Yesterday’s unhappy inflation report sealed the deal: “brief and shallow” has been displaced by “higher and longer”—higher inflation and interest rates for a longer period of time. Investors and business leaders better get used to it.

For their part, investors reacted swiftly to the news, and sent the market into its deepest dive since June 2020. Bridgewater’s co-chief investment officer Greg Jensen said there’s worse to come. “I think the biggest mistake right now is the belief we’re going to return to, essentially, prices similar to the pre-COVID [era],” he said.

Business leaders face a similar adjustment. “It may take years to reduce inflation to the Fed’s target level,” says a paper out soon from McKinsey (CEO Daily got an early look). “Companies need to draw on the proven playbook for success in a world of slower growth, higher inflation, and more expensive capital.”

What does that playbook look like? The consulting firm offers four pieces of advice:

—Don’t pull back on growth projects. “Our research shows that growth-oriented leaders react decisively to shorter-term disruptions that can be turned into opportunities.”

—Build talent smartly. “Employers tend to overrate ‘transactional’ factors such as pay and development and underrate the ‘relational’ elements—a feeling of being valued by managers and the organization, the companionship of trusting teammates, a sense of belonging, a flexible work schedule—that employees say matter most.”

—Stay the course on sustainability. “In an economically constrained environment, a through-cycle view on sustainability can be a lever for companies to build resilience, reduce costs, and create value.”

—Rebuild your supply chain for resilience and efficiency. “We’ve found that a careful assessment of supply chain vulnerabilities can reveal opportunities to lower spending with high-risk suppliers by 40 percent or more.”

Sounds so simple, doesn’t it? 

And thanks to NYU’s Alison Taylor for sharing with members of the Fortune Impact Initiative yesterday this clear-eyed view of why the corporate focus on social and environmental goals is being driven by business realities, not politics, and therefore will continue despite political pushback:

“A very simple way to think about it is that we’ve seen a shift from tangible to intangible value in terms of corporate valuation. It used to be, back in the twentieth continuation, corporate value came from plants, buildings, machinery, cash assets. Now it comes from branding, network effects, stakeholder trust, R&D, IP. And so all of this basically means that stakeholder perceptions, public perceptions, employee perceptions are a far great proportion of corporate value than they used to be. And that largely accounts for the investor interest” in social and environmental metrics.

You can learn more about the Fortune Impact Initiative here. Other news below.

Alan Murray
@alansmurray
alan.murray@fortune.com

TOP NEWS

Energy markets

The German government is reportedly considering nationalizing Uniper, the country’s biggest natural-gas importer, in which it already took a 30% stake earlier this year to stop it from collapsing and creating a Lehman Brothers effects in energy markets. Uniper still needs help staying afloat. Meanwhile, the European Commission now backs decoupling the effects of high gas prices on overall electricity prices, to allow consumers to “reap the benefits of low-cost renewables”—and also reckons the EU will raise over $140 billion from windfall taxes on energy firms’ profits. Bloomberg

Google fine

The EU General Court has broadly upheld a mega-fine imposed on Alphabet by antitrust enforcers several years ago. This, the first of a few big European losses for the company, was the case about Google abusing its position in the Android market. The court slightly reduced the record-breaking penalty from $4.34 billion to $4.125 billion, because its reasoning diverged a little from the European Commission’s, but Alphabet’s only hope now is to appeal to the EU Court of Justice on points of law. (Bonus read: South Korea just hit both Google and Meta with privacy fines.) Bloomberg

Xi emerges

Xi Jinping has traveled outside China for the first time in over two-and-a-half years, visiting Kazakhstan, with Uzbekistan—where he will meet with Russia’s President Putin and other regional leaders—next on the list. Xi’s diplomatic offensive comes weeks before a pivotal meeting of the Communist Party, at which he is likely to win another five-year term as president. New York Times

AROUND THE WATERCOOLER

Terraform Labs co-founder Do Kwon hit with arrest warrant related to Terra unraveling behind crypto rout, by Bloomberg

Climate change and the energy crisis are powering the comeback of a 1970s technology now being installed in 40% of new U.S. homes, by David Meyer

Michael Saylor unveils a new Bitcoin bet—and the strangest part is that the math could actually work for shareholders, by Shawn Tully

A DARPA grant inspired MIT scientists to build a desalinator the size of a briefcase that turns seawater into drinking water, by Ian Mount

Uber’s CEO thinks inflation may be encouraging more drivers to join the ride-hailing platform, as ‘life is getting more expensive’, by Nicholas Gordon

This edition of CEO Daily was edited by David Meyer.