The return of geopolitics to the business agenda

Thomas Gomart, Director of IFRI, comments on how recent geopolitical events have transformed the global economic map

For many years, business leaders have planned their strategies on the assumption of political stability. But, with the Russian invasion of Ukraine, geopolitics has made a rude return onto the corporate agenda.

The Mazars C-suite barometer, conducted late 2021, reinforced the transformative time business are operating in. Companies face a deep transformation from environmental degradation, global warming, the loss of biodiversity, and more. At the same time, they are confronting the propagation of digital technologies.

Now comes the war in Ukraine. The situation is especially difficult for European-based companies, because Europe was the continent at peace. That’s no longer the case—and it’s a big transformation.

The return of geopolitics to the corporate agenda marks a significant reversal of years in which political stability was taken for granted. What are the implications for business leaders?

Below, Thomas Gomart, French historian and Director of the French Institute of International Relations (IFRI) shares his analysis.

Since the fall of the Berlin Wall, you have had this belief that economics was more important than politics. That’s no longer the case. In the current situation, the real challenge for companies is to integrate geopolitical risk, which is more and more difficult to measure and manage properly.

What sort of globalization should companies expect? Deglobalization? New regional blocs? Or should we get ready for re-globalization? European companies share a narrow perspective with OECD geographies about ESG, about ways of working, about competition for attracting talents. And at same time, you have big questions: how should we deal with China? How can we be able to deal with China and the US market simultaneously depending on your industry? What about other markets such as Indonesia, India, or in Africa and Latin America, where globalization is continuing—and where ESG is less of a priority? The level of complexity is higher. You need a new map.

Energy is the biggest issue for the time being. Prices are high and that is very challenging for companies. Take Germany: its prosperity for the past two decades was built on exports to China, security guarantees from the US, and cheap energy from Russia. Today, Germany needs to reinvent its model, and in just a few months. The times we live in are absolutely transformative—very fast moving and with so many uncertainties.

The bad news for companies is that they need to make these transitions quickly, without preparation, and it is very expensive. We are in for some turmoil in the coming months. But the good news is that there is alignment in the medium term between this rupture of Russian oil and gas supplies and accelerated decarbonisation. It is not yet visible: we are burning more coal because of the lack of Russian gas. It’s very painful. But in the medium term, this rupture of fossil supplies from Russia is a good direction to go in.

Commentary by
Thomas Gomart, Director of the French Institute of International Relations (IFRI)