity, heart conditions
and other ‘preventable’ illnesses. Only
in this way can governments, facing
consumer resistance to higher direct
taxes, raise revenue to provide services
for ageing populations.
Freedom at a price
Living in the 2030s is an experience
of exciting diversity and change.
Governments and corporations are
developing policies, strategies and
innovations to cope with demand
associated with climate change and the
exhaustion of finite energy resources.
At the same time the work we do
requires us to be free-thinking and
enterprising.
How preferable is this compared to
the predictable and narrow, focused
working lives of men and women in
the early 2000s?
In the post-industrial era we have the
opportunity to exercise a creative
individuality surpassing that available
in any other period in human history.
This has become an increasingly
political issue. It has reduced the
revenue base of tax jurisdictions but
so too has the polarisation of personal
incomes, associated with growing
inequalities. Globalisation has created
downward pressure on earnings,
producing underclasses that pay no
tax at all.
3
What is the point of looking to the future? The answer is that
it is where our children and our children’s children will live. We all
have a duty to prepare ourselves – and today’s children – for what
it will throw at them. What will life be like for tomorrow’s young
adults? Here we take a few informed guesses.
‘So what will 2034 be like for me?’
China
moved from
after further political unrest
caused by water shortages
In another 25 years will become
one of the world’s
1bn millionaires
Never went to university.
Affiliated to lifelong-learning
college. Learnt
online
Takes daily
shower but pays
£100
to enjoy a bath
once a week
Zero
hours
SELF-EMPLOYED, WITH His
ENTIRE WORKING LIFE –
INCLUDING HR REPORTS
AND APPRAISALS – ONLINE
FOR NEW EMPLOYERS
TO SEE
20%
pays tax at
via the International
Revenue Service
4
BusinessFutures
‘And for me?’
Commodity trader dealing
in water futures averaging
$50/barrel
Oxford-educated with
a first class degree in
Mandarin
owns assets of more than
$75,000
Corporation tax paid
through Scotland,
the latest independent
tax haven
one of the
world’s wealthiest
10%
Not likely to retire
before the age of
75
Volunteer
primary school governor responsible
for its work placement programme
BusinessFutures
5
Education
The chances
of a lifetime
The world of work is changing fast and the
education system has to adapt to meet the needs
of business. But the attitude of both businesses
and individuals must also change drastically if they
are to succeed in the global race. We need an
education system which prepares young people
for the challenges ahead and individuals must
recognise we don’t stop learning when we leave
school or university.
Of course, we can’t predict the future.
That’s why it is vital that students get the
chances of a lifetime – the skills, knowledge,
attitudes and behaviours which will equip
them for the world of work in 25 years’ time.
Workers can no longer expect a job for life.
They will be forced to adapt their skills to
meet the changing demands of employers.
To survive the cut-throat competition for
work, people will need to go back to school
regularly throughout their careers to update
their knowledge or even retrain completely.
The education system, and those
responsible for it, must take a lead.
What will work and business look like?
Automation will allow even the smallest
companies to conduct business
internationally. Employers are increasingly
putting together trans-national teams;
technology is enabling this and competition
demands it. Rapid collaboration and
working offshore across cultures will
increase.
The notion of a ‘job for life’ with fixed
hours and an employer taking pastoral
responsibility for employees is disappearing.
The cost of employing people in other ways,
such as zero-hour contracts, is lower and
these are likely to become more prevalent
than they are today.
Even the professions are not immune –
automation of some of their work has
already begun.
Basic retail jobs will be harder to support in
the future but people with the personality
to help and guide the customer will always
be in demand, whether that’s as wealth
managers or service assistants.
Skills can be augmented by technology but
some activities, such as caring for the sick
and elderly or crafts which require good
hand-to-eye coordination, will continue to
be carried out by humans.
The demand for jobs – but not necessarily
the supply – will grow due to increases
in population and the inadequacy of
pensions. To secure work, employees will
have to be highly adaptable with excellent
communication and relationship-building
skills.
How can we reduce the skills gap?
Education is good at proving people
are intelligent but communication and
leadership skills are essential to operate at
higher levels.
It may not be necessary to change radically
the content of education. If the skills needed
are an ability to listen, collaborate, solve
problems and carry out critical evaluation,
it may be sufficient to find ways to inculcate
and measure these attributes.
Learning by rote has limited value. Students
will not only need a desire for knowledge
and skills, but they must ‘learn how to
learn’. That way they can embark on
the lifetime of learning they will need to
compete for jobs in the future.
It has been suggested that pupils should
be ranked in subject classes according to
their ability rather than their age. And it is
generally acknowledged that, in the UK,
specialisation occurs too soon. The decision
about the subject or training path should be
deferred beyond school age.
6
BusinessFutures
The monoglot culture of the UK must
also change. Some Russian children aged
eight are fluent in Russian and English,
and can also speak Spanish and German.
However, in a changing world the
traditional ‘modern languages’ need to
be replaced with Mandarin and Arabic.
Workers in the future will have an
increased online presence and it will
be routine for companies to establish
their employability from what is publicly
available about them on the internet.
Changing tack
A closer link between the government
and universities should bring better
investment in the right courses and
opportunities for young people to show
they have assimilated new skills.
People will have changing roles during
long working lives and need help to
take ownership and responsibility for
their own development; normalisation of
lifelong learning would enable them to
develop, adapt and repurpose themselves
into different careers.
Education is very focused on assessment,
which acts as a disincentive for students
to attend extra-curricular activities such
as listening to guest speakers. There
needs to be a cultural change away
from students learning for the sake of
assessment. The reward for learning
should not be passing a test. Large sums
of money are spent on assessment that
could instead be spent on teaching and
learning. Methods of assessment have to
be more sophisticated than a requirement
to remember facts.
Changing the focus in schools away
from assessment to learning is not
just a government agenda – parents
and children focus on grades as well.
To achieve change, universities and
employers must adjust their focus, with
a new form of skills-based assessment
counting towards A-level grades.
This is not to say we should abolish
examinations. Rather, young people must
be given a wider range of skills than can
be recognised simply through paper
qualifications. The education system
needs to adapt to take this into account.
Failure breeds success
It is important to find ways to create
awareness of the breadth of opportunities
available. Students should also be
informed about how the workplace
operates, for example, corporate
behaviour and office politics. If employers
tried harder to create awareness of
what it would be like to work for an
organisation and what is expected,
it would not be such a shock when a
graduate or school-leaver enters work.
Too many businesses currently punish
mistakes rather than learning from them.
A trial and error tolerance can generate
learning as much from admitting and
discussing mistakes and ‘near misses’ as
success. Employees given the freedom
to take small decisions can develop
momentum and build their confidence.
Work experience for school-aged
students, a key plank of access
accountancy, should be an essential part
of the education process rather than a
desirable add-on.
Who are you?
Employers need to recruit people with
the right attitude and personality.
Attitudes needed include resilience,
perseverance, curiosity and agility.
An involvement in sport or drama in
a candidate’s educational background
suggests a balance between ‘work and
play’; workplace solutions can come from
‘play’ experiences.
BusinessFutures
‘Education is what is left
when you have forgotten
everything you have been
taught.’ (Einstein)
‘In 25 years’ time, there
will be fewer jobs and the
recruitment process will be
very different.’
‘An autonomous,
collaborative individual
does not emerge from
someone who specialised
at age 16.’
‘As an employer I want
some of the interesting
things that a person does
in their personal lives to
bleed into the work space.’
‘Passion is revealed when
people are clear on what
they want to do and they
won’t give up.’
An ‘employability aggregator’ score
derived from sweeping across online
information, supplemented with a
psychometric profile test and direct
information from the applicant, may well
be used to assess work-readiness and
suitability for specific work. An automatic
checking process, including conduct and
ethics checks, could replace referencing
and manual sifting and filtering through
thousands of applications.
It is surprising where some of this
information will come from. For instance,
information generated from the results
of a game played online may be used
as an indicator of competencies such as
interaction skills, the quality of hand-toeye coordination, the ability to prioritise
and make a quick judgement.
Business in education
Some large organisations already
help young people with CV writing,
numeracy, financial literacy, money skills,
terminology and budgeting. This must
become more widespread. There will be
fewer jobs and more people will be selfemployed so financial literacy and other
commercial skills will be essential.
There should be more opportunities for
businesses to engage with all levels of
education, particularly between business
schools and smaller organisations. Input
by business into the curriculum content
of apprenticeship programmes is a
useful start.
A pipeline of indigenous talent in
developing countries and continents can
be achieved through early engagement
with education, internships, focus on
academia and universities, and showing
value added to business.
Teaching the teachers
Lecture formats with one person
speaking and students writing should be
redesigned. World-class academics can
deliver knowledge content through online
media (for example, massive open online
courses, TED talks, Reith lectures) while
the local teacher facilitates, manages
and delivers the learning process in
compelling ways.
For many years university academics
have been rewarded in prestige and
promotion for their research publication
achievements. Research and teaching
skills should be differentiated; a good
academic researcher does not necessarily
have good teaching skills and there may
be a disconnect between university
research output and teaching quality.
Ready for work?
The work-readiness of graduates is
questionable. Some employers say
graduate skills are not significantly
more relevant or greater than those of
apprentices. Knowledge grows out of
date and by the time students graduate,
a degree may not provide an advantage
in the job market.
attitudes and understanding of
the workplace that business needs.
Importantly, courses should be mapped
with the economic need for graduates
in engineering, maths, science and
innovation.
Pay-as-you-learn
Some employers closely specify the skills
they want in a role and only support
staff to fulfil that specific role. These
employers don’t want staff to develop;
they want people to stay doing the
same job indefinitely, or at least for a
significant period, to reduce costs of
recruitment and training. It will therefore
be increasingly necessary for individuals
to rely on themselves to seek out training
opportunities.
Education is likely to be more and more
reliant on private-sector funding with
students or, in many cases, businesses
meeting the cost of tuition fees. Young
people will have to choose alternative
personal development models which
ensure they manage risks and the cost/
benefit equation. However, tuition fee
levels will come under pressure as more
learning moves to the internet.
Professional bodies such as ICAEW are
important in providing a framework
for young people to fulfil their learning
potential and for safeguarding the public
in changing times.
Business in schools
Schools should think about the kind of
person they are turning out and take into
account what employers are looking for.
The importance of good careers advice in
schools cannot be over-emphasised.
The involvement of business in schools
is also important. Every school, even
the smallest, should have at least
one business person on the board of
governors.
The ability of teachers to give careers
advice and build awareness is crucial.
A recent survey by YouGov for the
Chartered Institute for Securities &
Investment (CISI) says only 44% of
secondary school teachers discuss
financial services as a career option
for pupils. In addition, two-thirds of
primary school teachers had little to no
understanding of the sector. Less than a
quarter (23%) of parents said they had an
understanding of financial services.
Adapt and survive
There is no international framework for
education. Some countries believe it to
be a route to social cohesion while others
emphasise academic attainment. Some
economies thrive with an extremely
competitive system but others (not
least the UK) see it as divisive and
counterproductive.
If there is a mismatch between what
the education system offers and what
business needs this will blight people’s
lives, local communities and national
economies. Whatever the approach –
cohesion or competition – it is clear the
education system will have to adapt if
the UK economy is to survive.
Graduates are squeezed on both sides:
the benefits of a degree are questionable
and prospective employers are often
disenchanted.
Rather than educating fewer people,
we believe a more valuable university
experience must be developed which
provide additional benefits so graduates
emerge with the soft skills and the
7
Education
Over the horizon
To succeed, employees of the future need enquiring minds, says ICAEW Vice President
and Open University lecturer Dr Hilary Lindsay FCA.
What are the top 3 skills that
business will need from employees
in 30 years’ time?
.
For me the first one is adaptability – being
able to change with the times. Looking
forward and not being stuck in the past.
How can someone develop
adaptability?
It involves personal confidence, engaging
with the environment, having the right
mind-set and being proactive. This
resonates with the more fragmented
careers people already have where there
are no longer ‘jobs for life’.
Academics have identified five
competences that make up career
adaptability: control, curiosity,
commitment, confidence and concern.
In my research into lifelong learning I
have relabelled these five ‘c’s as self-belief,
having a positive attitude, experimenting,
exploring and engaging. These are
skills and attributes individuals need to
develop.
And the second skill?
I think it must be horizon-scanning to
find out what is happening out there.
Individuals have to be able to respond to
a constantly changing environment.
How would a person get to the stage
that they are horizon-scanning?
You probably develop this through habit.
But it starts with people taking a personal
interest in what is around them.
And could you teach people how
to develop this?
I think the best way would be to
encourage an enquiring mind at an early
age. You could start by getting children
to question the cause of activities and
events. For example, a conversation
with a five-year-old who is putting on
wellington boots could be related to
the weather.
8
You need to develop an awareness
that there will be uncertainty and you
cannot always know what will happen
next. You need to cultivate a mind-set
where uncertainty triggers curiosity and
questioning. That can later lead to more
formal skills such as scenario planning.
And the third skill?
‘You need to cultivate
a mind-set where
uncertainty triggers
curiosity and questioning.
That can later lead to
more formal skills such
as scenario planning.’
People skills and, in particular,
communication skills. You would need to
be able to communicate in many ways,
including in whatever e-environment
might then exist. You need to be able
to engage both face to face, in small
and large groups, and remotely through
webinars, online communities and future
media.
How could communication skills
be taught?
A key step is to help make people
confident in making presentations. We
should seek to avoid this becoming a
potential problem or fear later on by
making it normal for a child to contribute.
We should encourage children to speak
and participate so they are not selfconscious.
What would be a fourth skill to add
to the list of three?
I think it would have to be empathy,
which is the other side of communication.
How could empathy be developed?
By being comfortable in yourself so you
can then concentrate on other people.
I have been reading a book entitled The
Charisma Myth [by Olivia Fox Cabane]
which argues that much of charisma is
about presence and about being really in
the moment with other people; thus the
importance of empathy as a skill.
What skills will be in high or low supply
in 30 years’ time?
There will be a need to look after more
older people, so caring skills will be in
short supply because the work is poorly
paid and supply and demand will not
match up. Meanwhile technology will
have revolutionised the skills needed in
areas such as agriculture.
The higher-level skills in short supply
could include horizon-scanning and
relationship-building skills, such as the
ability to motivate others, to engage
with key people and develop trust so an
understanding of each other’s position
develops.
On the other hand there will be so much
basic IT ability around that it will be
harder to differentiate skills in that area.
It will be just like writing is to us; people
will be using whatever has replaced
computers by then without even thinking
about it as a skill.
And finally what is the role of
educators in developing the skills that
business will need in 30 years’ time?
I think teachers should demystify
complexity, mentor, nurture and
motivate. Teachers will need subject
matter credibility and be able to answer
questions, but should seek to be partners
or facilitators rather than experts.
Learning establishments have to
provide a safe environment where
students can flourish.
Massive open online courses, or their
successors, will provide content on all the
technical material available. The teacher’s
role will be to make it accessible.
BusinessFutures
Ten key issues
1.There are no more jobs for life.
2.The education system fails to prepare young
people for work.
3. Too many young people lack basic reading
and writing skills.
4. The idea of a university degree raises
unrealistic expectations among students.
5. Government and universities should work
together to provide courses and skills that
businesses need.
6.Relationship building, cultural understanding
and languages, together with adaptability
and decision making skills, will be essential for
business success.
7. Employers must take more responsibility for
developing staff.
8.Schools should place much more emphasis
on STEM (science, technology, engineering
and maths) subjects, yet also reconsider
whether specialisation occurs too early.
9.Schools should develop students’ skills in
communication, collaboration, analysis and
problem-solving.
10.Employers, universities and individuals
must adapt to provide and participate in true
lifelong learning.
BusinessFutures
9
Water: no longer on tap
The concern is that water is
not ‘on the radar’ of most
organisations and it should be,
even if you don’t work for a
multi-national. We explore the
context and key issues relating
to water, presenting short case
studies of how organisations
have approached these
challenges and inviting you to
consider how water may affect
your own business.
The 2013 CDP Global Water Report found that
70% of respondents identified water as a
substantive business risk with major financial
impacts. The respondents in that survey
happened to be major corporations but issues
relating to water are increasingly likely to
affect businesses of all types.
The interconnectedness of our world means
we cannot afford to be insular about this
problem; it affects us all. It raises questions
about how the world should respond to the
erosion of a natural resource which for so
long has been taken for granted – in many
cases simply ‘on tap’.
According to the World Economic Forum,
‘water security (whether it be the challenge
of too little water over long periods of
time, or too much water all at once) is one
of the most tangible and fastest-growing
social, political and economic challenges
faced today’.
While we cannot presume to solve global
water issues, it is clear that businesses must
play their part by doing what they can to
alleviate the problems – certainly not to
exacerbate them – and also to ensure they
take account of risks and opportunities which
affect their own long-term survival.
Increasing demand, growing population
and climate change will all add to these
challenges, creating threats to food and
energy supply and ultimately even leading
to conflict.
Of all freshwater supplies, 60% are
concentrated in just 10 countries.
10
BusinessFutures
The global context
PROBLEM
Water quality
Too little water
Too much water
Poor water quality and lack of sanitation
present problems in many areas. Increasing
demands from a growing population,
urbanisation and rapid economic
development will make it worse in the
future.
Of all freshwater supplies, 60% are
concentrated in just 10 countries, including
Brazil, Russia, Canada and the United
States. Three billion people are affected by
severe water stress, many of them living in
developing countries such as China where
there is rapid economic growth and India
where there is rapid population growth.
(Source: Sustainable Growth: Taking a Deep
Dive into Water, Goldman Sachs.)
The 2013 study Future flood losses in major
coastal cities, led by World Bank economist
Stephane Hallegatte and the OECD,
forecasts that average global flood losses
will increase from $6bn per year in 2005
to $52bn a year by 2050. According to the
UK Environment Agency, ’floods are one
of the most common and widespread of
all disasters and are growing in frequency
and severity due to the impact of global
warming’. They have produced guidance
on how to prepare your business for
flooding, available at
gov.uk/prepare-for-a-flood.
It’s easy to see how this affects communities
and, of course, communities and businesses are
interlocked. Bad health and sanitation do not
lead to a healthy and productive workforce.
What will this mean? The consequences are
many. One is likely to be the adoption of
export restrictions for food.
This has already happened. Drought and floods
in 2005–07 led to a fall in cereal production,
export restrictions, higher food prices and
ultimately to economic and social difficulties,
with food riots in West Africa, Haiti and Egypt.
Other consequences of water shortage include
the hampering of economic development,
increased competition between conservation
and commercial interests and conflict between
countries competing for a scarce resource.
Flooding causes direct damage and
interruption to business operations but it
also leads to increased insurance premiums
and, rather like water scarcity, may even lead
to businesses moving away from low-lying
areas. Reports cite commercially important
New York, Mumbai and Guangzhou as
among the cities most at risk by the
year 2050.
There is, for example, talk of damming the
upper reaches of the Nile. This will potentially
impact the ability to irrigate the farm lands in
Egypt and jeopardise the lives of the many that
depend on agriculture in that country.
ThreatS to population
• Ill health
• Food shortage
• Damage to natural resources
• Lack of investment and economic
development
• Food shortage
• Damage to infrastructure
• Ill health
• Lack of investment
ThreatS to business
• Unhealthy workforce
• Not enough water for production
• Damage to reputation and removal
of licence to operate (if viewed as
a polluter)
• Need to move operations
• Disruption from disputes
• Increased regulation
• Business interruption
• Damage to assets
• Higher insurance costs
• Need to move operations
• Increased costs
opportunities FOR BUSINESS
• Impetus to streamline operations
and reduce costs
BusinessFutures
• Need for new products and services
to reduce water usage
• Opportunity to build reputation
11
Water
But my business is
based in the UK ...
It would be easy to think that, with the
possible exception of flooding, UK-based
businesses would remain relatively
unaffected by water risk. This isn’t the case.
The Water Footprint Network calculates how
much water it takes to produce various items
– known as embedded water.
It takes an average of:
• 15,400 litres of water
to make 1kg of beef;
• 10,000 litres of water
to make 1kg of denim cloth; and
• 1,000 litres of water
to make 1 litre of milk.
So it’s not only direct water usage that
matters. Take a very simple example. If your
product required cotton for its manufacture,
could your business be affected by a sudden
hike in input prices if your supplier’s country
experienced a drought?
That leads to consideration of your supply
chain. With water-related ‘events’ on the
increase, is it possible your business faces risk
through the supply chain?
The other question to consider is cost. It
is conceivable, even in the UK, that water
costs will rise substantially in the future as
infrastructure has to be replaced. Companies
will need to think of ways to reduce their
water usage just as they have done in the
case of energy use as energy has increased
in price.
Consider the case
of Coca Cola
Some years ago, Coca Cola
encountered difficulties in
India when it was said their
bottling plant in Kerala
caused water shortage and
environmental damage.
This led to closure of the
plant and much unwanted
publicity. In addition, the
state government of Kerala
passed a new law allowing
people to seek compensation
from the company.
Is it always necessary to use ’clean’ water for
a process, for example? The emphasis should
be on the use to which water is being put
rather than on the commodity itself.
Saving water and money, boosting
reputation
Adnams, a medium-sized brewery business based
in Suffolk, has to keep tight control of costs. When
they constructed a new brewery and distribution site
some six years ago they decided to upgrade their
on-site water efficiencies, harvesting rainwater and
introducing grey water recycling systems. Adnams
now uses around three pints of water for every pint
of beer produced, which is about half the industry
average. This saves them money and boosts their
reputation as a sustainable business. Adnams’ water
stewardship even caught the attention of Marks &
Spencer (M&S), who were looking to reduce their
own water usage. As their CEO, Andy Wood says, ‘it’s
just good business’. For a short film on Adnams see:
icaew.com/adnams
Source: UNEP/GRID-Arendal, grida.no/graphicslib/detail/water-scarcity-index_14f3,
Philippe Rekacewicz (cartographer), February 2006
Avoid your reputation
going down the drain
There are solutions to
waterproof your business
Reputation provides an important means of
gaining competitive advantage. It’s hard to
build and quick to destroy. As concern about
water increases over time, sensitivities will
become more acute. Social media means bad
news travels very quickly so businesses must
consider the implications of their actions.
While water-related problems are complex and
likely to get worse, it’s not all doom and gloom.
There are solutions. Some of these are gained
by working with other businesses or agencies.
Sometimes it’s a matter of understanding water
use, measuring it and monitoring consumption.
And it’s not only consumers who are exerting
pressure. In Britain, supermarkets demand
that vegetable suppliers demonstrate good
water stewardship. M&S will not do business
with mills that discharge untreated effluent
directly into water courses.
There’s also pressure from investors and
governments. In countries where water
shortage is more acute, such as Australia,
companies have to account more formally for
their water usage.
12
As part of its Plan A, M&S
aims to cut its own water
consumption and has introduced
sensor taps and flush valves into
more than 300 of its stores.
Wilkin & Sons of Tiptree,
perhaps best known for their
jams, use underground microirrigation systems on their farms
to ensure water isn’t wasted
(in some fields that means
each plant is drip-fed water).
Reservoirs recycle water used for
jam-making and rainwater for
use during the drier months.
BusinessFutures
Floods are one of the most
common and widespread
of all disasters and are
growing in frequency and
severity due to the impact
of global warming.
BusinessFutures
UK water companies are
responsible not only for supply
but also for water quality. South
West Water is recognised globally
for spearheading innovative
catchment management schemes
under its ‘Upstream Thinking’
programme. Alongside other
regional organisations and
conservation groups, it is working
with the agricultural community
and the national park authorities
to improve natural water
quality and water storage in the
landscape. This involves a range
of low-cost sustainable initiatives,
including moorland restoration
and farm improvements, and
brings numerous knock-on
environmental benefits such as
improved habitats for wildlife,
reduced flood risk and carbon
capture.
How can I identify
my business’s water risks?
All businesses are different, but if you want to
consider what this means for your business,
the starting point is to establish where your
exposure to water risk lies – directly in your
business, ‘upstream’ in your supply chain
and ’downstream’ in your customers and
reputation.
To equip you to do this we are preparing
a tool to help you assess your business’s water
risks. We are inviting businesses to contribute to
this project, so visit icaew.com/businessfutures
to get involved.
13
Ageing
poses both an opportunity and a
threat to businesses around the
world. Growth in the number of
people aged 15–64 is likely to
slow over the coming decades,
so businesses will be forced
to put emphasis on recruiting
older talent and ensuring lower
levels of ‘brain drain’ from their
organisations. At the same
time, consumption of goods
and services by the over 65s is
likely to grow at a faster rate
than any other demographic
group, necessitating innovations
in design and marketing to tap
into the ‘grey pound’.
14
BusinessFutures
Adapting to an ageing society
Businesses that anticipate and plan for these changes will be
best prepared to flourish, while those that fail to prepare could
struggle to survive and grow.
A rapidly ageing world: the numbers
• From 2010 to 2050 the proportion of the world’s population
aged 65 and over will rise from 7.7% to 15.6% and the
numbers will swell from 600m to 1.5bn.
• Across more economically developed countries, the
proportion aged 65 and over will rise from 16% to 26% and
the proportion over 80 will rise from 4.3% to 10%.
• While many regions are set to age rapidly, Asia stands out.
The proportion aged 65 and over is set to rise from 7.5%
in 2010 to 17.4% by 2050. (All statistics are taken from the
United National Population Division.)
A land of opportunity for business
If businesses intend to grow in an ageing society, they will
have to adjust their business practices to take advantage of
changing demographics. Businesses need a constant supply
of labour to produce goods and services as well as sustained
demand for what they produce.
‘We will need to fill 13.5m job
vacancies in the next 10 years but
only 7m young people will leave
school and college.’
Source: UK Commission for Education and Skills
‘Spending by the over 65s
will increase from 17% of total
spending today to 24% by 2037.’
From now until 2037, the 15–64 age group in the UK will,
on average, grow by just 29,000 per annum. By contrast, the
number of people aged 65 and over will rise by 278,000 on
average each year. If businesses focus exclusively on the under
65s, they will be missing out on a vast and growing talent
pool. Indeed, just to fill the likely number of vacancies over
the next decade will make the employment of older people a
necessity rather than a luxury.
The story is similar regarding demand for products and
services. The over 65s in the UK currently spend around
£2.2bn per week (£114bn per annum) on goods and services.
Assuming their weekly spending rises in line with
annual inflation of 2%, they are likely to be spending over
£6bn per week (£312bn per annum) by 2037.
BusinessFutures
15
Ageing
How should businesses respond to ageing? 1
Think strategically about ageing
Businesses must consider demographic
change as part of their strategic planning.
Human Resource departments are at the
forefront of this challenge. Yet the Chartered
Institute of Personnel Development (CIPD)
found that there is a general perception
among HR managers that businesses remain
unprepared for issues associated with an
ageing workforce and many company
boards do not recognise ageing as being
strategically important. A cultural shift is
required if businesses of all sizes are to take
the challenge of ageing seriously.
2
Become age-neutral
Part of the response to ageing must include
a drive towards becoming age-neutral. This
means that employers must reduce the
potential for age discrimination within the
workplace as well as within the recruitment
process. A relatively simple way to ensure
that older applicants are treated equally is
to remove age from application forms, while
better training and support for line managers
should help to reduce discrimination at
work.
3
4
Support those with disabilities as well as
the wider health and well-being of the
workforce
Businesses must ensure that people with
disabilities are given the appropriate support
to enable them to continue working
and help prevent underlying conditions
from worsening. Increasingly it is being
recognised that early intervention and access
to occupational health services provide an
effective return on investment for employers
(source: CIPD). But organisations also have
a key role to play in improving the overall
health of the workforce – particularly in
the face of rising obesity which looks set to
become one of the biggest public health
challenges of this century.
5
Embrace continuous learning
Continued learning and development
must be built into job roles, regardless of
age. This will ensure that individuals are
able to confidently fulfil their working
requirements, even in the face of technical
or organisational change. Investing in the
training and development of people over
the long term will undoubtedly be critical
to the success of many organisations.
As well as benefiting from improved
skills and knowledge, businesses will
also attract better talented applicants
while encouraging greater loyalty among
employees.
Deliver flexibility
Increasing the prevalence of flexible working
is another way to retain older workers. Some
employees prefer to work more flexibly as
they approach retirement, adjusting their
work-life balance in order to better manage
caring responsibilities for older relatives
while continuing to work. As well as helping
to retain older staff, flexible working can
provide a number of efficiency benefits to
organisations. These include better matching
of the workforce to fluctuations in demand,
and increasing the quality of outputs if staff
are skilled in multiple business areas.
Around 60% of over 50s say they would like
to continue working after state pension age,
but on a part-time basis (source: Equality and
Human Rights Commission, Working Better
– the over 50s, the new work generation).
Phased retirement alongside more flexible
working can help to make this a reality. For
the employer this can help improve retention
rates among older workers, while for the
employee, continuing employment can
provide a boost to pension income.
16
6
Support inter-generational fairness
Although there is increasing concern of a
generational split between the older ‘haves’
and the younger ‘have nots’, in reality
such a neat split does not exist. Substantial
differences exist within, as well as between,
generations and the problems affecting
one generation also impact on another. For
example, rising youth unemployment and
the high cost of living have led to additional
income pressures on older generations as an
increasing number of younger, working-age
adults have chosen to stay at home and live
with their parents.
Businesses must work with government
to ensure the standard of vocational
training improves and there is meaningful
employment for people of all ages.
7
Tap into the ‘grey pound’: importance
of inclusive design
With the number of older consumers set to
accelerate, businesses need to understand
how they can support this growing market.
Changes to physical and mental health are
likely to have an impact on the demand
for specific types of goods and services but
there is currently an unwarranted mismatch
between the designed world and the
changed capabilities of older people.
Age UK’s report The Golden Economy
recommends that we ask fundamental
questions about the design faults of our most
familiar and important home products in
order to make them more accessible to all.
8
Afford employees a good retirement
In their 2012 survey of occupational pension
schemes, the Office for National Statistics
found that as private-sector employers
have recognised the full costs of final-salary
schemes, including those associated with
rising life expectancy, they have closed
them to new entrants and have increasingly
stopped accrual for existing members. But
the defined contribution pension schemes
that have replaced defined benefit plans are
riskier for members and are less generous
since they typically suffer from lower
employee and employer contributions.
While Automatic Enrolment will increase the
numbers of people saving into a defined
contribution pension, the challenge is to
ensure that people will save enough to
secure an adequate retirement income.
This will require tackling the low level of
understanding about the need to save for the
future and how to go about doing it.
Employers have a significant role to play.
They should inform their workforce about the
benefits of saving over the long term, provide
links to professional financial advice for those
who might need it and incentivise higher
pension saving by their employees through
matching contributions.
This will help to facilitate greater overall
savings and better financial literacy. This
will be particularly important given the
substantial increase in freedom and choice
that individuals will have in accessing their
pension pots starting in April 2015.
BusinessFutures
Towards the end of retirement?
Even without changes to state pension
age, more and more people will continue
working long after 65. Some will be
drawing on their pension and working part
time through phased retirement, while
others will continue to work full time into
their 80s and beyond.
Some will be doing this while caring
for others – including the provision of
accommodation and financial support for
younger members of the family who may
be out of work – while others will be living
alone.
Given such a difference in the actual
experiences of those over 65 compared
with the retirement stereotype, is it now
time dispose of the concept of retirement
altogether?
If businesses make the right decisions
to support increasing flexibility in the
workplace, to raise health and well-being
of the workforce, to counteract ageism
and to embrace continuous learning, the
concept of retirement as we think of it
today will no longer have any use – though
the strong cultural attachment to the term
is likely to remain a key sticking point.
Around 60% of over 50s say they would
like to continue working after state
pension age, but on a part-time basis.
If businesses intend to grow in an
ageing society, they will have to
adjust their business practices to take
advantage of changing demographics.
BusinessFutures
17
Taxation
The future of taxation is full of uncertainties. They
arise from the changing shape of the global economy;
the shift to digital products and services; the physical
constraints on natural resources, and many other
factors. There are no simple answers, but how the
uncertainties are resolved will affect the way chartered
accountants are seen and how they operate.
18
BusinessFutures
Five key questions
1. Are taxes likely to rise or fall?
2.Will governments cooperate or compete for tax?
3.Where will the balance between producer or consumer (direct or indirect) taxes settle?
4.What behaviours will governments try to influence through the tax regime?
5.What should taxpayers’ rights and responsibilities look like?
We aim to identify points of
uncertainty among the issues that
are surfacing and to extrapolate
ways in which they might develop,
through speculation and debate
informed by the knowledge of
our members. We want to equip
businesses and professionals to
think through how things might
play out, and prepare for the
longer term.
Where are we now?
It is becoming ever-harder to pin down
where profits are made
•International supply chains make it
tricky to decide where profits arise,
so it becomes difficult to tax them
accurately and fairly.
•This is compounded by the hollowedout corporation: large organisations
often outsource and subcontract
functions that used to be core
business.
•Businesses in the digital economy may
have no tangible physical attributes
but are accessible from every desk or
jacket pocket – making it still more
difficult to identify the source of
profits.
As a consequence, the old assumptions
and models on which our taxation
systems are based face increasing
challenges.
BusinessFutures
Different pressures on tax rates
The need to compete internationally
creates downward pressure on tax
rates, at least at the multi-national/large
corporate level.
In Western economies, however, taxes
may not have much room to fall for
a long time to come. In the UK this is
because of the need to keep paying down
government debt and care for an ageing
population. Cross-border, it comes from
a reducing share of world GDP which
restricts economic growth. These factors
combine to create upward pressure that
tends to keep rates high.
What’s a fair approach to tax planning?
In the aftermath of the global financial
crisis there have been loud questions
about fairness and where to draw the
line between genuine tax planning and
aggressive tax avoidance.
19
Taxation
What can we expect?
More taxation of consumption
Greater international cooperation
Action to protect resources
A balanced approach
It may become more straightforward to
tax products or services at the point of
consumption rather than at the point of
manufacture or creation. But there is a
concern that indirect taxes such as VAT
can be regressive and disproportionately
expensive for the low paid. It also
introduces economic discontinuity
between producers, who create the
wealth, and consumers.
As the geography of profit becomes
harder to analyse, international tax
authorities will need to cooperate to an
ever-greater extent. They will need to
share more information with each other,
more frequently, with the aim of ensuring
that taxation is properly captured
somewhere. The OECD, G8 and others
have begun this journey already, building
on a framework which has existed for
many years. This process is likely to
accelerate and expand in the years to
come.
Resources will be constrained and tax
regimes will need to respond in order to:
Fairness will remain a key issue.
The ability of corporations and
high-net-worth individuals to plan
their tax affairs with sophistication
needs to be balanced against the risks
of creating excessive burdens on society’s
wealth creators and driving them away.
• try to reduce consumption of scarce raw
materials, especially water and oil;
• restrict emission of damaging waste
products such as carbon dioxide; and
• influence the behaviour of individuals,
or at least raise money to pay for it:
duties on sugar and fat could line up
next to existing ones on tobacco and
alcohol.
With the global shifts in economic
power come changes to the international
pecking order, and subtle but profound
alterations to cultural norms.
Potential outcomes
Global cooperation
Increased international cooperation
between governments and tax
authorities may take many years and
may not be smooth – but whatever
combinations of altruism, rivalry and
realpolitik bring it about, expect the tax
world to be a smaller place.
It might be possible to develop a shared
set of definitions about the tax base.
This should include common structures
and a general agreement about what is
taxable.
It is even conceivable that multinational
businesses might eventually make
a single payment to their home tax
authority and have the overseas portions
redistributed on an internationally agreed
basis.
Alternatively, it is possible that we might
see corporate profit taxes disappear
altogether.
Efficient and simple tax strategies
Sustainability and innovation
In order to balance the conflicting
upward and downward pressures on
rates, tax strategies will need more than
ever before to focus on efficiency and
simplicity.
An increasing world population and the
need to share global resources across an
ever-growing number of economically
developed nations mean that tax systems
will need to focus on encouraging the
sustainable use and consumption of
natural resources. We may also see
innovative new tax-raising measures
focused on health and welfare-related
issues.
•Efficient tax systems encourage
economic growth, so tax authorities
will need to keep working to reduce
taxpayers’ compliance costs, whether
measured in cash terms or by the
time taken to file returns and make
payments.
•Simplicity aids understanding,
provides consistency and acts to
discourage tax avoidance. More
than this, the need for simplicity in
the operation of the tax system is
paramount in creating the efficiencies
needed to reduce compliance costs.
20
BusinessFutures
One step beyond
A generation ago, most people had only seen a mobile phone when
they watched ‘Dallas’ or ‘Dynasty’ on TV and even then the things were
the size of a brick. Today 87% of the world’s population has a mobile.
Back in 1989, the first text message
was being sent and so was the first
communication from computer to
computer via a thing called ‘the World
Wide Web’. It was in the same year the
Berlin Wall fell and the Tiananmen Square
massacre took place.
Today a united Germany is the most
prosperous and successful economy in
Europe; China is poised to become the
world’s biggest economy.
Few of these developments could have
been predicted and the pace of change
around the world seems continually
to gather speed, making it even more
difficult to imagine the world in another
25 years’ time.
When we do contemplate the future, we
are limited by our imaginations and the
sense that much of what will happen is
unknowable.
Yet we must attempt this leap of the
imagination because the decisions
we make today – as business leaders,
as students and young people, as
governments and other policy-making
bodies, and as ordinary individuals – will
to some extent shape the whole future
and to a much greater extent determine
our own futures.
That is why ICAEW embarked on our
BusinessFutures project. It is also why this
is not a one-off exercise but the start of a
long-term project.
The aim of BusinessFutures is simple: to
encourage members, younger members
and students in particular, to think about
the long term and to encourage policymakers to do the same.
Most businesses are so busy worrying
about the next quarter that they don’t
have time for the next quarter century.
But they should do if they are to survive
and prosper, compete with companies
all around the world, and deliver the
investments needed now to ensure they
are giving themselves every chance of
heading confidently into the unknown.
If businesses are short term, the same
can be said for politicians and policymakers whose debates tend to focus on
the immediate here-and-now and whose
horizons rarely extend beyond the next
election. That certainly applies in the
democratic world.
Yet some trends are inescapable
irrespective of who is in power and their
political persuasion. As we have seen in
this first BusinessFutures publication, the
question of water shortages and the fact
that populations are living longer have an
impact on everyone. Dealing with these
questions requires long-term thinking;
short-term quick fixes cannot resolve an
issue like how to provide health care for
more and more elderly people.
Our BusinessFutures project will continue
to investigate and report on the topics
covered in its first year – tax, ageing,
water and education – but they are by no
means the only issues confronting those
of us who care about the future. And who
doesn’t?
We will shortly embark on the second
phase of our work. The topics discussed
here have already thrown up a range of
related questions.
• If the population is expanding fast, how
can everyone be accommodated? For
instance, as mega-cities develop across
the globe, how will they be run and
serviced and what relationship will they
have with their home nations?
• If tax revenues are likely to remain
under pressure, how will global debt
levels be handled? Are currencies and
governments secure and stable?
• If water is a finite resource, what about
all those fuels we need to keep the
lights on, the engines running and the
internet purring along?
ICAEW BusinessFutures intends to address
some of these questions. We expect to
find more questions than answers but we
also expect to suggest a few strategies
and policies which businesses and policymakers could consider adopting to
make the most of the opportunities they
present and mitigate the downsides as far
as they can.
We have consulted widely among ICAEW
members and others to get this far. We
are very keen to continue engaging as
many members and students as possible
in this project.
Please add to the debate by visiting our
LinkedIn group and checking out
icaew.com/businessfutures.
It’s your future we’re talking about.
Charles Carter
Director, Regions, ICAEW
Nigel Hastilow
Director of Enterprise, ICAEW
© ICAEW 2014
All rights reserved.
If you want to reproduce or redistribute any of the material in this publication, you should first
get ICAEW’s permission in writing. The views expressed in this publication are those of the
contributors. ICAEW does not necessarily share their views. ICAEW will not be liable for any
reliance you place on the information in this publication. You should seek independent advice.
ISBN 978-0-85760-967-0
BusinessFutures
21
BusinessFutures
Follow the future. We need your thoughts, opinions
and insights as the project continues, so join our LinkedIn
group to contribute to the debate.
Read more about the future of water, tax, ageing
and education at icaew.com/businessfutures.
ICAEW is a professional membership organisation that promotes,
develops and supports over 142,000 chartered accountants
worldwide. We provide qualifications and professional development,
share our knowledge, insight and technical expertise, and protect the
quality and integrity of the accountancy and finance professions.
As leaders in accountancy, finance and business our members have
the knowledge, skills and commitment to maintain the highest
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around the world.
Because of us, people can do business with confidence.
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