The pandemic has been described as an ‘acid test’ for ESG#, in particular its social considerations. COVID-19 turned the public attention to the humanitarian impact of the virus on workers and communities – and how companies responded. Businesses, by large, have risen to the challenge, rethinking and strengthening their approach to CSR and acting upon it. However, post pandemic, will companies sacrifice their social conscience in order to steady their own ship hit by rising costs and falling demand?
In this article we shine a spotlight on corporate pandemic efforts and look at good practice examples of businesses carrying social considerations and initiatives over into a post-pandemic world.
CSR: A broad concept, Corporate Social Responsibility is a company’s commitment to operating responsibly, incorporating ethical and moral considerations in their activities.
UNPRI: The UN Principles for Responsible Investing is an organisation propagating principles of responsible investing, persuading investors to implement ESG factors. It has over 2,000 participating signatories from over 60 countries representing more than US$80 trillion of assets.
Social bonds: Social bonds are ‘use of proceeds’ bonds that raise funds for new and existing projects with positive social outcomes.
Countless acts of corporate compassion
Social factors coming to the fore during the COVID-19 pandemic, such as health & safety measures, support for employees, communities and the wider public, have without question reinforced the importance of the S in ESG.
Despite severe disruptions to their operations, supply chains and workforce many companies rallied to contribute to a wider societal effort to mitigate the consequences of the pandemic. Prominent examples of corporates taking on the fight against the virus included fashion brand Christian Dior‘s perfume business starting to produce sanitiser, and global asset management firm, AllianceBernstein, 3D-printing medical supplies with equipment the company typically uses as part of its youth mentoring programme.
There have been countless inspiring initiatives in the UK, ranging from food chains and other firms offering steep discounts to NHS workers, to supermarkets reserving shopping hours for vulnerable and elderly people and hotels offering their rooms to homeless people.
Other companies approached the “S” by rethinking how they deal with clients and business partners: The world’s largest cosmetics firm, L’Oréal, announced they would aim to pay all its suppliers without delay on the first day they can. L’Oréal also created a €50 million fund to support charities in their efforts to fight poverty, help women achieve social and professional integration, provide emergency assistance to refugee and disabled women, prevent violence against women, and support victims.
Across the Atlantic, technology giant, Google, committed $100 million in grants for health and science, economic relief and recovery, and distance learning during the pandemic, and selected volunteers from its workforce to work on projects of any businesses that use data analytics and AI to improve understanding of COVID-19 and its impact. In addition, Google launched a ‘Rapid Response and Recovery Program‘ offering critical support services including crisis helplines to more than 200,000 underrepresented business owners in 32 countries.
Looking at employee support, a survey of nearly 2,000 employees in the UK indicates that employers are looking after their workforce during the pandemic: 86% of the respondents said their organisation has provided enough technical information for them to work from home effectively, 70% stated their employer has taken steps to ensure their mental health and well-being is addressed, while 72% have been consulted about how best they can all approach home working during the crisis.
The future of the “S” post pandemic
With many businesses showing their social responsibility during the pandemic the question now arising is whether companies will still rally to support employees, communities, and each other in the post COVID-19 world, when many find themselves under immense pressure to stem losses caused by fallen demand and costly new safety measures introduced during the pandemic. And, of course, the economic damage the virus is causing is dominating the headlines: The pandemic is set to increase existing inequalities in societies and countries, with job losses being far more extensive in lower income brackets, the World Bank recently stated. The organisation forecast a 5.2% contraction in global GDP occurring in 2020 alone, the greatest recession in eight decades, with companies expected to contract by 7%. And with a potential second wave of virus infections a possible reality in the coming months, worse outcomes may emerge.
However, against this bleak setting, the following examples give evidence that corporates, industry networks and other organisations are committed to further strengthen their focus on social considerations in the “new normal”:
A recent Willis Towers Watson survey of 177 UK employers found that more companies are looking to enhance their employee benefits than reduce them. Top priorities include wellbeing programmes (60%), mental health and stress management services (58%), annual leave policies (26%) and voluntary benefits (23%). Real estate-company JLL, for example, created an online portal of company resources to guide employees’ mental, physical and financial health, and foster their sense of belonging. They’ve also started to monitor their employees’ mental health via surveys and plan to continue with those engagement tools post pandemic, expecting that more staff will continue to work from home going forward.
To recognise its frontline workers, BT raised their annual salary by 1.5% effective from 1 July 2020, while managerial staff will not receive a pay rise in 2020/21. The telecommunications company also granted £500 of BT shares to all employees in June, equalling a £50m investment.
In addition to the aforementioned customer services that supermarket chains (dedicated shopping hours for the elderly and for NHS staff), restaurants (take away meals) and pharmacies (free delivery of medicine) and many other corporates introduced during national lockdowns across the globe, companies have started to think further ahead: AT&T, as well as Comcast, Verizon, CenturyLink, and T-Mobile and dozens of other telecom providers pledged to preserve phone-and-internet service for those customers that are unable to pay their bills. AT&T also announced to temporarily upgrade all plans to unlimited data and is launching six new Command Centers to help with increased customer support and bandwidth demand.
In July, global non-profit organisation “Business for Social Responsibility” (BSR) alerted its 250 member companies and other partners that cancelling or delaying purchasing orders may result in supply chain workers losing their livelihoods and accepting precarious work, while, as the economy recovers, last minute orders could create or exacerbate situations of modern slavery in supply chains. BSR called for businesses to engage proactively with suppliers in order to find out how to best support them financially and practically.
Many firms have done just that: The Coca-Cola company for example has pulled together a set of actions to support its suppliers, relying on partnership and mutual engagement. Amongst other measures the firm committed to timely payment of invoices and offers support for its suppliers’ cash liquidity through its
$1 billion supply chain financing program. Coca-Cola also helps its supply chain partners to get back to business more easily by engaging with public authorities and regulators to find safe ways to keep food production, trade and supply chains open.
Likewise, Unilever has offered €500 million of cash flow relief across its supply chain and early payments to small and medium suppliers. The company also said it is extending credit to selected small-scale retail customers.
Corporate compassion reached new heights during the peak of the pandemic with large numbers of businesses of any size donating to food banks, giving to charity appeals and encouraging staff to volunteer by offering paid holidays to do so.
Going forward, corporates are tailoring their donations and social initiatives to specific target groups within communities: German pharmaceutical company, Boehringer Ingelheim, for example, has launched an €580,000 relief fund to support the global Making More Health (MMH) network of social entrepreneurs in Kenya and India, as well as the communities in which they live and work. The fund will help social enterprises and their activities to sustain a longer period of low economic activity.
British mining company Anglo-American designed a Community Response Plan by engaging with the communities it operates in to understand their needs and ensure it offers the right support at the right time, both during the pandemic and during the economic recovery phase. Anglo-American has made the plan publicly available for other companies to use.
Corporates collaborating with governments
While Amazon joined a coalition of UK companies, universities and research institutions to boost the UK government’s COVID-19 testing capacity by offering to deliver test kits across the UK via its logistics network, the most prominent example of businesses and governments partnering to jointly fight the virus is the partnership of tech giants Apple and Google to develop application programming interfaces (APIs) and operating system-level technology to assist in enabling contact tracing in various countries, including the UK.
Companies helping other businesses
And there’s more help at hand, with global market leaders offering free support to businesses – another piece of evidence that businesses are taking seriously their corporate social responsibility. Accounting firm, PwC, for example, has created a free COVID-19 Navigator to help organisations understand the impact of the pandemic on every area of their business, including their supply chain. The company has also launched a tool to track tax, legal and economic measures undertaken in countries around the world in response to COVID-19.
Similarly, American software company Salesforce is helping businesses globally plan their response journey to COVID-19, through a variety of scenario planning resources covering the next 18-36 months. Meanwhile, CcHub, Africa’s largest innovation incubator, announced it will offer funding and engineering support to firms developing tech projects which can help to curb the social and economic impact of COVID-19.
Global network initiatives
In addition, there are other global initiatives from industry networks and other organisations. The World Economic Forum for example launched a COVID Action Platform, calling for its members to cooperate in order to limit the disruption to lives and economies around the world during and after the pandemic. It also launched its “Great Reset” initiative, a long-term commitment to rebuild the foundations of our economic and social system for a fairer, more sustainable future.
The global network “Business Fights Poverty”, which brings together companies and people wanting to tackle specific societal issues, published a “Rebuild better Framework” in May this year, which outlines how business can support the needs of their stakeholders, from employees to supply chain partners, customers and communities across three areas of impact: in their lives (health and safety), livelihoods (jobs and incomes) and learning (education and skills).
The investors community equally committed to help with the economic recovery: In March this year, the UNPRI urged its signatories to support sustainable companies through this crisis “even if that limits short-term returns.” In turn, BMO Global Asset Management, together with 194 other investors representing over $4.7 trillion in assets under management, urged the business community in an investor statement “to take what steps they can” and to consider in particular to provide paid leave, prioritize health and safety of their workers, maintain employment, maintain supplier and customer relationships and apply the highest level of ethical financial management and responsibility.
Looking ahead – what companies should consider, and where to look for support
Amidst this volatile environment, companies as much as investors and academics, have been looking very closely over the past few months, which business characteristics have contributed to comparatively stronger resilience of some companies – and not just those, where the product or service offering pushed sales during the pandemic, such as technology firms or online meal delivery services. Their conclusion: Those companies that have given ESG issues priority are now considerably better equipped to deal with the consequences arising from the pandemic, and they will also be more resilient when faced with future threats.
Sustainability indices’ performance underline the “power of ESG”: In the first quarter of 2020, Morningstar reported 51 out of 57 of their sustainable indices outperformed their broad market counterparts, while MSCI reported 15 of 17 of their sustainable indices outperformed broad market counterparts across regions and index methodology.
ESG as a crisis remedy during and post pandemic emphasises the business case for sustainable business conduct: 1) Companies with a strong ESG focus have risk management processes in place to continually assess long-term and emerging risks, helping them to draw up long-term contingency plans, hence improving corporate resilience. 2) Companies with high ESG scores are engaging more regularly with their relevant stakeholders, from suppliers to employees, customers and governments. This constant dialogue, representing a strong “S”, will have helped such firms to respond to their stakeholders’ needs during the pandemic and anticipate how attitudes and preferences may change post pandemic, therefore again improving business resilience.
Read the other articles in the series:
The S in ESG
Social Enterprises – making a difference while leading by good example
Social Impact Investing – the search for companies delivering financial return and positive social outcomes
Corporate clients who would like to discuss this topic further should contact:
Dr Arthur Krebbers, Head of Sustainable Finance, Corporates or
Varun Sarda, Head of ESG Advisory