20 Jan 2021: Thinking Long Term, Acting Short Term
By Ryan Anderson
Sustainability Strategy, Communications, and Outreach Specialist, CvCC
2020 proved that companies can no longer plan for global pandemics and climate change as unlikely or distant scenarios. Many companies accounted for a pandemic in their risk calculations, but less prepared for it across their value chains. Factory shutdowns, delayed deliveries, cybersecurity breaches and more reduced profits and, ultimately, led to mass layoffs across the US and world.
To avoid these problems in the future, many governments, companies and other large institutions have taken major action to address climate change and other urgent environmental issues in 2021. Most notably, the Biden administration plans to immediately push a $2 trillion bill for clean energy infrastructure and other climate solutions through Congress.
We at Companies vs Climate Change Sustainability Consulting (CvCC) strongly recommend that your company joins these climate commitments in 2021. Climate actions and preparations this year will help ensure your company’s value chain adapts to future environmental stressors of rising sea levels, more frequent storms and increasing droughts.
If considering what aspect of your value chain to address in 2021, we recommend focusing on the following business activities that the Covid-19 pandemic exposed or brought to the forefront of the public discussion in 2020:
Supply Chain Resiliency
A Capgemini Research Institute survey found that 80 percent of organizations experienced negative effects to their supply chains during the Covid-19 pandemic. 68 percent of the 1,000 Capgemini survey respondents said their companies required three months or more to restore all operations across the supply chain.
CvCC highly recommends a supply chain vulnerability assessment and remediation in 2021 if your company falls in the group that spent three months or more to restore operations in 2020. These assessments prepare your supply chain for the next social, health or environmental crisis that unfortunately is inevitable in the future. CvCC consultants have the expertise to evaluate and improve the essential components of a resilient supply chain of contingency planning, localization, diversification, sustainability, agility, end-to-end cost transparency and visibility.
Companies that participated in the environmental, social and governance movement in 2020 outperformed companies that did not in a number of metrics. The Fidelity International sustainability rating system found that stocks that received an A or B on their ESG rating scale outperformed stocks with a D or E for every month January through September 2020 for the exception of April.
This relatively high performance of sustainable companies has attracted investors. Morningstar found that US ESG funds experienced a $21 billion net inflow in the first half of 2020. This nearly broke the annual record for sustainable fund net flows of $21.4 billion set in 2019.
2021 will likely witness more sustainable investment due to the perceived resilience of ESG stocks and recent ESG policies and plans adopted by major investors. For example, BlackRock committed to valuing ESG considerations in all of its $7 trillion assets. Meanwhile, 30 global asset managers committed to the Net Zero Asset Managers initiative in December of 2020. These signatories committed to achieving net zero greenhouse gas emissions by 2050 across their portfolios, which comprise $9 trillion in assets under management.
CvCC has multiple experts in ESG reporting and strategy that can help your company attract investors during this expected boom in ESG investment.
Recentering Attention on CSR
The COVID-19 pandemic reasserted the critical role people play in the sustainability of companies. Companies need healthy, happy and productive employees, suppliers and customers to achieve short and long-term sustainability, mission and value creation goals. CvCC recommends recommitting or refining your corporate social responsibility programs to satisfy the needs and interests of each of these stakeholders in 2021.
First, implement actions that adhere to CSR investment trends to satisfy shareholders. The Principles for Responsible Investment (PRI), for example, surveyed their more than 3,000 signatories regarding changes they made to their investment strategies in response to the events of 2020. A majority of the respondents said they prioritized social issues such as employee health and wellness, paid sick leave and diversity training due to not only COVID-19, but the Black Lives Matter protests.
Keeping your employees happy and productive in 2020 begins with keeping them employed during an unprecedented year for job losses. Studies find that employees whether remaining or leaving do not respond to layoffs and furloughs well. The Harvard Business Review determined that employees remaining after layoffs experienced a 41% decrease in job satisfaction, 36% decrease in organizational commitment and 20% decrease in job performance.
To avoid layoffs and furloughs in the near- and long-term consider programs that either directly reduce layoffs or reassure employees during times of crises. These programs could involve cutting salaries for top executives, introducing voluntary short-term leave, staggering temporary furloughs and more.
Finally, customers support companies that visibly address social and environmental issues. In 2020, seventy percent of consumers that participated in Sprout Social’s #BrandsGetReal series surveys said they want to see brands take a stand on social and political issues. Many companies have improved their public reputation in 2020 by donating Covid-19 protection and treatment equipment, switching production to products and services that address the pandemic or committing to efforts that address racial inequality, poverty and climate change.
Conducting materiality assessments will help your company determine the CSR issues to prioritize in 2021 from this list of many. Our team of CvCC consultants has helped companies of all sizes determine the social and environmental issues most material to their business through organizing and leading interviews and surveys of critical stakeholders. These materiality assessments help to both guide sustainability strategy and complete ESG and sustainability reporting standards such as the GRI, SASB and more.
Final Takeaway: View Social and Environmental Stresses as Inevitable and Imminent
While 2020 was a hard year, it was a not a lost year. The world stands to benefit greatly from the many proactive commitments taken by world leaders, major corporations and other institutions to address racial, economic and cultural inequalities, climate change and other wicked problems. These commitments happened because COVID-19 demonstrated that these wicked problems are not far-out scenarios, but rather inevitable situations in our future.
Whether you choose to work with CvCC consultants or not, I recommend envisioning how your company will respond to these inevitable threats in the not-too-distant future. You can find many resources to help with this scenario planning. To start, I highly encourage reading through the PRI’s Inevitable Policy Response Initiative that forecasts the most likely and impactful policies national governments will take by 2025 to address global climate change. The most proactive companies will have little trouble adapting to these policies and build a head start into achieving ambitious goals such as net-zero carbon emissions.