Build Back Better - Do business leaders think a sustainable recovery is the way forward?

Build Back Better - Business leaders joining calls for a sustainable COVID recovery.

“It is clear that many aspects of our lives will never be the same again. Some industries may never recover from this crisis. We must use this challenging situation as an opportunity to work together with our global and national partners alike, to build a stronger and more resilient economy with the Sustainable Development Goals at its heart” 

Open letter by 150 UK business and civil society leaders in a letter to PM Boris Johnson 

While the pandemic is a public crisis, it has affected all businesses, mostly negatively. Now that we are in the recovery stages of the crisis, with most countries gradually easing restrictions, and companies able to start planning for a post-COVID future, it is worth checking how business leaders are seeing the recovery unfold.

What leaders think might come next

In a recent survey of Fortune 500 CEOs US business leaders were in agreement on a number of different aspects:

• It will take a while before the economy fully recovers, with three-quarters believing it won’t be before Q1 2022 and some thinking it won’t be until Q1 2023.
• Nationalism will rise and supply-chains will become less global
• More than half don’t think business travel will ever return to pre-COVID levels
• The crisis has accelerated the pace of technological transformation in 75% of companies
• Forty-eight percent of CEOs believe the pandemic will accelerate the move towards stakeholder capitalism

The commitment to stakeholder capitalism as expressed by last year’s US business roundtable statement seems to have been strengthened, with only 18% who believe it will be slowed down by the pandemic. But at the same time, over 40% of CEOs believe that concern about the environment will fall as a result of the more immediate focus on economic problems, pointing towards the increased importance of the social aspects of sustainability.

These concerns were reflected in a recent GlobeScan and BSR survey of over 100 senior sustainability professionals across the world. A majority of these believe that the crisis will either “enhance the need and relevancy of corporate sustainability going forward as we adapt to the new reality, or that it will lead to additional expectations or challenges for corporate sustainability (for example greater emphasis on social issues or health and safety)”. The group expressed particular concerns that corporate sustainability budgets will decrease over the next 12 months, which is a more negative outlook than that seen after the 2008 financial crisis.

A sustainable recovery is popular with business leaders and investors

In contrast to the above perspectives, the past few weeks have seen business leaders collectively become vocal about the kind of world they hope to see emerge from the COVID-19 crisis. In the first half of June Prime Minister Boris Johnson received not one but two open letters letters from a diverse group of leaders:

On June first, the Cambridge Institute for Sustainability Leadership coordinated a letter that was signed by more than 200 leading UK-based businesses, investors and business networks calling for the UK to deliver a “clean, just recovery, that creates quality employment and builds a more sustainable, inclusive and resilient UK economy for the future".

On June 9th, Freshfields Senior Partner Edward Braham together with over 150 business and civil society leaders wrote a letter coordinated by UKSSD and the UN Global Compact to ask that the UN Sustainable Development Goals (SDGs) are used to consolidate and future-proof COVID recovery plans. Specifically, the letter recommends that the government:

• Use the SDGs to unite all sectors behind a plan to build a stronger and more resilient economy.  
• Use the SDGs to prioritise the most vulnerable in our society and level-up regional and societal inequalities.  
• Use the SDGs to build coherent policies for a healthy planet and to aid the transition to net zero. 

In the US, CERES brought together over 330 major businesses representing over $11trn in market capitalisation calling on the US Congress to “build back a better economy by infusing resilient, long-term climate solutions into future economic recovery plan”.

Investors have made similar demands from political leaders with over 100 investors representing over €11trn of assets under management writing to  leaders and decision-makers across the European Union (EU) demanding a green recovery from the COVID-19 pandemic. Specific asks were to:

• Prioritise human relief and job creation without locking in high carbon pathways.
• Support the Green Deal and uphold the Paris Agreement 
• Ensure COVID-19 support addresses climate risk
• Prioritise climate resiliency and net zero emissions economic solutions, and 
• Embed investor participation in recovery planning

So why are business leaders and investors so keen for a sustainable recovery? Quite simply, it makes business sense, also known as enlightened self-interest: The growing demands for social justice and racial equality, the constant and consistent threat of climate change, the growth in low-carbon solutions and the need for a circular economy have created an operating, financial and political climate that supports sustainable growth.

What can business leaders do?

In addition to making their voices heard, business leaders’ priorities are likely to shift based on the lessons learned from the pandemic. With exquisite timing, the World Economic Forum, in partnership with Harvard, released a paper this week entitled ‘A Practical Guide to Stakeholder Capitalism for Boards of Directors’. The authors identify six leadership priorities for boards beyond the COVID-19 crisis to ensure their companies’ longer-term competitiveness and resilience as well as addressing societal challenges exacerbated by the pandemic:

• Align strategy and capital allocation with drivers of long‑term value creation
• Internalise material ESG&D [Environment, social, governance and diversity] factors in enterprise risk management
• Strengthen preparedness and resilience to crises and systemic shocks
• Engage the firm in cooperative efforts to strengthen its operating environment
• Prepare the company’s mainstream reporting in an integrated manner
• Adapt the Board’s organization, composition and engagement to these imperatives

It appears we may be learning some useful lessons from this crisis. Those companies that were already benefiting from the growing interest in sustainable solutions and investments will be able to use the recovery as an opportunity to leapfrog those companies that once dominated the corporate landscape but are struggling to adapt to changing times.