Shaping a better world

REMI ERIKSEN

Welcome to Trust and Transformations - Leaders Navigating Change, a DNV podcast. I'm Remi Eriksen, DNV’s Group President and CEO. 

In this series, myself and our business area CEOs sit down with other global leaders to talk about how they tackle transformation, build trust in their business and people, and what they think is coming next for their industry. Right now, they are experiencing a series of historically significant transformations, making trust more important than ever. 

Børge Brende is president of the World Economic Forum and former Minister of Foreign Affairs of Norway. And I'm delighted to welcome Børge as our guest.  

Børge, we usually ask our guests how they begin their day, but I want to tweak that question a bit for you. As president of the World Economic Forum, you have to be aware of and understand all perspectives. So I'm curious, where do you get your news from in the morning? 

 BØRGE BRENDE  

That's an important part of the morning. So I combine looking at some papers with my coffee. When I say look at papers is like looking at myself, I have to admit. So I do have I think I start with Financial Times and then I also have Wall Street Journal, the New York Times, and then I look at some Norwegian papers, but when I move into the bathroom, I then start to listen to BBC World News. They're very good and they have like a podcast that they record around 4:00 in the morning and it captures what has happened in the last 24 hours in half an hour. So that's a that's a good, good way, a good start of the day. 

REMI ERIKSEN  

As a foreign minister, you were instrumental in normalizing relations between Norway and China. You also helped broker peace in Colombia and now you have this global role. What is your North Star when dealing with leaders in such sensitive and complex negotiations?

BØRGE BRENDE  

I think it's all about values. You have to have the right values and you have to build trust over time. Both in the Columbia peace process, I think that President Santos, but also the FARC guerrilla had to trust Norway being an honest broker when it came to China. There was also over time necessary to see that there was a willingness from both of the countries to rebuild a relationship that was respectful.

We, in Norway, have our way of running our country and the Chinese have theirs and we do have to also respect the differences. But of course there also has to be, at the end, a willingness to find solutions. So I used to say when it came to peace and reconciliation like in Colombia, but also between the Israelis and Palestinians and in the Philippines, other processes where Norway was involved, I used to say that we can bring the horses to the well, but we cannot force the horses to drink the water. There has to be willingness also from the parties to make a difference. 

 REMI ERIKSEN

The World Economic Forum aims to foster cooperation on challenging topics. And in your mission statement you say, together we strive for a better world. But when you are dealing with so many different stakeholders, who determines what a better world looks like? 

 BØRGE BRENDE

So, a very good question. There are many players. I think what we're seeing now lately is that countries play a major role in this, but also big companies. We do have private superpowers also on the company side, but let me come back to that. 

First and foremost, we do see that a few nations are very influential when it comes to the geopolitics and the geoeconomics of the world. This G2 has been coined instead of G7, and G2 is US and China. So US is approximately 25% of the whole global economy. Just one country is 25% of the global GDP with 5% of the global population. So, US is still a superpower economically. Maybe some people would say superpower without superpowers because even big nations have their limitations, but of course US is very well positioned also when it comes to the new technologies. 

China is around 20% of the global GDP. So together, they're almost 50% of the global GDP - two countries. But you also see emerging economies that are moving very fast. India is growing substantially. So countries are very influential. And then we have big companies, platform companies, where we have seen that the winner takes it all. But now with AI and gen AI I think that will be a big game changer. Maybe it will improve productivity with 30% in the coming decade. So I think we also will see big changes. 

If you look at the 10 companies with the highest market value, market cap in the world, several of them did not, the 10 largest, several of them did not exist 25 years ago. 

REMI ERIKSEN  

Yes. Yes, exactly. And speaking about the G2 and if you look at AI, as you mentioned, and the energy transition, these are areas where both the US and China is excelling. And can they overcome this, you can say, ideological difference and collaborate on these two important issues, AI and the energy transition? 

BØRGE BRENDE   

I hope so. We have seen in the past that even if there are in the fierce competition, there are topics and challenges that are trans-boundary. Climate change being one of them - CO2 doesn't travel with a passport - future pandemics, cybercrime now costing maybe the global society 2 to 3 trillion US dollars a year. 

We have seen that there has been a way of finding solutions on climate change between China and the US. Eventually they agreed in Paris, they agreed in Glasgow, they agreed now lately also at COP 28 in Dubai. And you're mentioning AI, artificial intelligence, that has a lot of upsides or can increase productivity. That means really prosperity. But also, without traffic rules, we can see autonomous weapons, we can see also that AI can be, almost have nuclear weapon power if it gets out of control. So there needs to be established traffic rules and those have to apply for all countries and not just a few. 

REMI ERIKSEN  

So we will talk about the changes that are impacting us today and going forward. But I just want to mention globalization, which was one of the biggest transformations in the early 2000s, you can say. And one that the World Economic Forum has been central to this topic. How do you see the struggle between globalization and what we now see more isolationism that we can see playing out quite drastically in some parts? 

 BØRGE BRENDE  

So let's first clarify what globalization did lead to. So from 1990 until today, we doubled the global GDP and we reduced the amount of people living in extreme poverty globally from 40% to 10%. So we had like a win-win approach. Not beggar your neighbor, but prosper your neighbor. You produced and then you competed and you had this way of comparative advantages. You bought from where you got the best and cheapest product. And that led to exceptional growth. That growth engine was driven by, the growth engine was trade. Trade grew much faster than the global GDP.  

Then of course during the pandemic we saw that the global value chains had to be adjusted not only just in time but also just in case. I think in some areas that makes perfect sense but if you evolve into new tariffs protectionism and also then a form of decoupling you will also see that it will have negative impact on growth. I think that we are still seeing growth in global trade, not as fast as in the past, but still growth. And the global growth is now around 3.1/3.2% this year. The trend growth was during the last decades higher. So the trend growth was closer to 4%. So if you go into a situation where you only French or you only buy stuff from people that you think are your friends, that can also shave off a lot of global growth,  and who are really your friends? So what I do hope is that we have a normalization, that we continue to trade, but globalization also has to be rethought. It has to be a re-globalization in the sense that also, wealth has to trickle down. And especially in some developed countries, we saw that globalization led to a lot of changes that did not necessarily benefit everyone. And the governments have to have policies for that. But now we are faced with a new challenge, the gen AI, and the whole artificial intelligence, I think, is going to change the way we produce, the way countries compete with each other, maybe even more than the internet and the platform economies and maybe at the level of electricity in the past. So the world is changing very rapidly. 

 REMI ERIKSEN  

Yeah. And this year, you can say 2024 is the election year for the world and an important, very important year in sense of democracy and the testing time for democracy, you can say. As we speak, you know, in April and there has already been some elections. Do you see any patterns emerging from what has happened?

BØRGE BRENDE  

So I think some democracies are being challenged. We see that there is a growth in parties at the far right and also at the far left. But I overall, though, also have seen that democracies have a strong way of getting through this.  

And look at Europe, that is the big comeback kid. In 2012, people were saying, oh, the Euro is almost gone, it's very weakened. Today, the euro is still the second most important currency in the world. Greece was almost bust, bankrupt in 2013. And now it's one of the fastest growing economies in Europe. 

But it is true that when there is immigration, there are challenges related to integration. We also see that there are high energy prices, there is inflation, cost of living is increasing. Democracies are being challenged and the leaders know that their policies to implement doesn't give results the first year or maybe not the second year, or maybe not even the third year, and then there is an election. So you have to make compromises. You have to do what is right, even if it is not what necessarily gives you gain in the opinion polls in the first month. So we are living in very challenging times, but also big, we are in a geopolitical recession. A geopolitical recession where we see the competition between the US and China is fierce. We're also seeing a war in the middle of Europe unfolding in Ukraine. It's terrible humanitarian sufferings and it's going to have long-term effects on Russia where we see a decline in the Russian economy.  

We also see challenges in the Middle East, in Gaza, that we also have to find solutions to. So it's a complicated world, geopolitically. Geoeconomically though, the global economy is doing better than expected. So we were even thinking there would be a recession in the US or a soft landing. And currently there is not even a landing. The economy is growing very, very well. 

 REMI ERIKSEN  

I would like us to talk a little bit more about AI, artificial intelligence, before we move into the energy transition. I had a good time attending the annual meeting at the World Economic Forum in Davos early this year, and artificial intelligence was high on the agenda and the debates were both related to the benefits and the dangers of AI. And you have been engaging in artificial intelligence on different platforms after the meeting, Børge. What is your view on the impact of AI? Will it be more positive or negative for the world?

 BØRGE BRENDE  

AI is there to stay and it's growing exponentially. So I think we just have to make the best out of it. And there are huge opportunities when it comes to artificial intelligence too. We can solve things that took a long time - mechanical work - before, we can use it when it comes to health in a very revolutionary way. We can also use it in many other areas. But it's going to replace some of the jobs of today. But we also have seen this before, you know, 100 years ago, 90% of the population also in Western Europe worked in the agriculture sector. Today it's 2-3%. And they go into industries and other areas where they're producing higher up in the value chain, and that's why we're more prosperous. So AI used in the right way can increase productivity, prosperity, so we can pay people better salaries because they will then go into new jobs and they will be created. So in that respect, I think it's a change that we have seen in the past, but every country needs to deal with it in a proactive way. And if you focus more on the glass half-empty than the glass half-full, you have a challenge.  

My main concern with AI is these killer robots, autonomous weapons. We see it can be installed in drones. It can get out of control for humans. And also algorithms that can produce trillions of trillions of either attacks or can get out of control, we will need to also follow the precautionary principle. And here today, it is like the Wild West. There is no real global regulations making sure that AI is used in the interest of humankind. That has to happen very soon. 

 REMI ERIKSEN  

Yeah, and we are studying the risk of AI in all of our sectors that we at DNV are involved in. And I think with a few exceptions only, we see that there is a strong desire from both governments and the industries to have more regulation. And you can say regulation could also slow down innovation and uptake, but it can also kind of accelerate it, because then you have a common trust basis for where to and how to deploy it. 

So what do you think? We have now the EU AI Act and we have the executive order in the US and we have also certain directions in China. So where do you see this is going? Will we see more regulation or will we see patterns of piecemeal work all over? 

 BØRGE BRENDE  

Maybe both, but I do hope that leaders, both in the US and China, see that it's in their interest to establish like a floor, making sure that this doesn't come out of control.  

You know, after Second World War, there was consensus that nuclear weapons, we would have to avoid any kind of proliferation. So there were very strict regulations and we complied with them for a long time. We didn't want to see a proliferation of nuclear weapons. I'm not comparing AI with nuclear weapons, but what I'm saying is that AI can be used for good stuff, but we also have to make sure that it is not getting as I said, out of control. So humans have to be in control of it.  

What I'm worried about is that, since there is such a fierce competition, I think the big nations of the world also knows that the most prosperous nations in the century will be those that are on top of these new technologies, being AI, machine learning, having access to big data, but using this also to get ahead on life sciences, biotech and etc. So then it can be tempting to say, oh, we don't regulate because then we will create more opportunities. But that will backfire seriously. And I think there is enough common sense about world leaders that they will say that we can compete, but we should compete also based on certain values. And this is what the World Economic Forum is also working on with our AI alliance where we are seeking to build more understanding on the opportunities, but also the threats that is coming from artificial intelligence. 

 REMI ERIKSEN  

Yeah, and we at DNV like to differentiate between where human is in the loop and where the human is not in the loop when it comes to the deployment of AI. And we just launched a recommended practice towards the end of last year, which looks at how you can demonstrate trustworthiness in AI-enabled systems, where you have more autonomous functions, where the human is not in the loop, and where the consequences are more in the high risk category. And hopefully this recommended practice can be used in a more worldwide setting and can actually accelerate the uptake and capture the benefits of AI much faster than without having a common way of demonstrating this trustworthiness. 

So let's move on to the energy transition. Our research shows that energy transition is fast. A lot of things is happening, but it's not fast enough to reach net zero by 2050. From the access you have to leaders in business and government, can you offer any optimism that the goals of the Paris Agreement will be met?

 BØRGE BRENDE   

I think we have no alternative, but it certainly doesn't look that we are on track for 1.5. So it's also, let me try to look at it from an optimistic, positive side. Before Paris, I think we were on the track to like a 4°C situation. After Paris, maybe we had agreed on measures to get down to three degrees. After Glasgow, I think we are now more on track for like 2.3 / 2.0. It's not good enough, but at least it's moving in the right direction. And what we have seen is an enormous growth in renewables, but also the price of renewables has in a decade fallen to one tenth. 

So solar now is the most competitive energy source many places in the world with zero then subsidies and the same with wind. But of course these renewables also have to be balanced in the system. You will also have to have for example hydro balancing it or other sources that are not depending on weather and etc.  

I think what the complexity here we have seen is that we are faced with the triangle. It's access to energy. Still seven, eight hundred million people that don't have access to basic electricity in the world. Then you have energy security. We saw that in Europe. Like we got all the natural like a lot of natural gas from Russia and from one day to another it decreased dramatically. So you have to have a diversification. And I think renewables is a good way because these are like what the Europeans said, they're freedom fuels, I think they said at the moment. And then the third thing is this decoupling. You have to have, except growth and energy, but it has to be decoupled from CO2 growth. And I think that is the hardest piece because we have had the industry revolution for more than 200 years and it was based on fossil fuel. And then moving away from fossil fuel to a totally non-fossil fuel future in a few years is extremely complicated. But I do see a lot of hopes. Where we are lingering the most is on coal. Coal is still extremely important for many emerging economies and they have a lot of coal. And we cannot reach a 1.5 without also decarbonization of coal or moving away from coal. 

 REMI ERIKSEN  

I agree with you, Børge, that there is an Armageddon between four degrees and two and hopefully one and a half degrees. So there has been a positive development on the trajectory. But at the same time, when we launched our energy transition outlook last year, we said that the energy transition has not really started yet, because if you look at the energy growth, the demand growth that is being met with roughly half renewable and half fossil fuels. So really the emissions are not coming down. So we cannot solve this just by adding more renewables. We have to also replace the add-ons we get from fossil fuels with even more renewables. So we cannot continue on the path we have because emissions have to come down and the only way to do that is to use less fossil fuels.

 BØRGE BRENDE  

Yeah. You're so right. Like last year, the emissions to meet 1.5 had to be globally, had to be reduced by almost 2%. And then the CO2 emission greenhouse gases increased by 7%. And that is due to what you just said, Remi, even if we saw a big uptake in the growth in renewables, overall energy demand increased, so half of it was met with increased use of fossil fuel. This is not sustainable. But we also have to move, we have to find like bridges here. There's a big difference between, of course, growth in coal to natural gas, you have carbon capture and storage, all the bridges that can be a builder, but we really have to see the changes have to happen much faster, a lot faster than we're seeing today. 

 REMI ERIKSEN  

And if you look at the energy system, we have one part that can be electrified where end demand can be electrified. And then there is one part that cannot be electrified. And the part that is being electrified today that you can easily green also with solar and wind and hydro and things like that. But the other part, then we're talking about hydrogen and hydrogen derivatives. We also need renewables, but you can say it's kind of indirect electric. 

And I think that part has been moving very slow compared to greening the electrical part of the power system. How do you at the World Economic Forum see how can we move faster on, you can say, the hard to decarbonize or the hard to electrify part of the energy system? 

 BØRGE BRENDE  

So you're right that the hard to abate sector is the tough ones. You know, with aviation, shipping, but also even more so, cement, fertilizers, aluminium, steel. There you will need to really go into either hydrogen, of course, nuclear can play a small role in this too.  

But what we have to remind ourselves about is that the cost of action, that the cost of inaction far exceeds the cost of action. So with climate change now happening, and we see it every day, it has a huge cost on agricultural production. We're also seeing it is really about livelihood. So we will need to incentivize the decarbonization process in those hard to abate sectors in a very, very different way. And that's why the World Economic Forum also has launched this first movers coalition that is about creating a demand for green technology that is not there today. So if the big purchasers say that in the future, we'll only buy greener fertilizers, greener cement, greener aluminium, greener steel, then they're also willing to pay for that. So it creates a demand that is not there today. I think that's one way of doing it. Of course, if there had been a willingness to agree on internalizing the externalities, like paying a real price for what climate change costs through a CO2 tax, then you would see these changes. But there is no way, it seems like, there can be a global consensus on that. That's why I think the purchasers also will play an important role. 

 REMI ERIKSEN  

And I think this initiative that you have here, the first movers coalition, is a great initiative that you have taken. And you're pointing to some very important thing that these fuels will cost more than what we traditionally have used. So these costs will be absorbed by someone. So who should be paying for this eight times the cost of green methanol for instance compared to diesel. Who should pay for that extra? 

 BØRGE BRENDE  

It's coming back to my observation that then there has to be a level playing field too. If you then produce by using coal and others are then having costs that are eight times as high, then the product that you're selling to the market will be also more expensive. But if you look at it in a macro perspective for the world, the more expensive product is cheaper if you internalize the externalities, the real costs of climate change. So there has to be a matrix that is developed there, that's also where you see the real price also reflected. But this gets into a very, very messy global discussion also between industrialized countries, developing countries, those that are also relying on production and also export of coal and heavy fossil fuel.  

So how to reach deals here? It's very, very complicated. But I think we also have to rely on the consumers. Would you be willing to pay a little bit more for aluminium or steel that is produced in a way that it doesn't then put our planet on fire? I think so. But it is probably the most complex transition we have gone through in our lifetime. That's why I said we have built our prosperity and industrial revolution on fossil fuel. And then we see that this has to change and it has to change much faster than we maybe thought it had to do. And to move from one way of then basing our energy to another one very fast is extremely costly, extremely complicated. The only thing we know that is even more costly not to do something. So this is in a dysfunctional geopolitical world doesn't make it easier. 

 REMI ERIKSEN  

No, it's a challenge because the cost of these externalities, they come at different points in time. They come into the future and they come in a different election period. So they are not in the same time window. So it makes it even more challenging.  

We're coming to the end of our podcast. We have discussed some big global challenges today and they might feel overwhelming for some, especially for the younger generation. What would you tell a young person who is beginning their career today? 

 BØRGE BRENDE  

That I'm still overall optimistic. As I said, we used to have 40% of the global population living in extreme poverty. Today it's 10%. We are faced with technological revolutions like AI that can even help on allocation of energy. If you use AI in a smart way I think you can maybe save 10% of emissions just to use energy smarter in the allocation of today. I think we are much better off than we were in the past. We see that people live longer, people do live better. 

There is also just look at COVID, the pandemic. We developed a vaccine that was effective in a year's time. This shows that when the world comes together, we put the right resources on things. We can also deal with these challenges. So I think it's great opportunities for the younger generation, but it is also faced with a much more complex geopolitical situation and also the social media world reality is very challenging because we know that we can even ask the question can democracy as we know it today survive unregulated social media. The algorithms are pushing people either to one direction or the other. We will need to figure out this and that we also have to have even better education, so you have to navigate in a way that you see what is fake news and what is for real. 

 REMI ERIKSEN  

And would you agree that if you should give one advice, you should look for a company or organization that has a purpose, that wants to achieve something for the world beyond maximizing profit?

BØRGE BRENDE   

Totally agree. And this is also a center of talentism. The companies that have the best human capital, the best talents, are also going to do really, really well. And I think the smartest brains also would like to work for companies that, of course, they should be profitable, but they should also have a purpose in the sense that they should also be also part of making the world a better place to live. At least that's an organization or company I would have liked to work for. 

REMI ERIKSEN  

Børge Brende, President of the World Economic Forum, thank you for joining me here today. 

BØRGE BRENDE  

Thank you for inviting me and again, congratulations on 160 years of anniversary. It's impressive. 

 REMI ERIKSEN  

Thank you. 

REMI ERIKSON  

You've been listening to Trust and transformations - leaders navigating change, a DNV podcast. Head to DNV.com to hear more episodes of Trust and transformations or subscribe on your favourite podcast platform so you'll never miss an episode. Thanks for listening.