5 minute read 25 Aug 2020
Implementing sustainability as the new normal

Sustainability – an imperative for the new normal

By Chaitanya Kalia

EY India Climate Change and Sustainability Services Leader

Committed to sustainable development, a climate change expert, advisor on non-financial reporting. Digitally savvy and a nature lover. Amateur cyclist, swimmer and an ornithologist.

5 minute read 25 Aug 2020

As businesses navigate the pandemic, there is an opportunity to press the reset button and deepen the integration of sustainability into their strategies. 

The COVID-19 pandemic has brought about an unprecedented shift in the business environment. Since its outbreak in Wuhan, China in December 2019 and its subsequent spread across continents, many parts of the world have come to a standstill or experienced a dramatic slowdown in economic activity. The pandemic has had a negative impact on many of the United Nations Sustainable Development Goals (UN SDGs) and has accelerated socio-economic inequality, particularly in the areas of health and poverty.

A saw-tooth or W-shaped curve seems to be the most likely recovery scenario, with gradual aftershocks arising, depending on the success of containment. This recovery curve needs to be placed in the context of the future sources of risk, particularly with respect to climate-related disruptions. The implication is that businesses are likely to confront a myriad of interconnected risks in the near future. The need for resilience and leadership is therefore stronger than ever. This crisis is also an opportunity for businesses to pause and hit the reset button and lead the way toward a sustainable recovery.

A healing planet

Reports have emerged across the world that the pandemic induced lockdowns have eased some pressure on ecosystems due to the decline in human activity. Improvement in air and water quality and unusual sightings of animals in urban areas have been reported. India, with 6 of the 10 most polluted cities in the world, also witnessed a significant decline in pollution levels since the imposition of the lockdown. For the first time in 30 years, the residents of Jalandhar, Punjab could view the world’s tallest mountain range, 200 km away from their city, most likely owing to the reduced pollution levels in the region.

These positive signals are an encouraging, yet important reminders of the extent to which planetary health is dependent on human activity. While managing the social and economic impacts of the pandemic, it is essential for governments, policymakers and businesses to bear in mind that the next set of global challenges are increasingly likely to be climate-related and environmental in nature. Progress in the post-pandemic world must therefore be within our planetary boundaries, if we are to effectively mitigate the impacts of large–scale disruptions, such as COVID – 19.

The emergence of a new normal

The volatility induced by the pandemic has accelerated many business trends that were prevalent prior to its spread. Global trade volume has rapidly declined owing to lockdowns and various other geopolitical factors. Organizations that rely on lean and just-in-time supply chains spread across multiple countries have been particularly affected, due to restrictions on the movement of labour and material. The pandemic has also accelerated the digital transformation, highlighting the need for reliable data as well as rapid innovation. Operating in an increasingly volatile global environment requires businesses to build resilience and redundancy and prepare their value chains for future disruptions.

In light of widening social disparities, the role of businesses (particularly large corporations and brands) in the society is being re-examined. The crisis has highlighted the need to double down on the SDGs, while focusing in the short term to control the spread of the disease. Impact has also been felt on consumer behaviour, with consumers holding brands accountable for the societal good. EY’s research shows that affordability, health and sustainability are the crucial issues that brands are to focus on, if they are to effectively address the needs of the future consumer. 

The pandemic is likely to deepen calls from various stakeholders for businesses to play a more active role in addressing societal challenges.
Chaitanya Kalia
EY India Climate Change and Sustainability Services Leader

Sustainable by Design

The signals from the market and from nature are clear: any vision of a recovery needs to be sustainable and resilient to effectively respond to the challenges of the future. This implies the need for businesses to embrace ‘Stakeholder Capitalism’ and make Environmental, Social and Governance (ESG) a core focus of their corporate strategy.

EY’s Climate Change and Sustainability Services (CcaSS) team has developed a ‘Sustainable by Design’ framework with an objective to assist organizations in generating long-term sustainable value by integrating sustainability principles across the value chain. This is a three layered framework which enables the integration of Environmental, Social and Governance (ESG) principles across the strategy, operations, and value chain of the organization.

The first layer corresponds to the sustainability vision and direction of the business. This calls for a comprehensive and focused approach to sustainability right from the board level through the development of governance frameworks, risk management plans and clear targets. The second layer is about implementation, which comprises the specific operational levers to achieve those targets. Implementation of ESG initiatives requires businesses to take a life cycle view of their products and services and develop systems and processes that strengthen the ESG performance of the entire value chain. The third layer corresponds to the measurement and communication of sustainability performance. Stakeholders across the spectrum have called for transparent disclosure of performance data. Businesses may need to institutionalize robust metrics and internal governance & control mechanisms for their ESG data. By aligning with various international disclosure frameworks, they can gradually move toward higher standards of disclosing long–term value. For instance, the Embankment Project for Inclusive Capitalism (https://www.epic-value.com/) in which EY is a contributor, is developing metrics to measure long-term value.

The ‘Sustainable by Design’ framework is a comprehensive approach to sustainability integration, and a guide than can enable organizations to strengthen their foundations and set a trajectory for a sustainable and resilient recovery. The Now, Next and Beyond of the pandemic presents a great opportunity for businesses to integrate the principles of sustainability into their strategies and develop products and services that create value according to what the earth needs as well as what their stakeholders want. Their role is crucial in ensuring that the sky in the post COVID world is bright and blue.

Summary

Beyond the immediate concerns of health and economic recovery brought about by the COVID-19 crisis, the profound and pressing challenges of resource scarcity, climate change, pollution and societal inequality remain highly relevant. If businesses are to thrive in the face of these challenges and deliver long–term value, they would do well to enhance the integration of Environmental, Social and Governance (ESG) principles into their products, business models and strategies.

About this article

By Chaitanya Kalia

EY India Climate Change and Sustainability Services Leader

Committed to sustainable development, a climate change expert, advisor on non-financial reporting. Digitally savvy and a nature lover. Amateur cyclist, swimmer and an ornithologist.