Will the current crisis make or break the business world’s adoption of sustainability?

Apr 17, 2020

Will companies be able to find the time and resources to focus on sustainability after COVID-19? Laura Heuston is positive that they will.

COVID-19 has sent shock waves through the business community with most companies reeling from the immediate impacts. In the short-term, these companies will need to focus on survival – trying to stay afloat, minimise staff layoffs and keep supply chains going. This may mean temporarily diverting attention away from sustainability efforts which, until now, had been gaining traction as the business world realised its potential to lead the transition to a sustainable, low-carbon future.

The key question now is, will companies ever manage to find the time and resources to focus on sustainability again?

At SustainabilityWorks, we firmly believe they will. The business community had already reached a tipping point where the corporate profit motive and environmental and social agendas were increasingly aligned, and we predict that as soon as businesses are over the initial shock, the COVID-19 crisis will bring the concept of sustainability into even sharper focus than before. Social sustainability issues that have come to the fore during the crisis include the consequences of the gig economy and the advantages of remote working. There is also a clear link between the crisis and climate change as scientists have warned for years that the risk of pandemics is growing as rising temperatures damage fragile ecosystems, which act as 'containment' systems for our planet.

The mindset that believes sustainability will disappear from the corporate agenda due to the pandemic is the same mindset that used to underpin the description of environmental, social and governance (ESG) factors as “non-financial”. However, there is an ever-increasing body of evidence that shows just the opposite – that ESG issues have a clear financial impact, with research proving a positive correlation between a company’s performance on material ESG issues and good financial performance.

This positive impact is reflected in share price performance and in a lower cost of capital for those companies. Investors know this, which is why investors with over $80 trillion in assets under management have signed up to the Principles of Responsible Investment, the world’s leading proponent of ESG investing. In fact, the pandemic has already been reported by the Wall Street Journal as leading investors to ask more questions about employee pay and benefits, supply-chain management and other ESG priorities. Companies should expect more questions and more focus on these “non-financial” issues post-crisis – not less.

And while there is a broad range of ESG issues that attract attention from investors and the financial sector, it is climate change that is really focusing minds. During his time as Governor of the Bank of England, Mark Carney consistently highlighted the threat to global financial stability associated with both the physical and the transition risks of climate change. This led to the announcement of climate stress testing of banks and insurers by the UK financial regulator, while other regulators globally are collaborating on the issue as part of the Network for Greening the Financial System initiative. There is simply no going back on the awareness of these climate-related financial risks at this point – not by the regulators, the banks and insurers they regulate, nor by investors.

Finally, there are numerous examples of the current crisis bringing out the best in many businesses, with small distilleries becoming hand sanitiser producers, grocery stores paying staff unexpected bonuses and An Post bringing communities together with various initiatives from free postcards to free check-ins on our most vulnerable citizens. These actions will not be forgotten and they show the important contribution that businesses can make in response to societal challenges. This underscores one of our core beliefs in SustainabilityWorks: engaging strategically on sustainability simply makes good business sense.

As policymakers and corporates call for stimulus packages to be “green deals”, the businesses that rise from the ashes of COVID-19 will be the ones that embrace sustainability as part of their core business and, in doing so, lead the emergence of a fairer, greener, more resilient world. These businesses will also become resilient themselves, something which will stand them in good stead for the bigger shocks to business-as-usual that are coming down the tracks from climate change in the coming years. 

Laura Heuston is a Co-Founder of SustainabilityWorks, a boutique sustainability consulting firm that offers a unique blend of skills and experience across sustainability strategy, finance, policy and communications.