The security, efficiency and cost of both digital and physical infrastructure are the backbone of Switzerland’s economic and social development. COVID-19 has thrown into focus the importance of a modern, forward-thinking, functional infrastructure, particularly in the areas of digital communications, energy supply and smart initiatives. To drive digitalisation, develop its infrastructure and broaden and secure its energy supply Switzerland needs to create the conditions that promote innovation for tomorrow’s world. Government incentives to create smart cities and smart farming enable the benefits of digitalisation to be experienced by all, help to mitigate climate change and boost sustainability. Research into and development of climate-friendly products, systems and processes can give a small, export-oriented country like Switzerland effective means to combat climate change.

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Here are what policymakers and businesses need to do to help Switzerland modernise its infrastructure, broaden and secure its energy supply and power up its sustainability credentials in the future.

Policymakers

    Achieve the Paris Climate Agreement targets and encourage further international negotiations

    Achieve the Paris Climate Agreement targets and encourage further international negotiations

    When it ratified the Paris Climate Agreement in 2017, Switzerland set itself the target of a 50% reduction in its greenhouse gas emissions by 2030 compared with 1990 levels. Its CO2 Act actually goes further, requiring Switzerland to reduce its net carbon emissions to zero by 2050. The Swiss Federal Council’s vision is that most of this reduction should take place within the country’s borders and focus primarily on making buildings sustainable and private transport more environmentally friendly.

    Alongside developing new sustainability strategies at national level, it will be important for Switzerland as a strong but politically neutral economy to use its diplomatic clout to help achieve global climate goals and encourage new initiatives. The fact that a leading economy like the US has decided to opt out of the Paris Climate Agreement makes it even more important that other countries step forward to drive the sustainability agenda. Despite being a small country, Switzerland can exert a substantial influence in international negotiations on climate change.

    The international community would surely welcome Switzerland taking a more proactive role – one which could contribute more to the work of international bodies. International declarations and guidelines, such as the UN’s 17 Sustainable Development Goals, the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the UN Global Compact (an initiative on sustainable and responsible corporate governance) could provide Switzerland with a helpful framework.

    Promote research into and development of sustainable smart technologies

    Promote research into and development of sustainable smart technologies

    Research into and development of climate-friendly products, systems and processes can give a small, export-oriented country like Switzerland an effective means to combat climate change. And the whole world would benefit from access to Swiss solutions: a multiplier effect that suggests such research should be stepped up. Such research also forms the basis for technical innovation that can be applied in practice. Governments do not normally take responsibility for research and development of innovative technologies but they can influence the framework within which it takes place and, indirectly, help support industrial development.

    Pressing issues such as climate change are not a reason for the state to formulate industrial policy but countries should ensure that they support basic research and, in some specific cases, pilot projects. One priority in Switzerland would be authorisations: licences permitting, for example, the testing under real-life conditions of a smart grid for electricity. Communicative networking and management of components of the electricity supply system will ensure the system operates more efficiently and safely.

    However, the Intergovernmental Panel on Climate Change (IPCC) has made it clear that the far-reaching changes needed to achieve the Paris Climate Agreement go beyond electricity generation: action is also needed in key areas such as transport, agriculture, industrial processes and urban infrastructure. It would be possible to envisage government incentives to create smart homes, smart cities and smart farming, enabling the benefits of digitalisation to be rolled out. This would improve energy efficiency in homes, towns and cities, on the roads and in the countryside, helping to mitigate climate change and boosting sustainability.

    Develop a clear vision of Switzerland as a sustainability hub

    Develop a clear vision of Switzerland as a sustainability hub

    The government must develop an overarching vision of Switzerland as a sustainability hub – a conceptual umbrella for all sustainability projects that brings together individual measures with a clearly defined set of goals. Specifically, the state could support companies and academic research institutes through improvements to the regulatory framework, including tax incentives, measures to promote academic clusters, and arrangements that make cooperation between universities, universities of applied sciences and business more attractive. One model for this could be ‘Crypto Valley’ in the Swiss town of Zug, which is based on the US’s Silicon Valley and illustrates how attractive conditions, including lighter regulation and tax breaks for entrepreneurs, talents and investors have created an internationally recognised cluster in the area of blockchain technology.

    Switzerland also has the potential to play a leading role in developing sustainable technology. Building on its excellent reputation internationally, it is in a strong position to promote sustainable projects and processes. Switzerland can do this in much the same way as companies communicate their activities, tools and commitment to the outside world, thereby boosting their own attractiveness.

    Ensure first-class physical and digital infrastructure and guarantee energy security

    Ensure first-class physical and digital infrastructure and guarantee energy security

    Compared to most countries Switzerland performs very well on many infrastructure indicators. But infrastructure needs to be continually updated. To support digitalisation, develop its infrastructure and broaden its energy supply, Switzerland should create the conditions that promote innovation for tomorrow’s world. These conditions need to be framed openly, to be scalable and flexible and help shorten innovation cycles. This has worked well in the fintech sector, for example, including through light-touch regulation for smaller companies.

    Measures are also needed to tackle the issue of monopolistic providers. Depending on a single provider or very few providers poses a number of risks, including cyber attacks on energy supply.

    Energy security must be given greater priority. The COVID-19 crisis has shown that many countries meet their own needs first, as was the case with face masks and drugs, for example. Much the same is also likely to apply in electricity supply. Ensuring security of supply therefore means avoiding over-dependency on foreign producers. However, the aim should not be complete self-sufficiency. Instead, Switzerland should generate more electricity itself, especially in the winter months, to make up for the shortfall resulting from its new ‘Energy Strategy 2050’, which among other things means no new nuclear power plants are being constructed. A reliable assessment is needed of the technologies required to achieve this and the costs involved. This assessment must reflect the latest technological developments and be completely objective. And it must not exclude any specific technology – including nuclear power. Which solution is eventually adopted will, however, be a political decision.

    Make packages of measures more specific and clarify how all the targets in Switzerland’s ‘Energy Strategy 2050’ can be achieved

    Make packages of measures more specific and clarify how all the targets in Switzerland’s ‘Energy Strategy 2050’ can be achieved

    To make Switzerland’s energy supply gradually more environmentally friendly and sustainable, the Federal Council has adopted ‘Energy Strategy 2050’. The strategy also aims to cut energy consumption, increase efficiency and promote the use of renewables. It includes a number of measures, including introduction of a network supplement, the gradual transition out of nuclear power and the roll-out of smart meters and other intelligent tools to manage and regulate energy consumption. The state should now specify further packages of measures and accelerate the processes needed to put them in place.

    The conflict between the goal of an effective and successful national energy supply and reducing the population’s energy consumption must also be confronted. It would probably be easier to reduce consumption by means of higher prices, which create incentives to save electricity. However, this would have a negative impact on Switzerland’s economic competitiveness, not least in the manufacturing sector, which already faces significant challenges as a result of the strong Swiss Franc and the COVID-19 crisis. Politicians must therefore decide which goal they favour: providing energy competitively within the country or reducing consumption.

    It is also important that the goals of the energy strategy can be achieved using existing measures. Offsetting the impact of the decision not to build new nuclear plants requires reliable and environmentally-friendly alternatives, which will be a major challenge. Over the past 50 years, Switzerland’s strategy, a combination of non-hydro and carbon-free nuclear power generation, has served the country very well. Importing electricity from Germany and Poland that has been generated in a lignite-fired power station would make a mockery of the new energy strategy. The Swiss Federal Electricity Commission has questioned whether the measures adopted so far will ensure security of supply once nuclear plants are decommissioned. During the winter months in particular, bottlenecks are much more likely because of Switzerland’s high dependency on imported energy. Neighbouring countries are also less able to export electricity because production is less controllable, posing a further risk. Switzerland therefore first needs to define how much of its requirement for energy it can generate itself – and not just over the course of a whole year but also over short periods. Second, it needs to make further adjustments to the current measures to guarantee security of supply and achieve the other targets set out in the energy strategy.

    Accelerate the roll-out of new technologies

    Accelerate the roll-out of new technologies

    The International Energy Agency estimates that towns and cities are responsible for 70% of global greenhouse gas emissions and 70% of global energy consumption. Adaptation of urban infrastructure can therefore be a very effective means of pursuing sustainable economic goals. Projects on smart cities and dynamic pricing for public transport offer huge potential, which the state should use to boost efficiency.

    The necessary technologies and networking (employing the Internet of Things) require a high-quality data network. If Switzerland is to remain competitive in the field of digital innovation, it should be open to new technologies such as 5G, albeit with due consideration of potential minor health risks. After a successful risk analysis, these technologies must then be rolled out as rapidly as possible and not delayed unnecessarily as a result of bureaucratic processes.

Business

    Define sustainability and formulate a clear strategy

    Define sustainability and formulate a clear strategy

    To be able to operate sustainably, companies need to define what ‘sustainability’ actually means in a business context. They need to formulate a clear strategy as the basis for specific measures and measurable targets, which should be incorporated into the incentive and evaluation systems of decision-makers and make achieving these targets part of relevant reference values. Ultimately, sustainability means companies taking responsibility for their employment, environmental and economic impacts on society. Incentives for investing in and financing sustainable companies and projects can be seen as a crucial lever to achieve objectives, but it is also important that companies’ profits are themselves earned in an environmentally and socially sustainable way.

    Consistent integration of sustainability into individual company’s business activities, products and services is absolutely crucial, and those that see corporate social responsibility (CSR) as marginal to their business model and core business processes are falling short. Sustainability should not be something that can simply be tacked on to a company’s core business. Many of the areas associated with it, such as health and safety at work, employee satisfaction, diversity, energy efficiency and minimum standards in supply chains, underpin commercial success. The benefits for committing to sustainable ways of doing business include more efficient use of resources, a healthier and better motivated workforce, more extensive risk management, an enhanced corporate image and greater attractiveness to foreign investors.

    Integrate sustainability aspects in supply chain management

    Integrate sustainability aspects in supply chain management

    Sustainable supply chain management requires separate scrutiny of each individual area of activity, from procurement and suppliers to the value chain and – of course – the product itself. In particular, managing supply chains sustainably means ensuring sustainable procurement processes and including sustainability criteria in the selection and evaluation of suppliers. The adjustments companies are currently making to their supply chains as a result of COVID-19 should include filling gaps in such criteria, and there is evidence that the current situation has brought about improvements in both supply chains and sustainability. For example, local suppliers generate fewer emissions because they do not have to transport goods so far. Criteria like these may range from documented environmental management systems to detailed requirements in areas such as waste and recycling, climate change mitigation or the use of chemicals.

    Skills development and training for suppliers through workshops and discussions is also important, as is local monitoring of compliance with social and environmental standards. ‘Product chain certificates’ that are currently applied to timber, paper and cotton goods can help companies monitor sustainability across the entire value chain, from raw materials to end-product. And many companies still have scope to optimise the end-product itself, for example by using environmentally friendly packaging or halting the use of certain materials and chemicals, such as coatings, PVCs and plasticisers. Product innovation can also reduce pollution across the value chain whilst at the same time opening up new markets and groups of customers.

    Create supply chain transparency to enhance risk management effectiveness

    Create supply chain transparency to enhance risk management effectiveness

    More and more consumers are now demanding traceability, sustainability and transparency in supply chains. Increasingly, they are basing their purchasing decisions on information about manufacturers and their suppliers and will switch brands if companies do not comply with sustainability criteria. They see companies as responsible for their entire supply chain, both pre- and post-purchase, and believe they should be held accountable for any unsustainable behaviour by their suppliers. Many are also now willing to pay more for products with completely transparent and sustainable supply chains, from production of raw materials right through to the handling of waste. This means that businesses need to create greater transparency around the use of their products and the sources of the necessary raw materials.

    Many find it difficult to achieve this transparency, however. A Deloitte study shows that a majority of directors of purchasing have only a limited overview of their supply chains – and in some cases no overview at all. The traceability of flows of goods and services poses these individuals and their companies with an almost insuperable technological challenge: among other things, product ranges may comprise several thousand components, each of which has to be audited for sustainability.

    Modern technologies including blockchain and artificial intelligence (AI) can help to ensure seamless and transparent tracking across entire production and logistics chains in real time. They can also substantially improve supply chain transparency and accelerate the compilation and processing of data, minimising product liability risks and enhancing companies’ reputation.

    Make use of potential for digitalisation at all levels

    Make use of potential for digitalisation at all levels

    Digitalising and automating business processes offers further potential for companies to conduct business in a more sustainable way. In particular this involves standardising and harmonising business processes from the front end (consumers) to the back end (suppliers). An end-to-end business process includes all activities essential to fulfil internal or external requirements of goods and services, from manufacture through to delivery. Many different models have been devised to illustrate the structure of such processes, including make-to-stock (M2S) and make-to-order (M2O), engineer-to-order (E2O), purchase-to-pay (P2P) and order-to-cash (O2C), buy-to-scrap (B2S), hire-to-retire (H2R), and record-to-report (R2R). All these models can help cut internal operating and process costs and boost sustainability – provided the company has an agile and consistent model for data compilation and analysis as the basis for new digital services and forms of production. Here, Swiss companies still have some way to go.

    Provide employees with a mobility budget

    Provide employees with a mobility budget

    To reduce the number of private cars on the roads, companies could replace company cars with individual mobility budgets that employees could ‘spend’ on alternative modes of transport. This would make employee mobility both more sustainable and more flexible. Individuals travelling for work would be free to use their mobility budget for public transport, such as buses and trains, car-sharing schemes, e-bikes, taxis or other solutions. This kind of budget is particularly popular with younger employees, as it is flexible and offers different modes of transport for different situations, moods and tastes. In any case, many employees no longer see having a company car as a status symbol. For companies, meanwhile, mobility budgets mean they can reduce the size of their fleet and invest the money freed up in more CO2-neutral vehicles. Ultimately, a measure of this kind may also enhance a company’s reputation and make it more attractive as an employer, particularly among younger age groups.

    Put cyber security measures in place to protect critical infrastructure

    Put cyber security measures in place to protect critical infrastructure

    There has been a rise in cyber crime during the pandemic, with individuals working from home particularly targeted. This demonstrates the substantial risk that IT structures face both nationally and at the individual business level. However, this affects not only employees working from home but also the entire critical energy, telecommunications and transport infrastructure, which is at risk from hacking. The ongoing digitalisation of these sectors makes it essential that additional measures are taken to manage cyber risk.

    As cyber threats increase, it is important that companies continually update their staff, train them in handling sensitive data and remind them of the company’s code of conduct for handling data security. Cyber-security experts must be involved from the outset in developing new systems so that they can identify weakne ses at an early stage. They also need continually to monitor, identify and assess cyber risks, as new participants join and ecosystems change constantly. It is not just supply systems as a whole that are at risk. The many individual components that may be part of a critical infrastructure network, but do not have their own integrated security measures, are also vulnerable. It is therefore increasingly important for companies to look at these individual components, pool skills to deflect attacks, and embark on wide-ranging alliances to ensure the security of critical infrastructure.

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Contacts

Marcel Meyer
Marcel Meyer

Partner

+41 58 279 7356

Philipp Roth
Philipp Roth

Partner

+41 58 279 6049

Chris Tattersall
Chris Tattersall

Partner

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