With COVID-19 upending life and the metrics we use to track development of all kinds, the original concept of the triple bottom line, as coined by SustainAbility (now an ERM Group company) co-founder John Elkington in the 1990s, has been on my mind as I consider ERM’s responses today and how the pandemic will affect the sustainability agenda over time.
Elkington recognized that, while we measure economic outcomes in financial or profit terms, measuring the health of society and progress on sustainable development requires accounting for social (people) and environmental (planet) impacts as well.
In the immediate short term, I am certain the answer is to prioritize people. We have to protect lives before we can re-open any economy, even in a restricted manner. Thankfully, the safety and health of ERM’s staff, clients and partners, and anyone else we are accountable for is at the core of the way we do business.
This focus is amplified by the unique and universal threat the coronavirus poses, and we are taking extra precautions to keep our workforce safe while helping clients to keep their people safe also. I am incredibly proud that ERM is providing solutions to solve clients’ most complex issues related to the COVID-19 pandemic, in ways that protect their employees and businesses by enhancing pandemic resilience efforts.
Human cost; unclear horizons
The pandemic is not nearly over. We may well be living with the rhythms it forces on us for a year or even two until the virus wanes, a vaccine is developed, or we otherwise develop immunity. With much uncertain, we do know that COVID-19’s toll is already staggering. As reported in The New York Times and elsewhere, more than 2.4 million people had been infected globally by April 21st, and at least 169,000 have died.
In addition to the human toll, the economic consequences emerging are enormous. Millions have lost their jobs, and informal economies have been brought to a standstill. Societies and economies are learning harsh lessons about their fragility, and the situation makes it hard to discern what will happen to issues that have been subsumed by the coronavirus, including sustainability.
Sustainability, now more than ever
ERM’s purpose, shaping a sustainable future with the world’s leading organizations, commits us to the sustainable development agenda in good times and bad. Thankfully, as I consider the future of the firm and the wider economy, sustainable development appears if anything even more essential now than pre pandemic.
While the lessons of the coronavirus are only beginning to crystalize, several that validate sustainability practices are already evident.
It’s notable the degree to which the crisis is affirming the value of Environmental, Social and Governance (ESG) practices for investors and companies. Early analysis of information from Morningstar, Bloomberg and Blackrock suggests ESG investments and companies that are strong ESG performers have been weathering the impacts of the virus better than others. The WSJ expressed it this way on March 25th:
Environmental, social and governance investing was growing in popularity before the virus began to circulate, as investors flocked to companies that have taken steps to manage nonfinancial risks related to matters such as climate change, board diversity or human rights issues in the supply chain. But the pandemic has demonstrated on a large scale the importance of other factors that are paramount to ESG investors. Among them: disaster preparedness, continuity planning and employee treatment through benefits such as paid sick leave as companies direct employees to work from home.
Major institutional investors agree, as seen in this Morgan Stanley post April 6th suggesting, “The coronavirus pandemic will put more companies under scrutiny for decisions that impact employees, customers and society,” and that ESG factors will carry even greater weight in future than pre pandemic.
COVID-19 also makes Blackrock’s Larry Fink’s 2019 ruminations on purpose look all the more prescient: organizations with a clear societal purpose like Unilever have been incredibly nimble in pivoting to address COVID-19, underscoring Fink’s precept that “Purpose is not the sole pursuit of profits but the animating force for achieving them.” Companies that are both authentic and effective stand out in crises and will be market winners over the long term.
Hard as it is to believe, we have had the UN Sustainable Development Goals and the Paris Agreement on Climate Change only since 2015. COVID-19 is a fast-moving systemic challenge that has upended business and life as usual virtually overnight. The issues targeted by the SDGs and the Paris Agreement — including climate change, inequality, and biodiversity — are slower moving, but near enough that we can be sure that they will transform commerce and social structures in this generation.
In that light, the coronavirus has to be an inflection point, one at which the public and private sectors learn to think in more systemic terms, to anticipate and plan for probable futures whether we like the scenarios or not, and to build resilience capable of meeting the challenges those scenarios deem most likely regardless our preferences or beliefs.
The business of business . . .
Milton Friedman was one of the most influential thinkers of the last century, so it takes hubris to say his thinking was too narrow. But it was. The social responsibility of business as framed by Friedman is only to increase its profit within the rules of the game. We see today how business accountability and efficacy are expressed in stakeholder, not just shareholder, capitalism. The Business Roundtable’s redefinition of corporate purpose last summer moved such thinking further into the mainstream, and similar mindsets are now infiltrating evermore private sector organizations everywhere.
This shift is captured by Rebecca Henderson, the author of Reimagining Capitalism in a World on Fire, as quoted in the Financial Times: “The first thing is that I think the pandemic makes it increasingly hard to hold on to the idea that the business of business is merely business, that we only need to worry about the health of the free market and someone else will take care of everything else.” While the business of business is and will remain inclusive of profit, we have a different view today of what is relevant to the private sector and therefore within the scope of its accountability and purview to address.
Vulnerable but fast-learning
COVID-19 has shown more starkly than almost anything previously how vulnerable our modern, globalized world is to a fast-moving systemic shock. While marginally slower moving, climate change and other sustainability issues present similar systemic threats. It is critical that we learn to address these collectively and comprehensively. ERM refers to itself as the business of sustainability and is committed to leading on the short-term challenges presented by COVID-19 and on the longer-term sustainability agenda.
COVID-19 feels in many ways the ultimate sustainability event. While we mourn its impacts, we will not let its lessons escape us, and we invite others to collaborate with us on the next stages of society’s sustainable development journey.