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Sustainability and COVID-19: A disconnect?

The question we are addressing in this article is: Did the companies that have included sustainability and corporate responsibility in their strategies, acted fair und provided help during Corona (COVID-19). We are looking at the strategies of the companies and are providing examples of actions implemented in certain industries. Did they act responsibly or did they merely focus on limiting the financial impact (and did not pursue their sustainability goals as expected from measures linked to sustainability and COVID-19). We have identified two three phases the companies have undergone:

Phase 1: Risk minimisation for the company

The initial reaction to the threat “COVID-19” was to mitigate the risks for the company. Companies have limited the access to the offices for their employees and started often short-time work (limiting the impact for their employees with government support programmes). The safety of employees was needed in order preserve Know-How. The financial threat of COVID (lower discounted free Cash Flows) led to risk mitigation measures primarily in connection with the Human Capital thus avoiding reputational and licence-to-operate risks.

Phase 2: Trying to make business

In Phase 2 companies that have not been affected by decreasing demand or companies that were not forced to close their business carried on with their business. Those companies that were hit by COVID-19 measures (aviation, etc) tried to support the most urgent needs. Some helped to create masks, some supported logistics of getting masks. Those companies that faced an increasing demand (telecommunication, banks, etc) had to make sure that their business was functioning with a decreased workforce or employees working from home.

Phase 3 : Sustainability measures? Not really?!

Nearly all larger corporates have started to prepare sustainability reports in the past and included sustainability strategies in their vision or mission. So, the question is: What have they done voluntarily during the COVID-Phase (COVID-Shutdown) that had a positive impact on society? Which measures have been started showing, that a company did not only focus on itself, but on the society and its societal impact during this phase? The economic triple bottom principle defines that a company must be financially healthy to be able to implement sustainability measures. COVID-19 – of course – was a severe threat, but large multinationals have and had reserves to overcome a two months shutdown. Let us have a look at some examples of measures taken:

Banks:

+ Processor of the governmental support programs for businesses

+ Banks overdrafts

– No interest relief

– No measures with direct financial help

– No active communication of stock-exchange developments in the beginning

Insurance Companies:

+ Some companies offered monthly reduction of insurance premiums

– No coverage for corona incidents (tbd)

– No monthly relief with insurance premiums in general

Retailers:

+ Protected employees fast (plexiglass)

+ Ensured that supply chains keep working

+ Hired new employees due to increased demands

– Some chains sold face masks (and did not give away them for free)

– No price reductions in general

Real Estate Companies:

+ Construction activities started again quickly

– Laws had been necessary to prevent delogations due to payment difficulties due to Corona

– Unclear situation of business rents

Airlines:

+ Helped to bring back home residents

+ Helped to transport masks from China

– No refund of cancelled flights (tbd)

Infrastructure providers (Electricity, Telecommunication, etc):

+ Ensuring security of supply

+ Some Telecommunication providers gave download volume for free (5GB)

– No financial relief for monthly installments (power, gas or heat, etc)


These examples show that

  1. A lot of small initiatives within the existing business models have been started
  2. But in general, no real new sustainability measures have been implemented in a phase where people would have needed it most and
  3. No financial relief was offered by nearly any of the companies in all industries. When it comes to financial support or reduced pricing of products and services no goodwill has been shown.
  4. The positive environmental impacts (COVID led to a significant reduction in Co2 Emissions: approx. 7% reduction in 2020) have been due to shutdown and not any measures taken.

Conclusion

For companies it was important to reduce the financial risks of the company first and foremost. (remember the economic triple bottom line principle – mentioned above). Though companies have started the sustainability journey years ago, it has been clearly shown that such a crisis as COVID is and was, caught the companies unprepared. If they want to show their sincerity about sustainability, they need to do much more than has been shown during the crisis. It will be interesting to see how they will comment on the crisis in their 2020 sustainability reports. Contact us to close the gap between sustainability and COVID-19.

By Georg Tichy

Georg Tichy is a management consultant in Europe, focusing on top-management consultancy, projectmanagement, corporate reporting and fundingsupport. Dr. Georg Tichy is also trainer, lecturer at university and advisor on current economic issues.

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