Sustainable and inclusive growth: A weekly briefing

Inclusive growth means lifting all, not just some. Our weekly digest of McKinsey insights explores that topic.

Sustainable and inclusive growth: Briefing note #7, August 4, 2022

This week, a trio of McKinsey pieces examined the challenge of creating growth that leaves no one behind. A report on race at work found that hourly frontline workers, such as waiters and employees of retail stores—who are disproportionately people of color—often perceive that they face limited paths for advancement and a general lack of fairness and inclusion. A discussion about the growing divide between urban and rural America focused on strategies to encourage entrepreneurship and innovation in sparsely populated communities. And a look at the state of apprenticeship touched on the perils of the “mini-me” mindset: leaders offer opportunities only to team members they find most similar to themselves. Elsewhere, a pair of articles about efforts to decarbonize transport looked at ways to encourage more travelers to choose passenger rail and more shipping carriers to green their operations.

More than 70 percent of frontline workers would like to be promoted by their companies, but only 4 percent actually graduate to corporate jobs. Senior partner Lareina Yee and coauthors encourage companies to enable a smoother path to the middle class by investing more in their frontline employees. Workers of color in frontline jobs frequently receive little if any sponsorship in their organizations and face too many obstacles in climbing the corporate ladder.

The COVID-19 pandemic exacerbated the already widening gulf between the fortunes of urban and rural America. Matt Dunne, the founder of the Center on Rural Innovation, spoke with Rachel Riley, of McKinsey’s Future of America podcast, about his belief that tech can help narrow the divide. Small-town America has 13 percent of the country’s workforce but only 5 percent of its math and computing jobs.

Apprenticeship is a valuable tool for retaining talent and building the skills of employees. But leaders must be mindful about who gets to apprentice—and who doesn’t. Lisa Christensen and Tony Gambell spoke to The McKinsey Podcast about the keys to a successful apprenticing relationship (one is that the expert should know when to “fade away”) and about the danger of succumbing to the mini-me bias: sometimes experts are tempted to work only with apprentices who remind them of themselves.

The transport sector, which accounted for roughly 21 percent of the world’s carbon emissions in 2020, is looking for ways to get greener. Senior partner Detlev Mohr and coauthors say that shippers and carriers could collaborate to create incentives for decarbonization. Among the suggestions: shippers could create contracts requiring logistics partners to set carbon reduction goals.

Passenger rail experienced a steep drop in ridership during the pandemic. Since rail is generally more sustainable than flying or driving, restoring rail’s share of passenger travel would aid decarbonization. Carsten Lotz and coauthors examine strategies that would help rail to differentiate itself—for instance, providing better service and denser travel networks.

Here are this week’s other notable findings from our research:

Our latest edition of Author Talks features Melissa Daimler, Udemy’s chief learning officer, speaking about her new book, ReCulturing: Design Your Company Culture to Connect with Strategy and Purpose for Lasting Success (McGraw-Hill, May 2022). In an interview with McKinsey Global Publishing’s Katherine Tam, Daimler advised leaders to prioritize organizational culture instead of dismissing it as “soft stuff.”

This briefing note, based on our latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.

Sustainable and inclusive growth: Briefing note #6, July 28, 2022

Could heat pumps save Europe—and the world? Our weekly digest of McKinsey insights explores the topic.

With Russia threatening to slash its natural-gas exports in coming months, Europe could face severe heating challenges in the winter. This week, McKinsey assessed the potential for electric heat pumps. With 2.2 to 4.5 times the efficiency of gas furnaces, heat pumps are an improving technology that might provide a heating alternative while also cutting carbon emissions. Meanwhile, McKinsey’s look at sustainability in the grocery sector suggested that grocers are uniquely positioned—as intermediaries between farmers and consumers—to push for decarbonization of the global food system. And an examination of B2B opportunities presented by the world’s shift away from fossil fuels advised companies to look for durable competitive advantages that could arise from the transition. Elsewhere, a continuing investigation of equity in US higher education found that very few institutions achieve both representational parity and above-average rates of completion for students from historically underrepresented populations.

Heat pumps provide an increasingly viable solution for electrifying both space- and water-heating systems in buildings. Blake Houghton, Evan Polymeneas, and coauthors note that with equipment and installation expenses falling—and natural-gas prices rising—heat pumps are in some cases approaching cost parity with fossil-fuel-generated heat. A McKinsey analysis predicts that heat pumps, which could substantially reduce buildings’ emissions (exhibit), might constitute 90 percent of new heating-unit sales by 2050.

Heat pumps powered by renewable energy could produce significantly lower emissions than other common heating methods.
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The food system accounts for more than 30 percent of global greenhouse-gas emissions. Most of these emissions, such as those resulting from farm operations, fall outside grocers’ direct control. But, according to Bartosz Jesse and coauthors, grocers can be a powerful force for decarbonization while saving costs and capturing value along the way.

The transition out of fossil fuels could require an average annual investment of roughly $9 trillion over the next three decades. Senior partner Georg Winkler and coauthors say the B2B companies that reap the most benefit from these changes will be those that play offense, making bold strategic decisions instead of merely avoiding risks.

Equity in higher education will require both better student representation from historically marginalized populations and improved efforts to help those students graduate. Senior partner Jonathan Law and coauthors used data to illustrate that few institutions get both parts of this equation right. Almost 20 percent of institutions have not made recent, meaningful progress on either dimension.

Here are other notable findings from our research this week:

  • The world faces an acute shortage of healthcare workers, exacerbated by the demands of aging populations and newly emerging pathogens. Senior partners Pooja Kumar and Matt Wilson and coauthors offer strategies to rebuild the talent pipeline.
  • A McKinsey survey on US summer travel found that leisure travel is booming—increasingly outstripping even levels seen before the onset of the COVID-19 pandemic. Ryan Mann and coauthors discovered that nearly 70 percent of travelers plan to take a summer vacation “no matter what.”
  • Governments could benefit from AI innovations in areas such as crisis response, education, and healthcare but often face barriers that prevent them from capturing AI’s full value. Senior partner Tom Isherwood and coauthors suggest useful ways for governments to ease the implementation of AI technology.
  • Senior partner Asutosh Padhi interviewed Alan Murray, CEO of Fortune Media and former head of the Pew Research Center, about the emerging social consciousness of business. Murray says stakeholder capitalism is sometimes just a PR ploy but, done right, can be deeply meaningful.

Our latest edition of Author Talks features former marketing executive Dalia Feldheim speaking about her new book, Dare to Lead like a Girl: How to Survive and Thrive in the Corporate Jungle (Rowman & Littlefield, June 2022). In an interview with McKinsey Global Publishing’s Raju Narisetti, Feldheim advised executives to incorporate more “feminine traits”—such as passion and intuition—into their leadership style.

This briefing note, based on our latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.

Sustainable and inclusive growth: Briefing note #5, July 21, 2022

Is net-zero aviation cleared for takeoff? Our weekly digest of McKinsey insights explores the topic.

The Farnborough International Airshow opened on Monday—amid sweltering UK temperatures—and one major theme among executives in attendance has been aviation’s climate impact. This week, a trio of McKinsey articles explored the quest to decarbonize the sector. A report found that aviation can achieve net-zero emissions by 2050 through accelerated focus on aircraft efficiency and sustainable fuel production. An examination of aircraft life cycles suggested that reducing non-fuel-related emissions—by devising greener manufacturing and maintenance operations—can also play a role. And a look at capital flows into future air mobility, or FAM (think electric flying cars), argued that funding, though slightly down this year, remains comparatively strong. Elsewhere: a McKinsey analysis of equity in higher education revealed that, for some historically marginalized groups, progress seems to have stalled.

The Making net-zero aviation possible report—created by an alliance of climate leaders, in conjunction with McKinsey—proposed scenarios for reaching net zero in the sector by 2050. Among the most promising levers for decarbonization are power-to-liquid approaches that convert electricity into sustainable, synthetic liquid fuels capable of running aircraft engines (exhibit). Axel Esqué and his coauthors estimate this technology could enter the market at a large scale by the late 2020s.

Global aviation can achieve net zero by 2050.
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Fuel-related emissions account for most of aviation’s climate impact, but a broader reckoning must also assess an aircraft’s full life cycle. A recent post on the Future Air Mobility blog suggests that aerospace companies moving to decarbonize their operations—manufacturing, assembly, maintenance—can play a part in emissions reduction. Sourcing low-carbon materials such as green aluminum will aid the effort.

Investment in the FAM industry slowed in the first half of 2022, but Robin Riedel and his coauthors say funding is still on pace with historical trends. FAM entrepreneurs are working on innovative airframe designs and propulsion systems. One of the more active investment areas concerns development of passenger electric vertical takeoff and landing vehicles (eVTOL)—sometimes referred to as “flying cars.”

Historically marginalized populations continue to be underrepresented in higher education. An analysis from senior partner Jonathan Law and his coauthors found that, if current trends persist, it could take 70 years for these groups to achieve full equity in student admissions. As for faculty: there was effectively no progress in representation between 2013 and 2020.

Here are other notable findings from our research this week:

Our latest edition of Author Talks features Stanford Graduate School of Business lecturer Susan Wilner Golden speaking about her new book, Stage (Not Age): How to Understand and Serve People over 60—the Fastest Growing, Most Dynamic Market in the World (Harvard Business Review Press, June 2022). In an interview with McKinsey Global Publishing’s Raju Narisetti, Golden explained that extended life spans are creating a “longevity economy.”

This briefing note, based on our latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.

Sustainable and inclusive growth: Briefing note #4, July 14, 2022

Assumptions about sustainability may not always align with data. Our weekly digest of McKinsey insights explores the topic.

Intuitions about sustainability can benefit from reality checks grounded in science. This week, McKinsey investigated the climate impact of plastic—a frequent environmental bugbear—and discovered that widespread assumptions about this oft-maligned material might warrant some reexamination. Likewise, an article looking at trends in luxury automobiles—another common target of climate criticism—suggested that electrification will come to dominate future premium car segments. Elsewhere, on the topic of inclusivity, discussions with healthcare and financial services executives explored strategies to boost everyone’s health and wealth, regardless of background.

In a McKinsey report on the climate impact of plastics, senior partners David Feber, Stefan Helmcke, Thomas Hundertmark, Chris Musso, and their coauthors found that, while plastics often catch criticism for contributing to marine pollution and general environmental toxicity, the full picture is more complicated. In some cases, plastics can reduce greenhouse-gas emissions when compared with alternative materials like paper, aluminum, or glass (exhibit).

Soft drink container US 2020 view: PET bottle has the lowest total greenhouse-gas contribution.
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The luxury automobile segment is expected to gain market share over the next decade. It’s also where much of the most exciting vehicle innovation is happening—including cutting-edge electrification technology. Senior partner Jan-Christoph Köstring and his coauthors found that affluent customers are increasingly willing to go electric when shopping for premium cars.

The zip codes we grow up in shouldn’t determine our health outcomes, yet too often still do. In the latest episode of the McKinsey on Healthcare podcast, Daniel E. Greenleaf, CEO of Modivcare—a healthcare services provider—spoke about how his personal background has inspired him to address ongoing disparities in health equity.

Closing the racial wealth gap could boost GDP in the United States by 5 percent annually. McKinsey brought together a group of financial services executives for a video conversation about how the industry can play its part in enabling economic mobility for all.

Here are other key findings from our research this week:

Our latest edition of Author Talks features former policy maker Justin Zorn and consultant Leigh Marz speaking about their new book: Golden: The Power of Silence in a World of Noise (Harper Wave, May 2022). Quieting our minds has never been more difficult—or more important.

This briefing note, based on our latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.

Sustainable and inclusive growth: Briefing note #3, July 7, 2022

Sustainable and inclusive growth is a global effort, happening locally. Our weekly digest of McKinsey insights explores the topic.

Achieving sustainable and inclusive growth can, and should, involve peering beyond our own backyards. This week, McKinsey zeroed in on a variety of global locales from which business insights are emerging. In Europe, consumer goods companies are discovering the potential of circularity. In Asia, an e-mobility ecosystem is growing—and creating opportunity. Africa is home to a fintech pioneer. Further articles include a multimedia look at the future of video entertainment in Hollywood, a survey of LGBTQ+ workplace experiences in the United States, and an examination of sustainable mining practices that could be implemented worldwide.

Consumer-packaged-goods companies have sometimes viewed circularity as a threat: How do you sell new goods if customers are buying the used versions? But, in fact, circularity presents growth opportunities. Senior partner Stefan Helmcke and his coauthors demonstrate that smart companies can capture value even as product life cycles are extended, with benefits for sustainability thrown into the bargain (exhibit).

By 2030, European  circular-economy product segments will grow at around 10 to 15 percent annually to reach around 400 million euros to 650 billion euros.
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E-mobility is gaining momentum in Asia, and there is growth to be captured for those who think in terms of ecosystems. Opportunity lies beyond the traditional auto industry frameworks. Senior partner Nimal Manuel and his coauthors suggest that both established firms and start-ups can grow by exploring novel relationships between technology, energy, and finance.

The popular African mobile-phone-based money service M-Pesa serves seven countries, with 50 million monthly active users. Its success has transformed lives: one study found that M-Pesa lifted 2 percent of Kenyan households out of poverty by encouraging healthier financial behavior. In the latest episode of McKinsey’s Talking Banking Matters podcast, M-Pesa’s managing director, Sitoyo Lopokoiyit, spoke about the vision driving one of Africa’s first fintechs.

McKinsey’s The Next Normal series aims its lens at the future of video entertainment. Discussions with experts from film, TV, and video games explore a push to democratize the tools of content creation and enable new, diverse voices to tell compelling stories for all audiences.

McKinsey research on “active allyship” in the workplace discovered, among other eye-opening data, that 45 percent of surveyed workers who identify as LGBTQ+ say they feel they must be careful about discussing their personal lives at work.

After years of underinvestment, mining is poised for transformation. McKinsey offers five key areas of focus for mining CEOs as they chart a future path. One suggestion: treat environmental, social, and governance (ESG) propositions as a source of value.

Here are other key findings from our research this week:

  • The latest McKinsey Global Survey on economic conditions tracks a dramatic shift in sentiment. Respondents from all corners of the world no longer suggest that geopolitical instability or the COVID-19 pandemic will be the biggest impediments to future growth. Inflation has become their number one concern for the year ahead.
  • Companies might strive for a unified culture but should accept that there are many varied paths to get there. When it comes to cultural transformation, the most effective business leaders are flexible and accommodating along the way.
  • Government leaders with good intentions often find themselves battling intransigent bureaucracies. Lessons from successful organizations can help make sure those leaders aren’t sabotaging themselves with self-defeating behaviors.
  • As demand shifts from gasoline to petrochemicals, refineries need to adapt by rethinking their operations.
  • Advertising is being transformed. Commerce media directly links ad impressions to consumer transactions, thereby improving targeting and delivering better experiences for consumers. It has the potential to generate more than $1.3 trillion of enterprise value in the United States alone.

Looking for more insights? McKinsey Global Publishing produces more than 40 newsletters on a broad range of topics. The Daily Read highlights one article per day that we think is worthy of special attention. Monthly Highlights is a summary of our top-performing articles from the past 30 days. And On Point makes a daily connection between top news stories and a published McKinsey insight.

This briefing note, based on our latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.

Sustainable and inclusive growth: Briefing note #2, June 30, 2022

Accelerating sustainable and inclusive growth is often a matter of mindset. Our weekly digest of McKinsey insights explores the topic.

We tend to think of achieving sustainable and inclusive growth as the challenge of building new technology or retrofitting the physical world around us. But this week, McKinsey explored how sometimes the crucial step is developing a fresh mindset. Our research on how many Americans work from home reveals a sea change in what it means to have a job. Articles about meeting the psychological needs of all workers, improving wealth management for women, decarbonizing real estate, and pursuing global cooperation highlight how changing the way we think about people and institutions can be the key to growth.

The third edition of McKinsey’s American Opportunity Survey provides the data on how flexible work fits into the lives of workers in the United States. The most striking figure from this research is 58 percent: the number of Americans who reported having the opportunity to work from home at least one day a week (exhibit). When workers are offered flexibility, 87 percent choose to work from home at least part of the time. Senior partners André Dua, Kweilin Ellingrud, and Robert Palter and their coauthors reveal that employees’ mindsets about work have clearly changed. Now it’s up to employers to think creatively about how to satisfy workers’ desire for flexibility in ways that strengthen diversity, innovation, and productivity.

Of job holders in the United States, 58 percent—the equivalent of 92 million people—say they can work remotely at least part of the time.
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Many leaders mistakenly believe that only other professionals who have enjoyed similar success truly value the nonfinancial aspects of their work. That is simply not true, yet data show that the psychological needs of lower-earning workers are typically going unmet, far more often than is the case for higher earners. Our novel data and analysis illustrate the premium placed by all workers on psychologically satisfying work and how business leaders can respond.

Women investors now control roughly a third of total assets under management in Western Europe, valued at some €4.6 trillion. By 2030, women’s share of investments is expected to reach a total of €10 trillion. Senior partners Cristina Catania and Martin Huber and their fellow authors explore how women investors differ from men and what financial institutions should do to better serve them.

On March 21, 2022, the US Securities and Exchange Commission proposed a climate-related disclosure rule for investors. Whatever the final outcome, the proposed regulation signals a new era for how real-estate players think about their industry and climate change. Industry players are becoming aware that they need to measure their Scopes 1 and 2 greenhouse-gas emissions, work on decarbonizing buildings, and offer tenants and other stakeholders ways to reduce emissions.

The global economic landscape offers plenty to worry about, including the war in Ukraine, the difficulty of the net-zero transition, and inflation. But don’t assume that things are impossible, counsels Jean Pisani-Ferry, senior fellow at the European think tank Bruegel and professor of economics with Sciences Po in Paris. In an interview with Janet Bush and Michael Chui, executive editor and partner, respectively, at the McKinsey Global Institute, Pisani-Ferry examines nuanced ways to look at the trade-offs presented by global challenges.

Here are other key findings from our research this week:

Our latest edition of Author Talks features Marcus Buckingham, a business consultant and motivational speaker, speaking about his new book: Love + Work: How to Find What You Love, Love What You Do, and Do It for the Rest of Your Life (Harvard Business Review Press, April 2022). Employees who find teams, projects, and situations to love tend to be highly successful.

This briefing note, based on our latest published insights, was prepared by Katy McLaughlin, a senior editor in McKinsey’s Southern California office.

Sustainable and inclusive growth: Briefing note #1, June 23, 2022

A new era is possible—one that sees growth and societal benefits as complementary goals that reinforce each other. Our weekly digest of McKinsey insights explores the topic.

For over two years, this compendium of McKinsey’s latest research focused on COVID-19’s implications for business. While our pandemic-related insights will continue, we are pivoting our summary of the week’s publishing to a new topic of similar urgency and complexity: how to achieve sustainable and inclusive growth (SIG). This regular briefing, curated by McKinsey Global Publishing editors, will highlight our most recent perspectives on how companies, organizations, and society can view growth and societal benefits not as conflicting goals but as equal imperatives for holistic impact.

We are launching the “SIG briefing note” on the heels of McKinsey’s 2021 ESG Report, which provides a multifaceted view of our approach to environmental, social, and governance imperatives. Before we ask other organizations to examine themselves for ways to improve, we must ask the same of ourselves. In this report, we share our decarbonization efforts, progress on diversity and inclusion, sustainable procurement, and other cornerstones of ESG. Case studies highlight companies that have successfully merged growth with what in another era might have been considered “social missions.” The report explains why it is no longer helpful to look at social missions as separate from traditional corporate growth and profitability goals; instead, a SIG mindset sees addressing a broader array of stakeholders’ needs as part and parcel of growth.

At McKinsey, we believe the future belongs to those who can drive growth that is both sustainable and inclusive—and we are working with purpose, on issues from decarbonization to diversity, in order to make that future a reality.

Bob Sternfels, Global Managing Partner, McKinsey & Company

Getting to net zero will depend on building green businesses to produce the technologies, materials, and systems the transition requires. Like the digital leaders of our time, successful green business builders have been adept at creating and shaping markets rather than spectating and waiting for the markets to appear, and they have embraced the notion of accelerated scaling. Senior partners Rob Bland and Tomas Nauclér and partner Anna Granskog highlight promising innovations and best practices.

Car manufacturers should look beyond the tailpipe to deliver greener cars. Industry players can capture carbon and cost savings by scrutinizing the end-to-end manufacturing value chain. More environmentally friendly cars at a lower per-unit cost will depend on moves including redesigning components, implementing circularity to decrease waste, and making design shifts to reduce the amount of raw material required. Collaboration with suppliers and R&D are key enablers of both the commercial and technical aspects of the implementation strategy.

Nearly all European flat-steel players have announced plans to gradually decarbonize production processes for the sheets and plates used by the automotive, machinery, and construction industries. For many of the newly built plants, the initial intention was to use natural gas for parts of the process. Now, rising natural-gas and electricity prices, as well as potential limitations on the natural-gas supply, are forcing reconsideration. McKinsey’s analysis of how to safeguard the green-steel industry suggests four scenarios for how the situation may play out, two of which represent the most viable courses of action.

Strengthening Black-owned businesses can accelerate inclusive growth. Twenty percent of Black Americans start businesses, but only 4 percent of these businesses survive the start-up stage. On the Future of America podcast, McKinsey senior partner Tiffany Burns and associate partner Tyler Harris discuss challenges Black entrepreneurs face. One key sticking point: a lack of contacts, mentors, and a network that can be crucial for building beyond the “great idea” phase.

Here are other key findings from our research this week:

  • Edtech start-ups raised record amounts of venture capital in 2020 and 2021, and market valuations for bigger players soared. To learn how edtech is being adopted in higher education, McKinsey surveyed over 1,400 students, faculty, and experts at US public and private nonprofit colleges and universities. Senior partner Varun Marya and his coauthors share which learning tools have the highest uptake, how students and educators view them, the barriers to higher adoption, and the notable impacts on learning.
  • Organizations can prepare for compliance with new US cybersecurity regulations by following a three-step approach for readiness, response, and remediation.
  • The McKinsey Quarterly interviewed entrepreneur Marc Andreessen about Silicon Valley’s past and future. He advises companies to identify their smartest technologists—and make them the leaders.
  • Three new factors have emerged as critical to capturing value from digital transformations. They include the development of proprietary assets, the use of digital tech to achieve strategic differentiation on customer engagement, and a focus on attracting and developing tech-savvy executives.

Our latest edition of Author Talks features Daniel Coyle discussing his new book, The Culture Playbook: 60 Highly Effective Actions to Help Your Group Succeed (Bantam Books, May 2022). Coyle, an adviser to Google, Microsoft, and the Navy SEALs, shares methods that allow teams to connect over goals and a common purpose. Companies should not rely on people being “a good culture fit,” which can lead to homogeneity, but instead should look for ways employees can bond, including by sharing their vulnerabilities.

Also in Author Talks, Julien and Kiersten Saunders, creators of the blog rich & REGULAR, discuss their new book, Cashing Out: Win the Wealth Game by Walking Away (Portfolio, June 2022). The authors say the FIRE movement—which stands for “financial independence/retire early”—is lesser known in communities of color, where there may be fewer role models of people who have successfully “cashed out.” Learning to eschew lifestyle inflation, to save, and to invest are key to financial independence.

This briefing note, based on our latest published insights, was prepared by Katy McLaughlin, a senior editor in McKinsey’s Southern California office.

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