Pandemic Recovery with Sustainability on the Agenda

The outbreak of COVID-19 is continuing to cause disruptions for every organisation in Australia, fundamentally changing the way business is done in almost every industry. Over the past few months, businesses across the country have adapted swiftly to protect the health of their employees and customers, dealing with today's challenges and getting ready for what comes next.

Even as companies fight to keep their footing in a COVID-19 world, business leaders are starting to see the possibilities of embedding more sustainable and responsible business practices into their plans for the future.

The pandemic has raised the stakes for consumers too. Public scrutiny is rising, and will continue to rise, on any practices that fly in the face of corporate citizenship. In March, a global study from Edelman showed consumer expectations of businesses increasing during the crisis, with 78%¹ expecting companies to act to protect employees and the local community.

Clearly, during the current crisis, the safety of colleagues, customers, cash flow and business continuity take precedence. But, even now, there is a compelling short-term business case for environmental, social and governance (ESG) practices that are directly linked to better outcomes for business and society.

Five steps to a sustainable advantage

1. Keep consumers at the heart
   The research is clear. Demand from consumers for responsible and sustainable products, services and practices is rising during the crisis. Customers expect businesses of all sizes to step up – to do the right thing by their customers and help broader communities. Many companies have earned accolades for the COVID-19 support they have been providing. Others have faced reputational damage that will be hard to overcome. The response of every business during the pandemic will make or break their long-term relationships with consumers. According to Edelman’s ‘Trust and the Coronavirus’ survey in March, 74%¹ of respondents in the UK said companies that prioritised profits over people would lose their trust forever. 64%¹ agreed that how well a company responds in a crisis will impact future purchasing decisions, while 24%¹ began using a new brand based on its actions during COVID-19.
2. Engage your employees
   The COVID-19 crisis is a defining moment for employers. In the short term, many are being tested to make tough decisions, such as reducing salaries and cutting bonuses. Others are planning for medium-term moves that set the stage for a more resilient, sustainable future, coming together with employees to reshape working practices for the greater good. Every business leader recognises that the most powerful driver to a post-COVID recovery will be the human capital in their company. And those that can communicate difficult decisions today in ways that align with responsible, sustainable business values that their most valued employees share – on climate change, equality and human rights – will retain and attract the best talent.
3. Work with suppliers
   If there was ever a time to put thoughtful, sustainable practices into supply chains to ensure more resilience, it’s now. Businesses do not operate in a vacuum. The UK economy is dependent on complex supply chains that span the globe. And while the pandemic may have exposed weaknesses in some models, it has opened the door for companies to create shorter, stronger, simpler supply chains that can react more quickly in crisis situations. This will also help with more sustainable, transparent and environmentally friendly production. In shifting to shorter supply chains, businesses will be able to reduce pollution levels and emissions, and leverage new technologies to be more efficient.
4. Consider the environment
   Even in a pandemic, resource efficiency – such as energy and water conservation – benefits the bottom line. Investing in energy efficient plant and machinery can offer tax breaks through Enhanced Capital Allowances, for example, and a reduced carbon footprint can result in reduced costs and higher profitability. But the benefits go beyond the balance sheet. UK cities recorded cleaner air during the initial lockdown period with mean reductions of nitrogen oxides of between 30 and 40% recorded² as a result of a near total shutdown of the big sources of pollution. According to research from the Centre for Research on Energy and Clean Air, this meant that 11,000 pollution-related deaths were avoided across the UK and Europe³. COVID-19 has catapulted UK companies to a future of flexible remote working, driven by technology, that’s reducing costs and helping to dramatically cut emissions and waste.
5. Think longer term for your investors
   Sustainable investing (the integration of ESG factors into investor analysis and decision making) has also seen a remarkable rise over the past couple of years. A company’s credentials as a ‘corporate citizen’ are now a major backbone of today’s investment trends. So far, the coronavirus outbreak hasn’t stopped the growth of sustainable investing. In fact, through the crisis, portfolios focused on ESG have outperformed those that aren’t⁴. Stocks of companies with strong ESG credentials have proven a safe haven in disrupted markets, elevating sustainability even further up the investor agenda. Investor expectations of businesses to create, and live up to, more purposeful missions and values will only increase.

The pandemic has produced a variety of shifts that will change how successful businesses operate in the Australia and globally. Companies that commit to sustainability during the crisis can be put in a stronger position. By doing so, they may create more solid customer relationships, improved employee loyalty, enhanced supply chains, higher productivity and increased corporate reputations.

Useful links

Find out more about environmental taxes, reliefs and schemes at www.environment.gov.au/topics/about-us/business-us/tax-concessions

¹ 2020 Edelman Trust Barometer Special Report: Trust and the Coronavirus

² https://uk-air.defra.gov.uk/assets/documents/reports/cat09/2007010844_Estimation_of_Changes_in_Air_Pollution_During_COVID-19_outbreak_in_the_UK.pdf

³ https://energyandcleanair.org/air-pollution-deaths-avoided-in-europe-as-coal-oil-plummet/

⁴ https://www.morganstanley.com/ideas/esg-funds-outperform-peers-coronavirus#:~:text=Sustainable%20funds%20outperformed%20traditional%20peer,Stanley%20Institute%20for%20Sustainable%20Investing.