shaping your ESG strategy in response to COVID-19

Aug 30

published 6.4.20

While it is too early to have accurate figures on the socio-economic impacts of COVID-19, ESG programs and leaders will be put to the test. Is your sustainability strategy resilient and inclusive - not only in response to stakeholders, but also for rebuilding and quick post-pandemic recovery?

Seeing organizations step up and partner to design innovative relief responses and achieve business continuity is encouraging, but what we need most is immediate action to ensure a more resilient and inclusive future. In a market-driven economy, the crisis requires global cooperation. Governments cannot respond alone so business leaders have a unique role to play.

There is an opportunity to lead with empathy and raise awareness on the importance of placing people, planet, and profit at the core of business strategies that consider risk management and truly understand corporate vulnerabilities in a complex and volatile environment.

Today, we are figuring out how to respond to COVID-19, but this won’t be the last one. Business strategies from here on have to be built to respond to future epidemics, climate crisis consequences, social inequalities, and so many uncertain hazards in an increasingly interconnected world.

Be strategic with sustainability.

Business, as usual, is not an option post-COVID-19. Sustainability can not exist as a silo but rather must be baked into the organizational performance going beyond environmental issues to consider social, economic, and cultural impacts that shape the business context. Companies that still have a sidelining sustainability program not fully embedded into their business operations and strategies are losing money and time. A strong social and governance structure within the sustainability strategy ensures alignment with core values and transparency on reporting and accountability to all stakeholders.

This is not merely a domain of large corporations. Small and mid-sized companies, key actors in global supply chains, and who are particularly exposed to economic disruptions and environmental impacts, also need to understand their risk and opportunities to effectively respond to those uncertainties and deliver a purpose-driven business model. Besides, investors expect that companies can demonstrate how they consider and integrate ESG -Environmental, Social, and Governance- criteria within their company decision making, to respond to the pandemic and support their investment decisions.

Build from materiality and stakeholder engagement (the core of your sustainability strategies).

Immediate actions to address this crisis should not sidetrack the organization's material sustainability issues. This is an opportunity to review and analyze how the organization has managed those issues and take proactive actions to mitigate short-term risks and steer long-term strategies.

The materiality assessment, which considers a company’s social, environmental, and economic risk factors and opportunities in the business context, provides insightful information on the most relevant issues impacting business success. This analysis helps to identify, prioritize, and deliver the strategic vision on which the company should build its sustainable business plan, mitigate risk management as well as to consider stakeholders concerns and impacts.

In the short-term, companies can adopt methodologies to assess internal policies and strategies, analyzing how to balance social, economic, and environmental trade-offs considering human rights, labor conditions and safety standards, good governance practices, and environmental impacts. For example, BSR has publicly shared a rapid human rights due diligence tool to mitigate adverse human rights impacts during the COVID-19 response. And, The UN Global Compact recently release an assessment tool to assess and track how business operations are responding to the SDGs.

Companies should also consider a higher level of engagement with suppliers, promoting their adoption of environmental and socially responsible business practices. It is essential to assess internal procurement processes considering sustainability criteria to guide purchasing decisions as well as adopting a holistic lifecycle approach to understand risks and opportunities of all associated impacts of products (from acquisition, production, use, and eventual disposal) and services. The development of a disaster recovery strategy can help to be prepared to respond as quickly and effectively to situations such as natural disasters, safety and security concerns, and changing business conditions.

But, when it comes to building a resilient business strategy for the long-term, one of the most significant opportunities is on the environmental side. Sustainability teams and business leaders should seize on the momentum of raising awareness of the climate crisis and commit to take action. Consider adopting processes for identifying, assessing, managing, and reporting on climate resilience strategies and resources management, considering our planetary boundaries and the relationship with human capital, to inform following public reporting standards, industry trends, and evaluate climate-related scenarios.

Thinking ahead, the COVID-19 crisis would demonstrate how companies that consider a more strategically aligned sustainability management can be more resilient than those that still manage short-term or reactive social and environmental programs.

Sustainability is no longer nice to have; it is a must-do that needs to be embedded within business operations and facilitate decision making, considering a higher purpose that is not only focused on economic exchanges.

To learn more about our work building resilient organizations that put people first, please reach out. We would love to meet you.