Postcard from the OECD World Forum, South Korea

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This week I am attending the OECD World Forum on ‘the Future of Well-Being: Statistics, Knowledge and Policy’, as a guest of the OECD.

This year was the sixth annual World Forum but the first Forum at which private sector representatives and business leaders were invited as speakers and panel participants. In addition to myself, I saw and heard from representatives of other countries’ business associations, the big consulting firms and a handful of multinationals and tech-related start-ups.

This year’s OECD World Forum is examining three key trends that will have an impact people’s well-being in the next ten to 20 years:

  1. the digital transformation;
  2. the changing role of governance; and
  3. the role of the private sector in influencing well-being.

With many sessions running concurrently, i have tried to attend the presentations and discussions about digital technologies and the role of the private sector in shaping community well-being.

This Blog is about the Role of the Private Sector. It will be followed by a separate Blog on the impact of digital technologies on current and future well-being.

But first some basics: The Organisation for Economic Development (OECD) is essentially an international club for advanced economies. The Governments of these countries are its members. It conducts research to help inform economies, communities, policy and development across its member countries. It compares countries, looks for ‘best practice’ examples across governments, NGOs and the private sector and makes (very stern) policy recommendations and pronouncements.

Why is the OECD so interested in ‘well-being’? And what are they doing about it? This is all part of the OECD’s desire to push the world ‘beyond GDP’, in terms of how and why we develop economic policy, globally, nationally and locally. That is, what else should we aim for, apart from economic growth? Since the OECD is essentially a research and statistics organisation, their starting point is to see what can be measured, and what can be constructed from the available data.

So far, the OECD has developed a set of national indicators and constructed them into the Better Life Index (BLI), published annually in its reports How’s Life? And Beyond GDP. The OECD has also developed a World Happiness Index, although this is less directly relevant to this Forum or to economics data and the role of business. Economics is the ‘dismal science’ after all!

South Korea: blending the old and the new

South Korea: blending the old and the new

This year’s Forum is being held in Incheon South Korea because South Korea was the first major economy to develop and regularly publish a (monthly) national well-being index to supplement the usual economics data and metrics. Over the past decade, this has become the most widely anticipated release by the Korean Office of Statistics (KOSTAT), second only to the monthly employment data but eclipsing the GDP data for local media interest. KOSTAT is hosting this Forum, in conjunction with Incheon National University and other Korean Government agencies.

As an aside – and somewhat depressingly – South Korea’s KOSTAT Director confessed that South Korea ranks 35 out of 37 countries in the OECD for work-life balance and has low scores for other employment-related measures, mainly because of its very long average work hours and very rigid employment system. Flexible work hours and working from home are a long way off, when the full-time work week is still around 52 hours per week for many workers. The Government has just legislated 52 hours as a maximum. At the same time, South Korea’s birthrate has fallen to 0.9 births per woman, which is well below replacement level. These two trends are acknowledged to be not unrelated. For the environment, South Korea publishes live online daily air quality readings for all major urban areas. On the days that I have been in Incheon, so far only one day has been above the recommended air particle level. Apparently the air is pretty good for autumn this year.

New Zealand is now taking a similar path to South Korea, albeit for different reasons. Its Treasury is developing and implementing its own ‘Living Standards Framework’ for regular Government reporting, which is a simplified version of the OECD’s BLI combined with the OECD framework for sustainable development (simplified down to just 100 indicators of current and future well-being, that is!). Canada and other countries are also working through a similar process.

Eventually, all of this work may see GDP knocked off its perch as the top economic indicator for each country, in favour of living standards indexes. This is about as exciting as international statistics gets!

Renowned American Economist Prof Jeffrey Sachs of Columbia University addresses the Forum

Renowned American Economist Prof Jeffrey Sachs of Columbia University addresses the Forum

Why does well-being analysis matter to business? In short, plans are afoot to extend this type of well-being measurement, reporting and evaluation to business and industry. Why? Because businesses and workplaces are central to how we all live and work, so they are central to community well-being. Benefits to businesses that undertake this type of well-being audit and management were said by various speakers (including Professor Joseph Stiglitz of Columbia University and Ms Malin Ripa of Volvo Trucks) to include:

  • Protect and build brand value for shareholders and business owners;
  • Shift the focus of shareholders and owners from short-term profits to long-term sustainability, innovation and growth;
  • Improve staff retention, staff contributions and ultimately staff productivity;
  • Establish your ‘licence to operate’ among consumers and communities (particularly important in the current environment of extremely low trust in governments and corporations globally);
  • Differentiate your product, and ensure it is sustainable in the long-term;
  • Contribute to the ‘health’ of the market of consumers and therefore to the health of the business operating environment; and
  • Get a head start on ‘future-proofing’ their business by identifying internal and external non-financial issues before they become financially measurable problems or impediments.

The benefits to individual businesses of this type of measuring and reporting are becoming more apparent, particularly in light of the data collection and analysis that is being enabled by the digital revolution and ‘big data’ capabilities (more on those topics in the next Blog).

Prof Rudolph Durrand of the Agencie Paris Business School (an executive MBA program) claimed his research demonstrates that businesses that implement some type of well-being focus have gained:

  • 3% to 5% price premium on their products over competitor products (for products sold to consumers rather than those sold to other businesses);
  • Better employee retention, reduced staff turnover and reduced absenteeism; and
  • Better rates of successful R&D activity, innovation and product development.

What would well-being reporting for businesses look like? The consensus of this conference was that the BLI and related systems are too complex and detailed for business purposes and not all of the indicators would, in any case, be relevant (e.g. measures of healthcare access, community safety or loneliness). Instead, several speakers proposed a simplified set of indicators based on the UN’s Sustainable Development Goals (SDGs). For businesses, these SDGs look a lot like an extended re-mix of ‘triple bottom line’ reporting. They include a mix of financial and non-financial reporting metrics. The key is to come up with a consistent comparable set of measures for all businesses, so that businesses (and others) can use the results to compare, benchmark and identify best practice examples. Transparency is paramount, but it is inevitable that some data will always need to be kept in house for commercial reasons. Even when not released, the process will still have value to the businesses that undertake it.

For some businesses, well-being analysis will cross over with supply chain analysis that is already being undertaken for other reasons. Supply chains are becoming increasingly complex and global, so the risks attached to them require more research and analysis than may have been required in the past. A well-being framework can assist by identifying the ‘soft’ or non-financial risks that may be lurking in a company’s supply chain. This seems especially relevant to businesses operating in jurisdictions that are implementing legislation to address modern slavery, worker exploitation, illegal logging and other global socio-economic and environmental concerns.

Where to from here?

The OECD is now consulting businesses directly, through its Business and Industry Advisory Council and through the G20/B20 process to develop a business well-being analysis framework that it has dubbed ‘Business for Inclusive Growth’ (B4IG). This is initially based on the G20 principles of governance and due diligence and will be refined and modified over time. A prototype is currently available for testing and comment on the OECD website.

Eventually it is hoped that B4IG will evolve into a standard tool for business, at least for those who are large enough to access and undertake it. One speaker said they wish to see “well-being reporting become as ubiquitous and routine as financial reporting” for larger listed companies. Other, smaller versions will need to be developed for medium and smaller businesses, but this is even further away.

Ai Group will continue to explore how we can contribute to this development process and how we can maximise the value of a global ‘well-being’ management framework for Australian businesses.

How will digital transformation affect people's well-being over the coming ten to 20 years?

How will digital transformation affect people’s well-being over the coming ten to 20 years?

A handy list of acronyms

OECD     Organisation for Economics Development

BIAC      Business and Industry Advisory Council to the OECD

BLI          Better Living Index

SDG       Sustainable Development Goals

CSR        Corporate Social Responsibility

CPR        Corporate Political Responsibility

UN         United Nations

ILO         International Labor Organisation

NGO      Non Government Organisation

SME       Small and medium size enterprises

For more information go to: https://www.oecd-6wf.go.kr/eng/info/overview/overview.do

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Julie Toth
Julie heads the Australian Industry Group’s economics team, producing economics research, comment and policy advice for Ai Group and its members. She is also: Adjunct Professor of Economics and advisory board member at Deakin University; panel member of the Melbourne Economic Forum at the University of Melbourne; and a member of the National Economic Policy Panel of the Economics Society of Australia.

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