With a few notable exceptions, 2020 has been a tough year for businesses. Tools were downed and the lights remained switched off, as the world entered lockdown. Covid-19 struck at a time when the sustainability movement was gaining traction on a global scale; from the Extinction Rebellion protests to the various national commitments to achieving net zero emissions, progress was being made, with the tantalising prospect of COP26 on the horizon.
However, with restrictions easing and world’s economic cogs beginning to whir back into life, it’s time to consider whether the impacts of the pandemic, and how governments and business respond, will derail or delay corporate sustainability, or will they usher in a more sustainable future as part of a broader economic recovery?
For many businesses, resourcing sustainability-related projects has always been a battle – often sustainability has been viewed as an optional extra – the prevailing view being that if it isn’t broke, why try to fix it? The problem is that our broader global economic system, predicated on endless economic growth, is certainly close to breaking point. Increasing government action, coupled with a shift in both business and public attitudes, mean sustainability has now entered the mainstream, but as we head towards a severe global recession, will businesses be forced to cut funding for sustainability initiatives in the post-Covid-19 world?
Edie’s recent business survey revealed that half of the respondents had postponed sustainability-related announcements whilst only 30% were confident that funding would remain steady post-Covid-19. Fortunately, the business case for sustainability has never been stronger; public perceptions, investor expectations and regulatory pressures are becoming increasingly more demanding. The business case has always been strong but often the benefits of sustainability have been indirect, intangible, or hard to quantify. For example, how do you quantify the benefit of a more resilient supply chain? It requires companies to rethink how they assess and manage risk and allocate investments.
What the current situation has done is give us a real-world case study on the potential impact of what climate-risk related disruption to the supply chain looks like, and it has further justified the increasing importance investors are placing on Environmental, Social and Governance (ESG) criteria in making investment decisions. In fact, research indicates that ESG-focused investments have outperformed non-ESG counterparts during the Covid-19 economic downturn, which clearly suggests that corporate investment in sustainability initiatives is a sound business decision in the eyes of investors. As sustainability professionals, we need to lean on this evidence to illustrate the business case for sustainability.
Much has been made of the opportunity to make the Covid-19 recovery a sustainable one, with everyone from senior business figures to leading economists to the International Energy Agency, calling for a ‘green recovery’. The challenge for governments now is to find the balance between ‘building back better’ and short-term emergency bailouts that avoid an economic disaster.
Many industries, including highly polluting ones such as the fossil fuel and airline industry, have already received or are likely to receive government bailouts. There has been extensive lobbying by businesses to ensure that support came without environmental strings attached. The airline industry even managed to water down climate commitments made pre-Covid-19 but some territories have found a balance between short term bailouts and addressing the impending climate emergency. In Canada, firms receiving Covid-19 bailouts will now be required to report annual climate-related disclosure reports in line with the Task Force on Climate Related Financial Disclosures (TCFD) recommendations. Evidence suggests that the UK may follow suit; Celsa Steel UK have been given a £30m bailout conditioned on a commitment to “climate change and net zero targets”.
Whilst it’s unlikely all nations will follow the UK and Canada’s example on bailouts, it’s far more likely that the other prong of the UK’s recovery strategy, prioritising investment in greener, more sustainable industries, will be.
We’re moving into a world where we need to reduce global emissions to effectively zero within the next 30 years and no industry will be immune from the impact of this. Already majorly polluting industries are being corralled into action – the UN’s ‘Corsia’ scheme will force airlines to offset their emissions or use lower-carbon fuels. This will be the new baseline requirement for any airline. Similar schemes can be rolled out across other industries, at both a national and international level. In the UK, Climate Change Agreements are available on an industry level – where participating businesses voluntarily reduce emissions in return for tax breaks. What Covid-19 has shown us, is that governments can act quickly, and be transformative, when necessary.
With the UK government making a lot of noise about a ‘green recovery’, the lesson for businesses here is clear: policy is evolving towards incentivising growth in cleaner, greener industries, increasing climate-related disclosures and more stringent environmental regulation. Businesses should act now, lead change at a sectoral level through collaboration with competitors where possible, engage with industry bodies, and publicly advocate for change.
Read “Covid-19 & Corporate sustainability: What comes next? – Part 2” here.
more than a word.