Ieva Tetere: The new reality is here to stay. The three key focus areas for 2021

Although 2020 made us face challenges that we were not even aware about before, the changes brought by Covid-19 have also enabled each of us to spot new growth opportunities. This has been a much-needed push to get going faster in many areas, by prioritising efficiency and reviewing the usual order of things. Just like any crisis, this one has exposed the deficiencies previously swept under the carpet in a quite painful way. Clearly, our priorities have changed, and there is now different emphasis to be considered regarding our overall development for 2021.

Focus area No. 1: Investments to improve digital skills of the Latvian population have to be increased

This year, work from home, remote management of teams, training and even doing sports have been the regular routine for all of us. We see that in general, transitioning to the digital environment has been quite active, but it has also exposed the previously disregarded “edges of the iceberg”. The problem of insufficient digital skills of the population has now become much more distinct. We cannot pretend that everything is fine in this regard.

According to the Digital Economy and Society Index (DESI) compiled by the European Commission, the population’s digital skills level is low. This year, it continued to fall below the EU Member State average. While we have good performance in terms of connectivity and digital public services, more than half of the Latvian population still lacks basic digital skills. Likewise, not all schools and teachers have been ready for the new reality, thus investments in infrastructure and in raising the competencies of teachers are required.

In terms of digital skills, in Latvia, the gap is primarily observed in age groups and locations (cities vs regions). With the changes brought by Covid-19, digital solutions are increasingly used by the seniors, which is a positive trend promoting the overall development. However, it is important to be aware that the current situation is not a temporary period that will pass and then things will fall back as they were. It is here to stay, therefore the faster and more efficiently we refocus, the better the results we will reap in our development.

These issues represent a huge challenge for any business, as they require large investments for educating customers and maintaining a number of business channels. This hampers productivity as well as economic development. Therefore, increasing investment to boost people’s skills and their motivation to use digital tools is key.

On the one hand, everyone should take on the responsibility of self-education and the development of digital skills. On the other hand, employers are also responsible for educating their employees. Mastering digital skills does not always require special training. This can be done while working and adding value at the same time. For example, when companies transform their processes, involving employees as the messengers of change and digital mentors in internal innovation projects is important.

Focus area No.2: Companies should focus on the digitalisation and development of e-commerce more actively

This year, we continuously monitored the sentiment of our business customers. Comparing the performance of the end of last year and those of the middle of 2020, we can see that small and medium-sized enterprises in the Baltics view digitalisation as an important factor. Within a couple of months, from April to June, the share of companies that consider digitisation important went up by nearly 10 per cent. We see that not only mature companies are willing to use e-solutions, those for whom e-commerce is a completely new direction of development are interested, too.

In the Baltics, due to Covid-19, we were able to see strong growth in e-commerce. In the medium term, however, it is unlikely to be sustainable, it rather marks a long-term move towards further and more focused development. This year, the volume of e-commerce of our customers has doubled. However, from a global perspective, the share of retail e-commerce in the Baltics is still lagging behind e.g., the United Kingdom and Sweden, by about eight and two years, respectively.

Covid-19 has accelerated the growth of food e-commerce as companies have found solutions to adapt to the new circumstances. There has been a significant growth in demand by the population, the number of market participants in the industry has also increased. For example, payments for the delivery of ready-to-eat meals have tripled – now people value such a service more than before and are willing to pay for it.

However, overall, businesses still use digital channels relatively little. More than half of the surveyed companies do not offer their products or services online. Furthermore, too many companies still do not see the benefits of such a transformation. According to the DESI index, our entrepreneurs are not making full use of the opportunities offered by digital technologies. In this regard, we are lagging behind nearly all EU Member States.

While consumer habits do not change in a year, the new circumstances have accelerated the ongoing trends. Looking to the future, companies should definitely revise their spending and focus more on the development of digital channels. The digitalisation of internal processes will also become increasingly important for companies - the way we organise our work internally on a daily basis can translate in great motivation for employees to master digital skills. For example, organising HR management processes in such a way that the employee has to participate in the process using their digital signature or attend remote learning training, would improve the skills and habits of the employees.

Focus area No. 3: Commitment to sustainability – our everyday choices must promote global changes

The challenges brought forward by Covid-19 reminded us about sustainability issues in a very symbolic way. They encouraged us to think more about the impact on the environment as well as respect for where and how we live, and what footprint we leave behind us.

The climate crisis is a serious threat that requires a concerted action on the part of decision-makers, businesses and every individual. Being the players in the financial sector, banks have an important role in this, considering economic, social and environmental aspects in all business decisions. When we encourage customers to head for low-carbon solutions, we must set an example and reduce our CO2 emissions in a targeted way. Since 2008, SEB has been measuring its carbon dioxide emissions from electricity and paper consumption, use of company cars and business trips. According to our goal, from 2021 on, the net impact on climate by our bank should be targeting zero.

We must head for a shared economy. May be maintaining the infrastructure that we only use a few times a month is not necessary because we can lease it when we need it, thus we would save heating and lighting costs. New investments, whether in infrastructure, cars, industrial buildings or information technology solutions, must be climate-neutral, or at least expected to become such in the near future. I am convinced that soon it will be cost effective, too, because such projects will have a greater opportunity to attract financing, and in the future they will be much cheaper to maintain.

Nowadays, good practice is setting not only financial goals, but also social responsibility goals in business plans. We see that worldwide, the value of the shares of such companies is higher than those operating in the industries that set only short-term financial goals without bringing obvious returns to the society. Changes will occur when we can see the economic benefit resulting from them on a timely basis, which is still driving progress. Otherwise, our business will be increasingly impacted by the climate changes - devastating floods, droughts or storms to name a few.

Ieva Tetere
Chairwoman of the Board of SEB banka