Sustainability has been thrust to the fore of business strategy discussions in recent years, becoming such a focus that any business forum or conference would inevitably have a portion, if not the whole, of its programme dedicated to addressing the subject.
But what happens when a “predictable surprise” such as a pandemic redirects everyone’s attention? Would the practice of sustainability prove its worth or become an afterthought in the scramble to survive and restart basic business operations?
We recently interviewed a number of sustainability business experts about how they thought corporate sustainability practices would be impacted by the Covid-19 pandemic.
In the face of future crises such as Covid-19 and the effects of climate change, businesses should start to educate their teams across the organisation and enable all levels and roles to be able to reach into the sustainability tool box to strengthen their operations.
Our immediate concerns were that there was little clarity about how companies’ sustainability experts were responding and how businesses were using their sustainability resources to weather this storm; and whether the response to and recovery from the pandemic might slow down the embrace of sustainability by companies and investors to improve their business decision-making and strategies.
Based on research that we conducted over the last year and half for “Leading Sustainably—The path to sustainable business and how the SDGs changed everything”, our upcoming book from Routledge, we believed that companies with mature sustainability programs were better positioned to handle and survive this unusual crisis, and that ESG/sustainable investing portfolios were more secure in a chaotic market.
The companies that we had interviewed for the book—spanning industries from hospitality to waste management, fashion, finance, and more—ones that had embraced sustainability in their core strategies, were taking a stakeholder perspective that looked beyond investors to examine their relationships in all the spheres in which they had a presence.
This enabled them to better understand and improve the impacts that they had on communities, ecosystems, consumers and business partners. In turn, this improved visibility into their impacts prepares them to respond more quickly and effectively when problems do happen.
According to the experts with whom we spoke in the past couple months, all the groundwork that has been done in the past decade and before has indeed helped businesses be more resilient in the face of the Covid-19 crisis, with sustainability strategies becoming more indispensable to businesses in the process.
A short survey that we first conducted with 30 chief executive officers (CEOs), senior managers, entrepreneurs and investors showed how businesses thought that their sustainability stance might change in the new future.
The majority of respondents to the survey believed that the level of focus on sustainability in their companies would remain the same (40 per cent) or increase (30 per cent), though most thought that the priorities would change (57 per cent).
They thought that CEOs should focus on having “nimble staff and diversified supply chains”, improving resilience, accepting the new normal and enhancing their sustainability strategy, and implementing long-term planning so that they could suitably weather 8 to 12 months of local or global instability.
A majority, too, thought that resources such as budgets and people would remain the same (36 per cent) or increase (28 per cent) over the next 6 to 12 months, for a total of 64 per cent.
The experience of Dr. Mark Milstein, director of the Center for Sustainable Global Enterprise and Clinical Professor of Management and Organisations at the Johnson Graduate School of Management at Cornell University, confirms this continued focus on sustainability in businesses.
Dr. Milstein has nearly 30 Cornell students that were leading seven corporate projects before the onset of the Covid-19 crisis. In his recent communications with those and other companies, while he sees them trying to quickly respond to difficult situations with managing their supply chains and handling their workforce fairly, they have not taken their eye off the ball when it comes to sustainability.
“They still are saying, ‘Sustainability, just as important as it ever was, if not more so’,” says Dr. Milstein, “because these issues that we’re dealing with today are directly linked to sustainability issues that the field has been talking about for decades.”
He thinks that the 2008 financial crisis is the best lens through which to consider the Covid-19 situation, when it comes to what happens to sustainability programmes within businesses.
“Certainly, there were companies that looked at their sustainability employees, or sustainability-related employees that were occupying very specific niche roles, and those folks might have lost jobs,” he says. “But the companies that you see who led from 2008 until now were the ones that said, ‘This is the time to invest (in sustainability), because we understand getting better at sustainability means we’re more resilient over time.’”
Annette Stube, former head of sustainability at Maersk Group and a board member at Fortum OYJ has seen that companies with more experience in practicing sustainability have been better prepared to manage the situation and offer services to help resolve problems. She attributes this to their deep understanding of society’s expectations for them.
“Companies who are well versed on the sustainability agenda, who have reached a kind of maturity level, have probably been able to adjust to the situation more quickly than others in the sense of understanding their own role in society. And that’s what this is all about, right?,’” says Stube.
“That’s the request that we are seeing from governments and from stakeholders in general, ‘Please step up as a company if you have the means in in any way. So I think this transition has happened faster in mature sustainability companies than others, because they are very well aware and acknowledge their role in society.”
Stube believes that the advantage that companies with robust sustainability strategies have comes from their knowledge of how to navigate complex and competing requirements from both internal and external stakeholders.
“The ability to balance different and sometimes contradictory needs is something that all sustainability people know very well, because that’s what we do every day. And I think that’s going to be key in this situation. To be able to do what is good for society and is good for the company,” she says.
“Companies will be judged on how well they manage this balance going forward, and especially right now during the crisis, but also right after the crisis. That’s an ability that that companies that have worked with sustainability for many years have built and, and are quite good at, and are also aware that they that they can do. So it’s an ability, a competency, if you will.”
“Industries like renewable energy are not seeing folks back off,” says Cornell’s Dr. Milstein. “They’re seeing their plans moving forward. That’s where the investment will be, because that’s where the future is, Covid or no Covid.”
“Other scientific indicators on habitat destruction, water quality, soil quality, air quality, have been headed in the wrong direction for a long time,” he explains, “and this is a real opportunity for those companies that have been delivering good viable solutions for those issues, to bring them to the forefront and link them back to this issue in a salient way to say, ‘If we want to avoid the worst of what this kind of situation we’re currently in has to offer, we need to make these investments today so that we have a better world tomorrow, where we’re at healthier, we’re happier. Where there’s more economic robustness to our economies and our communities.’”
Recovery and growth
To acquire and maintain the sustainability thinking that makes for resilient businesses, Fortum’s Stube believes that companies need to have sustainability programs that are themselves “resilient” within the organisation.
Such businesses embed sustainability into their core operations, rather than relegate it to a “nice-to-have” function that can be cut during tough times.
“If you have a notion that the way your sustainability programs are built is that they have to make sense for society and business at the same time, then they will be more resilient. If you have programs that just benefit society, that are just ‘nice’ philanthropic programs, then in times where the company is under great pressure, they are going to be really challenged,” she explains. “Whereas if you have programs that also make a good business case, then why would you close them down? Those kinds of programs are going to be more resilient.”
The next step in the sustainability journey for business is to move sustainability from specialised roles and divisions to become a core functional set of skills and strategies that permeates an organisation’s operations.
“We have these chief sustainability officers and sustainability offices with teams of people and, that’s usually a sliver of an organisation, usually a group that is looking at certain problems in certain ways,” says Dr. Milstein.
“And one of the issues that leading companies have been on to now for quite a while is that creating those offices and positions was a first step in in really institutionalising the issue of sustainability within the organisation. But it didn’t necessarily embed it in the strategic fabric of the organisation. That’s a slightly different issue.”
He points to Unilever, the gold standard example when it comes to businesses that have implemented transformational sustainability strategies.
Describing a visit with students to Unilever’s US headquarters in February with their head of PR, Milstein’s says “she went through each functional area within the organisation and talked very knowingly about the way in which sustainability touched that position, the way in which sustainability metrics were built into the incentive structure for those people and really demonstrated that this is not a function that is in one group of people or one functional area. This is now throughout the company. It affects every decision that they’re making, it’s the lens by which everything is viewed.”
“When we look at this kind of situation, I’m hoping that our experience here with Covid-19 and broader issues as they relate to sustainability, has forced companies to be more introspective in thinking through that these issues are not merely the domain of a couple of people in the organisation with a certain title, but they are important for everybody from the CEO suite all the way down to the line employees. Everybody ought to be thinking about this, because when a sustainability issue comes up like this, it affects every part of the organisation, not just one element of it.”
Our point of view is that as companies look to transform to a sustainable business model like Unilever, there are five steps that such organisations proceed through (see “The Five Steps to a Sustainable Business Model” above).
The majority of companies that have set out on a sustainability journey are working through Step 3, “Actions and First Wins”, perhaps even faster now because of the Covid-19 crisis testing their business-as-usual models.
The challenge for many of them is to pass to Step 4, where, as Dr. Milstein points out, sustainability concepts in the business world should become a cross-organisation priority that extend from the CEO all way down to line employees.
As we outline in “Leading Sustainably”, “Bridging the knowledge gap” is one of our three fundamental suggestions for accomplishing this cross-organisation priority setting that allows you to fully align your business with sustainability.
Companies need to create and provide their teams with as many opportunities as possible to establish the strategic sustainability knowledge base within their organisations that is necessary to make sustainability-driven business decisions. This should be done in the beginning to kick-start a journey and build an A team, and continued to reach out and train teams as a company works to achieve total alignment across the organisation and throughout their processes.
In the face of future crises such as Covid-19 and the effects of climate change, businesses that want to be able to respond as well as those leaders in sustainability—the ones that were better positioned for this massive disruption—should start to educate their teams across the organisation and enable all levels and roles to be able to reach into the sustainability tool box to strengthen their operations. Only then will such businesses have the organisational capabilities to be truly resilient when the next “predictable surprise” arises.
Donald Eubank is cofounder and principal of Read the Air, a Tokyo-based sustainable business advisory service.
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