Opinion

Sustainability strategies for enterprise resilience in post-Covid world

Ankush Patel | Updated on October 06, 2020 Published on October 06, 2020

Covid has shown us transformational changes can be done overnight. Let’s apply these lessons in business and try to address issues that matter to collective well-being

The year 2020 marked the 50th anniversary of Earth Day, celebrated on 22 April every year, starting from 1970. Since then, we have progressed tremendously in terms of industrial and technological advancements. Sustainability has come a long way, however, the year 2020 has been nothing short of a nightmare.

Amidst a global pandemic, the world has seen massive bushfires in Australia affecting more than half the country, major forest fires in California, devastating floods in Indonesia, the Black Lives Matter movement in the USA and a 25 per cent increase in deforestation of Brazil’s Amazon. According to the New York Times, global temperatures increased by 1.9 degrees celsius in the last year alone.

The effects of this pandemic are long-lasting, but we cannot divert attention from the collective calls and debates focused on sustainability. Climate change is no longer something we cannot see and witness, it’s in our face on a regular basis. It is critical that we get effective climate action right.

In fact, Covid-19 points towards another unpleasant trend: more planetary crises are coming. McKinsey says that at an emission rate of 40 to 50 gigatonnes of CO2 per year, the global economy has 10 to 25 years of carbon capacity left.

The time to act on this was yesterday, but all hope is not lost yet. Creating a robust sustainability strategy and building enterprise resilience has thus become the top priority for company leaders, as they strive to help businesses adapt to a post-Covid world. In a way, this crisis has enabled business leaders and corporate managers to view their sustainability agendas in a new light, as they tackle pre-existing environmental, social and governance (ESG) risks.

Most enterprises, large and small, have embraced remote working, virtual meetings and teleconferencing. This has massively reduced travelling time and efforts and has showcased better air quality in urban cities.

Small, big steps

In January, residents from Delhi were gasping for breath. By May, there was a 49 per cent reduction in the city’s air quality index. Researchers also found an 87.9 per cent decrease in the Nitrogen oxide generated, that comes through traffic. In the first half of April, global greenhouse gas emissions fell by 17 per cent due to COVID-related closures according to the MIT Sloan Review, but those reductions come at the economy’s expense.

However, climate change isn’t in conflict with economic growth - enterprise leaders need to ensure to not tip the scales on either of them while keeping the greater good of our planet in mind. There is a realisation that post-COVID many employees can continue to work from home effectively.

In an organisation’s value chain, supply chains are the most vulnerable when it comes to environmental performances. According to the CDP, supply chain emissions are on average 5.5 times as high as a corporation’s direct emissions, and climate change risks could have a financial impact of $906 billion globally.

Now’s the time to bring shorter, higher-energy-efficiency manufacturing and processing and technology-led supply chains into the picture, while keeping stakeholder interests at hand. Moreover, consumers have become more aware of the way their favourite brands are responding to this challenge.

Even the smallest steps taken towards effective climate action and sustainability management will help enhance brand and reputation and create positive sentiment among the larger consumer community. Indian sustainability funds have also experienced record inflows of $507 million in first-quarter 2020, supported by Axis ESG Equity, which received $239 million in inflows, according to media reports. .

So how do we build back better?

We can start by integrating environmental resiliency into the core of our businesses. The first step for business leaders needs to be a shift in thought process — we need to be able to view the learnings that this crisis has to offer, and all the opportunities it presents. One way to do this is to conduct a post-COVID materiality assessment with key stakeholders.

Then, we move on to aligning business strategies with sustainability goals that emerge from your materiality matrix, since there is an increasing pressure to act on this not just from consumers, but investors as well. The European Council has stressed that its fiscal response to the Covid-19 pandemic will not mean abandoning its Green Deal for Europe principles.

The most important lesson, though, is that anticipating a risk is not enough. Global enterprises now need to empower and equip employees to be agile enough to embrace the new normal that Covid brings. For this, leaders need to do both — plan now and act now. Plan what can have the greatest positive impact in line with both, climate action and ESG risks — they are intrinsically linked with creating true value for shareholders. ESG-oriented investing has experienced a meteoric rise.

Global sustainable investment now tops $30 trillion — up 68 per cent since 2014 and tenfold since 2004 says, McKinsey. Companies who follow ESG frameworks diligently are not only more environment-friendly but have better social credibility and significantly higher growth.

Whether it is doubling down on energy efficiency measures or shifting from fossil fuels to renewables, viewing company-wide initiatives with a sustainability lens drives tremendous top and bottom-line impact. In fact, JP Morgan predicts that by the end of 2020, $45 trillion in assets will adhere to sustainable practices, including ESG principles. Green bonds have grown almost explosively this year, especially for alternative energy, pollution prevention and sustainable transport.

And while we focus on effective climate action, it is also critical to focus on the S and G parts of ESG. Leaders who treat employees fairly, enhance safety protocols and ensure the health and well being of their teams will most definitely build greater enterprise resilience than those who don’t. Companies that demonstrate diversity in the workforce and treat women equally, with board representation will outperform.

Sustainable development

This is also the best time to take stock of supplier and vendor relationships and create shared value for them, and the first step to doing this correctly is setting concrete targets for long term supply chain sustainability. This ties into the overall business sustainability agenda and ensures that teams can review risk assessments and act accordingly.

Now is also the time to really look at sustainable development through the consumer lens and imbibe circularity into existing business processes. Assessments such as these have the power to not only gauge consumer sentiment but unlock investment power as well. Only then will be able to create change and stick by it.

In the Indian context, industries such as consumer goods, pharma, and retail, will be driven by robust distribution networks, which means their supply-chain footprint will have to be reassessed.

The COVID-19 crisis has shown us that it is possible to make transformational changes overnight. We have to apply these lessons to address climate change, to maintain the momentum of these transformations and stay focused on the bigger challenges posed by climate change. I don’t think we can go back to the way the world was, but together, we can definitely collaborate and build a better one for future generations.

The writer is Founder and CEO, Treeni Sustainability Solutions

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Published on October 06, 2020
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