Sustainability is just as important now. Here are some practical steps for staying on track during the crisis.
Sustainability and ESG are now more important than ever.
The novel coronavirus (COVID-19) is testing our health, social and economic systems in extreme ways. This crisis is unlike many other disasters we have witnessed in recent years with respect to its pervasiveness and the speed at which it has affected, directly or indirectly, billions of people around the world.
As people and organizations face extreme circumstances and need to make immediate decisions, the present is, understandably, often prioritized over the future. When possible, it is important to balance responding to the crisis in the short term with maintaining resiliency to other risks facing business and society in the long term. For example, in the 2020 annual risk report from the World Economic Forum (WEF), the top five risks in terms of likelihood were environmental, and the top four of five risks in terms of impact were both social and environmental in nature. (1)
While the risk of a pandemic was noted as important in the report, and something for which we are unprepared globally, it was not identified as one of the top five risks in terms of likelihood or impact in the 2020 survey.
High-impact and highly probable risks, such as climate change, biodiversity loss and water crises, are just as present now as they were before the pandemic started and could amplify the challenges created by COVID-19. Thus, while dealing with the immediate challenges posed by COVID-19, maintaining strategies and programs that may reduce risks to other long-term threats will be important for building long-term organizational resiliency.(2)
Sustainability and environmental, social and governance (ESG) programs are key components of long-term value and business resiliency; but in the current crisis, they may seem like a luxury that can be sidelined for now.
However, to the contrary, strong ESG programs may help buffer the impacts of the current crisis, hasten recovery, spur innovation needed to navigate a “new normal” and reduce risks to additional crises in the future. For example, ESG funds have shown stronger performance than non-ESG rivals during COVID-19.(3)(4)
The crisis has revealed for many companies the benefits of investing in their social and human capital, which is enabling them to mobilize talent and resources in new ways and continue to function in uncertain circumstances through a culture of trust, commitment and innovation. Similarly, research has shown that a loyal and motivated workforce creates enterprise value over the long term through increased productivity, lower voluntary turnover and improved labor costs.(5)
The pandemic has also revealed the importance of other nonfinancial factors that impact business outcomes and are important to ESG investors, such as disaster preparedness, continuity planning and employee benefits, like paid sick leave and flexible working arrangements.(6) Some companies are showing their commitment to society by proactively seeking ways to be part of the solution to the pandemic as demonstrated by Apple, Tesla, General Motors and Ford Motor Company, who are directing their resources to increase accessibility and production to critical medical supplies.(7) Distilleries such as Anheuser-Busch, Pernod Ricard, Bacardi, Tito's and others have redirected operations to produce significant amounts of much needed hand sanitizer.(8) Google is supporting the state of California by providing 100,000 free Wi-Fi hotspots and donating 4,000 Chromebooks to students across the state.(9) Grocery stores around the country, from Whole Foods to Stop & Shop, are offering special hours for seniors and others who are most vulnerable to the disease.(10) In being part of the solution and adding value to their communities and society, companies are likely to secure long-lasting trust in their leadership, which is an increasingly important factor to investors, customers and future employees. (11)(12)
Given this, what are some tangible steps that companies should take with respect to leveraging their ESG and sustainability programs during the height of the pandemic and afterward to build a resilient business that creates long-term value for all of its stakeholders? Below are a few steps your company may consider now and in the months to come.