Coronavirus and ESG – what now?
By Sophie Morello
It wasn’t long ago that news headlines were dominated by all things climate change; Extinction Rebellion, Australian bush fires, floods and Greta Thunberg pleading with businesses and governments to make seismic changes to save the planet. And there was a sense that things were changing too. We were talking about ‘progressive capitalism’; delivering for all stakeholders, not just shareholders. We saw big companies make meaningful carbon reduction commitments and global asset managers shun fossil fuels. But what now?
With the spread of the coronavirus, every business, understandably, is battening down the hatches and turning inward, bracing itself for the economic storm ahead. So, with the focus being on survival, will companies stop thinking about ESG (Environment, Social, Governance) and having a meaningful purpose in the world, or will the threat of this virus unite business leaders around serving their people and communities, and protecting the environment?
The social or ‘S’ aspect of ESG seemed a secondary consideration to the ‘E’ earlier this year but it has now been thrown into the limelight. How companies protect and guide their employees through this crisis is proving to be a real test of their social conscience and as the economic environment worsens, the pressure will mount even further. Will they provide adequate sick pay? Will they be flexible for suppliers under pressure? And for those that can afford to, will they forgo profits to keep people employed? How they respond will have long term implications for their reputation and social standing.
But while lock downs and shutdowns across the globe are giving Mother Nature a much-needed breather from the constant onslaught of human activity, it does seem that this element of ‘ESG’ is no longer front of mind. The zero waste movement, for example, has suffered as coffee shops (until the ceased trading) reverted to disposable cups to avoid contamination and demand for plastic-free soap bars seems to have gone by the wayside as people strip the shelves of bottled liquid soap (despite soap bars being just as effective!).
For the environment, hopefully businesses will at the very least maintain their environmental commitments and when the worst of the coronavirus is over it will be high on the agenda again. But this crisis is showing just how quickly the focus shifts. Of course, its human nature to react to the most immediate and pressing threat, but we don’t want to forget that the climate crisis is still there and will be a much longer-term problem. Business shouldn’t lose sight of this as they will continue to be critiqued on their environmental impact.
Despite the truly unprecedented circumstances of the current crisis allowing for some concessions, how businesses behave and communicate to stakeholders now will stick with them in the years to come. If anything, this ‘pause’ in business-as-usual activity can provide an opportunity to reflect and reset, to look ahead to a more purposeful future. Could this be the change for us to work together to create a more regenerative form of capitalism? Time will tell.