ESG: The legacy of Covid-19

Nov 05, 2020
Lasting focus on ESG could be result of this crisis

During the depths of the first lockdown, you could be forgiven for expecting to see ESG issues jettisoned from corporate strategy for the foreseeable future.

As businesses immediately focused on navigating the huge challenges of the crisis, fighting to continue their operations and adapting to remote working, it certainly appeared that there was a move away from broader concerns such as climate change and diversity. 

Over the past few months, however, there has been a serious return of ESG issues to the corporate agenda. Indeed, ESG-focused corporate announcements have been listed in the ranking of the top eight news stories from reputation intelligence, analysis and media monitoring company alva for the last 15 consecutive weeks: from UK supermarket Waitrose’s announcement that it will remove unnecessary plastic packaging in this year’s Christmas ranges to fellow retailer Tesco’s pledge for a 300 percent sales increase in meat alternatives within five years. 

Elsewhere, high street pharmacy Boots has recently announced that it has partnered with BBC Earth on a range of bathroom gifts that it estimates will save the equivalent of 990,000 plastic bottles. BNP Paribas also announced its support for Chanel’s launch of new sustainability-linked bonds, allowing investors to support the luxury brand’s carbon-reduction targets. 

According to professional services network PwC, the share of European assets in ESG investments could more than triple over the next five years. This comes as a result of growing pressure on large companies to invest ethically, and the fact that ESG was deemed likely to outperform other areas when the crisis hit.

Indeed, a lasting focus on ESG could be the legacy this crisis has left on corporates. Perhaps this is because the realization that our societies and industries can, in fact, fail has become frighteningly real over the last six months. Covid-19 has highlighted how suddenly and quickly the institutions and organizations we take for granted can be challenged. 

With the highest levels of redundancies since 2009, the huge disruption of economies around the world and immense challenges to the healthcare sector, the bastions of our economic wellbeing have been revealed to be surprisingly frail. It is evident that global environmental and social crises can have an equally detrimental effect on the performance and growth of business, if they are left neglected. 

The crisis has emphasized the urgency of these issues, and reignited efforts to lower our impact on the environment and improve social cohesion. With world leaders at the UN General Assembly in October discussing the ever-growing threat of ‘environmental Armageddon’ – manifested in rising sea levels and Californian wildfires – there is a recognition that it is crucial for big companies to incorporate such issues into their long-term strategies. 

And as audiences become more and more wary of brands’ ‘greenwashing’ tendencies, they will be looking for firm evidence that corporates are bringing ESG issues into their overall strategy in a meaningful way. In a recent survey from Schroders, 60 percent of investors say greenwashing is the greatest obstacle to their sustainable investment goals.

ESG activities have so far largely been an afterthought or launched as a response to urgent events – when a crisis occurs, when our environment becomes problematic, when a resource is depleted, or when certain groups in society feel so unfairly treated that they can no longer sit in silence. But these activities are very often too late – and our reaction subsequently inadequate. 

Could this haphazard approach to ESG be changing? Certainly, the size and frequency of big ticket ESG announcements that have been highlighted in alva’s analysis suggest these are no longer ideals and intentions that can be sacrificed as other business priorities emerge. ESG should be very much an integral part of ‘business as usual’ – for corporates, investors and consumers alike.

Alberto Lopez Valenzuela is founder and CEO of alva and author of The connecting leader

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