Related Expertise: Public Sector, Strategic Planning, Corporate Finance and Strategy
A strong social sector is a prerequisite for any country’s human development and the well-being of its people. Yet as we look toward the future, we see several trends that could affect societies across the globe, including a changing climate, aging populations, rising mental health issues, and growing income inequality, to name a few. If fully realized, long-term trends such as these could eventually threaten social-sector stability, put greater pressure on governments’ fiscal sustainability, reduce overall economic growth, and negatively affect the well-being of individuals, especially those who are most vulnerable.
Given the extent of the potential impact, it’s clear that scenario planning for the social sector should be high on government agendas.
Scenario-planning exercises focus on the contingencies of current trends and are used to identify actions that governments can take now to prepare their societies for the future. Accordingly, they typically do not cover black swan events—which are not the result of long-term developments—such as the coronavirus pandemic or natural disasters not induced by climate change. However, scenario planning could still generate positive outcomes that prepare governments to deal with one-off events when they do occur; the actions governments take as a result of scenario planning often strengthen overall resilience.
It’s Not Too Late to Prepare
As part of a “future foresight” exercise, BCG looked at the driving forces, structures, and enhancers of the social sector to determine what may happen over the next 30 years. This is a sector whose organizations address multifaceted, often interlinked issues, including health, income, education, families, the environment, and community engagement. Social-sector organizations work with a broad spectrum of individuals, from senior citizens and people with disabilities to vulnerable children, low-income populations, and other groups with socioeconomic disadvantages.
The social sector is simultaneously affected by multiple trends that threaten its stability. Stakeholders within the social sector must anticipate and confront these disparate but converging trends, which can be organized into three broad themes:
A look at global forecasts indicates how some of these trends may evolve up to 2050. The aging of the global population, for one, could change the structure of society and the workforce, as 1 in 6 people worldwide will be over the age of 65 by 2050, up from just 1 in 11 in 2019, according to recent United Nations projections. The UN also predicts that fertility will decline to 2.2 births per woman in 2050, from just under 2.5 in 2019. In the wake of a rapidly aging population, this downward trend could imbalance our ability to support the most vulnerable populations.
In addition, the Organisation for Economic Co-operation and Development (OECD) expects over 30% of jobs to be radically transformed by automation in the next 15 to 20 years, a trend that could trigger the social marginalization and exclusion from work of those without the necessary technical skills to compete. And climate-induced resource and food scarcity could affect the physical and mental well-being of entire populations, as 70% of cities will likely experience a change in climate conditions by 2050, according to a Crowther Lab study.
Scenario Planning Is a Powerful Tool
These trends and their impact on the social sector naturally carry a great deal of uncertainty. They might continue in their current direction or move in a different or opposite one, depending on a multitude of factors. No matter the scenario, however, governments need to be ready if they are to protect and provide for their citizens and societies.
Scenario planning is a powerful tool in this regard. It allows governments to look at key relevant trends and uncertainties, imagine sequences of possible events that could occur, and identify sets of actions they can take today to prepare for potential scenarios that can eventually come to pass. We recommend the following three-step scenario-planning process for the social sector.
Identify and Analyze Trends Affecting the Social Sector
Governments should begin by looking closely at the trends touching on their countries’ unique social sectors and the uncertainties those trends create. An aging population, for instance, may place a substantial burden on governments through rising pension and health care expenditures. Recent OECD forecasts show that by 2060 expenditures on issues related to aging may increase the public debt burden by around 180% of GDP in G20 advanced economies. At the same time, the aging populace could continue to work and contribute, potentially becoming a new source of economic growth and creating a booming “silver economy.”
Future technology advancements, in turn, could either be transformative or disappointing. For example, between 2018 and 2025, according to Allied Market Research, the global genetic testing market will grow by approximately 11% per year. By 2050, personalized gene therapies could therefore be widespread, with genetic engineering making many illnesses issues of the past. However, genetic engineering could also fail to deliver on its promises, achieving only incremental improvements in health outcomes.
Similarly, shifts in the economic landscape could lead to a new world order, or simply help maintain the status quo. Assuming a business-as-usual scenario in the US, Europe, and China, income inequality will increase dramatically by 2050. In fact, the World Inequality Lab projects that the share of global wealth owned by the top 0.1% will climb to around 25% (from approximately 15% currently). This trend could instead be reversed, making equal income distribution and shared prosperity a new reality.
Generate a Range of Scenarios
As the next step, governments should develop “axes of uncertainty” for each of the three trend themes. (See Exhibit 1.) These axes represent opposite extremes in the ways that trends could evolve—either by contributing to a thriving society or by exacerbating societal decay. Governments should then generate a range of potential scenarios for the future by exploring combinations of “uncertainties,” or potential outcomes.
Given that the range of possibilities is so great, planning won’t be easy, but it is essential. By forcing governments to integrate as many alternative possibilities as they can into the planning process—imagining many different outcomes rather than simply extrapolating what seems most likely to occur—this type of scenario planning is made to challenge conventional thinking and to create a spectrum of visions for what the future may hold. The exercise will help governments plan and build social sectors that are well-prepared for the coming decades, safeguarding human development and the well-being of citizens, regardless of how the trends eventually play out.
Using a combination of uncertainties, we have developed eight divergent but plausible scenarios for the year 2050. (See Exhibit 2.)
A few examples:
Identify Actions to Help Prepare
Once they have generated a broad range of potential scenarios, governments should contemplate how best to anticipate them well in advance, then identify no-regret actions they can begin to take immediately. We have identified several actions that are relevant to all eight scenarios noted above, and though their applications would necessarily vary, each can be deployed to help governments build capabilities and prepare for the future.
Governments Should Start Future-Proofing Now
While some governments have already begun to run scenarios, this type of planning is not yet very high on the typical government agenda and rarely—if ever—involves the social sector. While the evolution of the sector over the next few decades remains uncertain, scenario planning will help governments prepare for any eventuality, benefit from upside opportunities, and alleviate downside risk. A thriving social sector could be the greatest legacy of current governments if they remain vigilant, plan responsibly, and start future-proofing immediately.