Has COVID-19 changed priorities for ESG?
Has COVID-19 changed priorities for ESG?
Sue Bonney, Head of ESG, discusses the impact of COVID-19 on environmental, social and governance.
Cast your mind back to February. Three short months ago. A lifetime ago.
Then you couldn’t turn on a TV without seeing Greta or the aftermath of the Australian fires, COP26 in Glasgow was looming, the financial press was wall-to-wall ESG and there was pretty much no Board in the country which wasn’t starting to take ESG seriously.
Then came COVID-19.
So the question that’s posed now is, ‘Has COVID-19 overshadowed ESG (or at the very least kicked the recyclable can down the road some way)? Or is the moment now?’
Safety, cost and capacity
There are certainly some compelling things which could knock it off course.
One is safety: my client Tesco is in the process of removing 1 billion pieces of single use plastics from its stores. But where we find ourselves now, apples safely packed in plastic bags are more appealling to many. Last year, we removed plastic cups from all our offices and gave reusable water bottles to each of our employees. However, when we come back to the office in a few weeks, we won’t be able to let people use them due to the extra precautions we’ve put in place.
Then there’s cost. Many businesses are still in survival mode. They’ve done the low-hanging fruit, the no-regrets cuts. But now government support is starting to rein back, so they’re on to the tough stuff. While there’s no doubt many ESG friendly measures can actually save money – energy efficient lighting or insulation; fairer wages, meaning less churn – they do often involve some front-loaded cost or investment.
Perhaps most telling is management capacity. Leadership teams have been stretched to absolute breaking point as they steer through COVID-19 without a previous playbook.
The E is still here, and the S and the G have dialled up
But the ESG imperative really hasn’t gone away.
The E was top of the list before COVID-19. And the climate emergency clearly hasn’t gone away. If anything, the pressure has grown as people have seen the immediate tangible impacts of less travel and how things could be in a cleaner world. If my reading of what we can expect is right, they’ll see an equally immediate impact the other way when we start driving and flying again.
So the E part’s definitely still there. What COVID-19 has done is also dial up the S and G.
We’ve seen competitors collaborating together to solve critical social problems, such as producing ventilators, and doing things for the public good at no profit, like at the Nightingale hospitals.
We’ve seen a much greater appreciation of localised supply chains and businesses. That’s not only been from a resilience perspective. It has been about a sense of trust and a growing appreciation of the value of local enterprise in the community.
We’ve also seen companies making finely balanced judgements about taking government reliefs, but then paying out exec bonuses or shareholder dividends. There’s a real sense that businesses will be judged tomorrow by what they do today.
Beyond that, we’re just starting to appreciate the likely profound social implications of a new shape and size of workforce as we emerge from the pandemic.
All that means that ESG has rebalanced yes, but it’s absolutely no less of an imperative.
Applying the lessons of COVID-19
One business leader said to me recently, what COVID-19 has done is show businesses the possibilities of high-speed innovation to drive change, the value of resilience over efficiency and the need for ‘purpose’ for real. That speaks directly to the ESG agenda.
We can take the learnings from COVID-19 and apply them as we tackle the critical issues of our time.
- Firstly, scenario plan. Properly. Don’t assume tomorrow will be just like today but a bit sunnier. Think radically about possible and plausible futures as well as the one you think’s most probable and stress test your thinking against those. If you’re a hotel group, don’t just focus on taking single use plastics from your hotel rooms. Think about a world where planes are permanently grounded to reduce carbon. It might take you to a different strategy altogether.
- Secondly, how many of us surprised ourselves with our agility to do things we never thought we could as a business – and survived to tell the tale? How do you bottle that and make sure you can do the same again in the new world without your old-style risk and decision processes stifling innovation at birth.
- Thirdly, take the time to fundamentally rethink your business strategy and goals. If a gust of wind blows down a house of cards, don’t just rebuild it. As you pivot your strategy to meet the new demands, do that with a clear ESG lens and rebuild a business and operating model with ESG at the core.
Finally, there is that point about not having enough leadership bandwidth. Most forward looking organisations are now starting to separate out their “business as usual” from COVID-19. That’s allowing members of the senior leadership team to get to grips with what the new reality looks like. And there is no doubt – ESG is the context for that new reality.
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