Yahoo Finance Editor-in-Chief Andy Serwer is joined by Boston Consulting Group Global Chair, Rich Lesser at the 2022 World Economic Forum in Davos, Switzerland as they discuss energy security, supply chains, and globalization.

Video Transcript

ANDY SERWER: I'm here with Rich Lesser, Global Chair of BCG. Rich, nice to see you.

RICH LESSER: And it's great to see you again, and to see you in person. We've done a lot on Zoom. It's nice to be in a setting where we're together.

ANDY SERWER: Absolutely. So Davos is winding down. You spend a lot of time discussing global climate change and sustainability. What are some of the big takeaways, Rich?

RICH LESSER: Well, obviously the main theme of the week has been what's going on with the war in Ukraine. And the first order implications, the war refugees. An enormous second order implications, energy, inflation, a food crisis that looks like it could be coming at us, what it means geopolitically in a world of more division. So of course, we're in Europe. It's a war in Europe and it's so directly hitting people in their pocketbooks and in communities. That's topic one. But the other topic and the one I spend most of my time on is climate and sustainability. We had 80 meetings here this week on those topics. I wasn't in all 80, but I was in a lot of them. And the focus is single fold, which is how do we go from commitments to action. Everybody-- the commitments we need to get even further, but everybody agrees there are some good commitments from many places. How do we translate it into action and that was the big part of the dialogue I was in.

ANDY SERWER: And when you talk about second order effects, for instance, the war in Ukraine. Obviously Europe is looking at energy transition because they want to move away from Russian oil and gas, but then there's talk that they'll be using coal.

RICH LESSER: Yes.

ANDY SERWER: What do you see-- how do you see that playing out, I guess, Rich?

RICH LESSER: I think the short term implications will be energy security takes precedence. We can't have people cold in the winter. We can't shut down industrial production. I think energy security issues will be at the top of the list. But we shouldn't-- and in the near term that might have some of the implications you're describing that we're burning more coal or we're doing other things to build energy security that are not moving climate in the direction we would want. I do think the more people recognize that fossil fuels come with instability, risk, and likely longer term higher prices than people realize, will also push for medium and long term security which is to boost renewables and to accelerate out elements that are pro climate. So short term, probably more of a negative than a positive, but medium and long term, I think it's neutral to positive in terms of accelerating this massive decarbonization journey we need to be on.

ANDY SERWER: Shifting gears a little bit because it's kind of an adjacent issue supply chain.

RICH LESSER: Yes.

ANDY SERWER: And you're hearing a lot of discussion about friend shoring versus onshoring. Offshoring seems to be sort of off the table these days. What's your take on that?

RICH LESSER: Look, we've been arguing for a long time, well before COVID, that the changes of production economics were such, that we would see shifts in supply chains. Not to move fully away from globalization, but to move more in the direction of being able to be closer to market, faster response to customers, labor costs were less of a differentiator or leverage point around the world. Robotics were allowing a lot of people to be extremely efficient regardless of location. And when you put those elements together the trends you're describing, I think precede the current crises. But I think the current crises accelerate them. People are looking to build reliability and resilience into their supply chains. And I think they will be looking to figure out what are the models, some of which you can do with data and analytics, see through your supply chain with tools and insights better than you could before. But some of it will be to have more different sources of supply and more ability to adapt in different circumstances. And in a geopolitically more challenging world this friend shoring idea, however it plays out specifically, I think will take on increasing relevance.

ANDY SERWER: And picking up on this globalization, or actually, de-globalization theme, which was front and center here this week, what's your feeling about that? I mean, is the golden age of globalism over? In other words, everyone I think acknowledges we're going to continue to do globalism, but is it sort of in the rear view mirror, like WTO and China joining, that was the high point, and now we're kind of sliding back.

RICH LESSER: I think we're entering a more challenging period for globalization, but I personally don't feel like this is the end of globalization. I feel like-- and look. There will be things that none of us can control that will be decided a full decoupling, or something that moves close to full decoupling, will not help anyone. And I-- and anything we can do on all of the geopolitical actors to allow for a continued connection in the world is better for the citizens in those countries, better to create more progress, will accelerate things like decarbonization. But I think the way we perceive globalization where you could push any product anywhere, where a lot of supply got concentrated in one place, often China, not only, but many cases.

ANDY SERWER: Mmhm.

RICH LESSER: I think those times, I think people are recognizing that we're in a new phase of globalization rather than the end of globalization.

ANDY SERWER: I'd like that, the new phase of globalization. Rich Lesser, Global Chair of BCG. Thanks so much for joining us.

RICH LESSER: It's a pleasure to see you, Andy.