By Andrew Adie, Managing Partner
In the world before Covid-19 (remember that?) we all spent large amounts of time asking corporates what their social purpose was. Where did they stand on ESG? What did it mean to work for their business?
Today – as attention begins to turn to a post-pandemic recovery – corporate purpose is very clear: companies exist to make money, create and nurture jobs and fuel economies.
Even ‘sin stocks’ have arguably started to be allowed off the naughty step if they can be shown to be taking steps to secure jobs, support their supply chains and do work that has a wider social benefit (i.e. building ventilators or searching for a Covid-19 vaccine). The fact that their customers’ are endangering themselves by consuming the product hasn’t gone away and total rehabilitation for ‘sin stocks’ is unlikely. But in a post Covid world, views on purpose and value have taken a more pragmatic nuance. If you choose to drink or smoke that’s your bad, if the ‘sin stock’ company is maintaining jobs, paying taxes and helping fight coronavirus then that’s ‘good’.
I’m not suggesting this means we’re entering some sort of free-for-all where bad corporate behaviour can be ignored as long as it’s off-set by some socially useful side-show. Actually I think the opposite is true. Consumers and the court of public opinion will be enhanced in a post-Covid world. We all understand that the actions of one has ramifications on all. However, as we dare to consider what a post-Covid world may look like, the social purpose of business has been re-set to address the new area of greatest need.
The shocking forecast from the Office of Budget Responsibility (OB) that the UK economy could shrink by 35% and lose 2 million jobs will add to that sense of economic mission. Once we emerge from lock-down we enter a new fight, to save the global economy and in that world corporate purpose will be more micro in focus: fixing the balance sheet, ending furlough and driving growth.
So where does that leave ESG? What happens to Greta Thunberg and will sin-stocks be rehabilitated (at least in part) in a new world where saving the economy and ending the ‘Third Great Depression’ is a defining social purpose for business?
My hunch is that we’re going to see ESG emerge with renewed strength in a world that will have also seen us grow increasingly accepting of ‘big state’ intervention and the role of ‘society’.
While the environment has dropped like a stone from news pages it will be back in a post-Covid world when we will have been reminded how delicate the balance is between humans and nature and will no doubt be reminded that Covid-19 lock-down is nothing compared to climate extinction. On big macro issues such as this, we’re likely to be less tolerant of abuses within ‘soft touch’ regulatory regimes that have the potential to see one organisation’s bad behavior comes back to haunt us all.
Across the board corporate behaviour that sits within a broad ESG framework (including diversity and inclusion, pay and bonus culture, supply chain behaviour, community relations and corporates’ role as sponsor for pension schemes) will be under greater scrutiny than ever. While broad corporate purpose may be re-set to focus on economic outcomes, the way we do business will matter more than ever.
Companies will not be tolerated if they try to act with impunity using jobs and revenue as an excuse for behaving in a way that disadvantages society. To that point, in the past few days we have also seen reports that British American Tobacco is being investigated in the US for ‘sanctions busting’ and technology firms are being criticised for asking the Government to ‘look again’ at a new tax introduced on their profits, with critics claiming they’re using the coronavirus as a cover.
We’re all in this together has rarely felt more real and while business will have a renewed purpose as the engine for growth in a post-Covid world, ‘society’ will be in the driving seat.