How COVID-19 Has Impacted Corporate Sustainability

While it would be easy to assume that the COVID-19 pandemic has derailed companies' sustainability efforts, the fact is that most are pushing ahead with their targets.

According to research from NAEM, a full 90% of companies were on track or ahead of schedule with their sustainability/ESG reporting efforts, while 77% were set to hit their greenhouse gas reduction goals. Although the survey was completed three months into the shutdown, it still gives us some insight into how brands are prioritizing their sustainability efforts during the pandemic.

In recent weeks, we’ve also noticed an uptick in industry news articles about corporate sustainability — and we're sensing that this might signal a heightened interest in sustainability efforts. It makes sense, in a way: companies have come to recognize sustainability as not only a “nice to have”, but as a mission-critical objective.

As our team discussed this topic, we wondered what other research might be available to support this notion. Here’s a sampling of what we found:

  • Companies like Walmart, Apple, Microsoft, BP and Ford Motor Company have all announced net zero targets this year
  • Similarly, net zero commitments from businesses and local governments have doubled since last year, according to a report published by the Data-Driven EnviroLab and the NewClimate Institute.
  • A new report from the Governance & Accountability Institute showed an increase in corporate sustainability reporting among companies of all sizes
  • Investors favor companies that practice good governance, setting records for sustainable investing in 2020
  • A public perception survey from GlobeScan and GRI shows that trust in how companies communicate their sustainability performance has increased to a record 51% this year
  • China, the world’s largest economy, recently announced its intent to become carbon neutral by 2060

Our findings show that corporate sustainability has not been sidelined during the pandemic. Rather, we found quite the opposite to be true: many businesses have actually doubled down on their sustainability efforts. Likewise, environmental stewardship, social responsibility, and corporate governance have remained at the forefront of customers and shareholders’ minds.

EHS in the spotlight

At the beginning of 2020, climate change dominated the conversation. Massive wildfires were raging in Australia, as climate scientists announced that our planet was headed for its hottest year on record. Business leaders, economic experts, and policymakers gathered in Davos for the World Economic Forum (WEF), where climate change emerged as a central issue. BlackRock, the world’s largest money manager, declared its plans to avoid investments in companies with a high sustainability-related risk.

Once shutdowns began, however, our collective attention shifted to health and safety. Corporations were focused on how to maintain operations and reopen safely. Naturally, many EHS leaders were pulled in to assist with the crisis response.

One might expect this to result in a slowdown on other sustainability efforts — and in some cases that may be true. Among the companies surveyed by NAEM, only 64% were on schedule to meet their sustainable sourcing initiatives. That means more than a third of companies are off track..

Waste reduction is another area where companies have fallen behind, for obvious reasons. COVID-19 has increased the use of disposable packaging and single-use items such as masks and gloves, meaning more waste is being produced. At the same time, prices for scrap materials have dropped and recycling collection has been delayed or suspended, leaving companies with fewer options to dispose of waste materials.

One surprising silver lining of the shutdowns is their impact on greenhouse gas (GHG) emissions. Global carbon dioxide emissions are expected to drop by 8% in 2020 — the largest decline in history.

Since the pandemic began, many businesses have slashed their greenhouse gas emissions, putting them ahead of their reduction targets — not the challenge it might have been, now that many employees are working from home. With fewer people in the office, companies have reduced their office space and, in turn, their energy usage. And with business trips on hold indefinitely, companies have cut back on carbon emissions related to corporate travel. Many of these changes are likely to remain even after the pandemic is over, illuminating a possible pathway for companies to achieve net zero or carbon neutral operations.

Navigating disruption

Much of the work companies have done with regard to sustainability has been focused on climate risk. Organizations have developed the knowledge, tools, and processes to identify vulnerabilities and respond quickly to emerging challenges. These efforts paid off when the pandemic hit.

Take supply chain disruption, for example. Astute CEOs have long recognized the dangers of putting all their proverbial eggs in one basket. These risks have been amplified by the global increase in climate-related disasters. A hurricane could shut down refineries along the coast, disrupting the supply of fuels needed for their operations. Planned electricity outages designed to prevent wildfires can leave businesses without power for extended periods of time, interrupting production and putting deliveries behind schedule.

Knowing this, companies have been carefully examining their supply chains for weaknesses and developing contingency plans. Thus, organizations that had prepared for potential supply chain disruption were able to respond more quickly when the pandemic hit. Having a backup plan helped businesses avoid significant disruption when suppliers were shut down or unable to get supplies in or out.

Sustainability efforts are also helping companies take advantage of new opportunities and prepare for a post-pandemic recovery in surprising ways. Electric utilities, for example, had already been investing heavily in renewable energy, storage infrastructure, and energy efficiency solutions. These same investments can help create jobs, increase energy bill savings for customers, and make the grid more flexible and reliable in the future.

Likewise, organizations with good governance practices had a leg-up because they already had effective structures in place, such as cross-functional teams to coordinate and mobilize a response and data analytics tools to support decision-making.

Doubling down on sustainability

The coronavirus pandemic has made one thing clear: Now is the time to double down on sustainability. The economic recovery depends on it.

For evidence, corporate leaders only need to look at the 2008 recession. An analysis from nonprofit Responding to Climate Change Limited (RTCC) revealed that after the financial crisis, the average company score on the Dow Jones Sustainability Index increased significantly — suggesting that companies shifted toward greener business practices in the wake of the crash.

Likewise, sustainability should be central to companies’ post-pandemic recovery strategy. That means finding ways to improve operational efficiency and reduce resource usage. Investing in new technologies that support sustainable growth. Increasing their focus on issues like diversity, social justice, pay equity, and employee health and wellbeing.

It won’t be easy, but companies that prioritize sustainable practices now will be well-positioned to survive the downturn and emerge as leaders in the next growth period.

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