KPMG Norway, through its alliance with Eurasia Group, hosted its annual Top 10 Geopolitical Risks event on 8 February. Eurasia Group’s Director for Europe Naz Masraff highlighted that a lack of global consensus underpinned the 2022 risks described in the leading risk consultancy’s flagship publication – with the US and China looking inwards to domestic issues and the COVID-19 pandemic continuing to disrupt global supply chains.
KPMG Norway focused on the three risks that it believes are the most relevant for Norwegian businesses.
Climate change and the energy supply crisis
Data from the International Energy Agency shows that Norway is not on track to meet its commitments under the Paris Agreement. While hydropower makes up the most of its domestic energy mix, and Norway has the highest number of electric vehicles per capita, Norway remains Western Europe’s leading fossil fuel producer. The oil and gas sector represented 15% of the country’s GDP in 2021, and the government recently awarded 53 oil licenses in mature fields.
The geopolitical backdrop to these shortcomings is complex. European consumers and industries have been hit by record electricity prices this winter. Much higher levels of investments in the renewables sector would be needed to match the continents’ energy demand. Europe’s energy supply has been at the heart of escalating tensions between the West and Russia in recent weeks, with the Nord Stream 2 pipeline suspended by Germany alongside sanctions announced by the US and its allies.
In 2022, companies have the opportunity to contribute to the implementation of Norway’s climate goals. They must first treat climate change as an operational and financial risk and understand how their businesses will be impacted if no decisive actions are taken. They should invest in the energy transition, including developing the wind and solar power sectors in a responsible way. They can also become leaders in reporting on climate-related measures and their greenhouse gas emissions – perhaps even leading the way on systematically reporting on scope 3 emissions.
Increasing public and regulatory demands
Norwegian businesses are facing mounting public expectations to address human rights abuses and governance challenges in their supply chains. In recent months, companies have been facing public criticism and high reputational risk for engaging with foreign companies involved in the Occupied Palestinian Territory, supporting sporting events in Qatar, or sourcing from the Xinjiang province in China.
Norwegian businesses will also face greater regulatory demands in the form of the Transparency Act, which will come into force on 1 July 2022. The act will require large companies to annually report on human rights violations in their supply chains, and document how they are working to mitigate any adverse impacts. The act will empower anyone to request information from relevant companies.
Consequently, businesses must build a robust corporate culture that is able to identify and mitigate any violations. Leadership should take an active role in building ethical supply chains. Greater transparency will present businesses with opportunities to strengthen public trust, and to attract socially - and environmentally - conscious employees.
Navigating an evolving digital space
A country where 8 out of 10 citizens uses social media daily, Norway has been a close partner of the European Union on matters related to digitalization. The European Council’s proposed regulation on big tech, antitrust issues, and content moderation is highly likely to impact the Norwegian digital landscape.
However, it is cybercrime and online fraud that are at the forefront of business leaders’ minds in 2022. The previous year saw an acceleration in cyber-attacks against a variety of actors, from municipalities to the Parliament, and from small businesses to large ones. Only strong collaboration between private and public actors will help stave off growing digital threats. Companies will also have to invest smartly in digital tools and capacities, ensuring that new and existing employees are up to date on combatting cybercrime.
Overall, 2022 will see companies needing to adapt to an increasing volatile geopolitical world. Constant dialogue with employees, consumers, regulators, and other public actors will help companies best understand and prepare for any change that lies ahead.