- Society has given corporations a licence to operate - and in return, businesses must fulfil their responsibilities to society.
- Companies can play a huge role in shaping a brighter future for the world - and bringing stakeholders along with them.
- An era of sustainability and prosperity is in reach. Here's where to start.
Given today's volatile business environment, is this an appropriate time for companies to make ESG commitments for the future? To us, the answer is clear. The COVID-19 crisis, in many ways, is a clarifying moment. Once again, human resilience has shone through with hope and optimism in the face of hardship, and we know this is a moment to reinforce continued commitments to ESG investing for positive returns and long-term impact on society, environment and business performance.
Interestingly, this has also been a learning moment, spanning the exact three dimensions – planet, people and policy – that ESG investing seeks to impact. While corporations have come to appreciate the fact that ESG investing is inextricably linked to shareholder value because it helps shape sustainable business models, the current set of crises reminds us all to act with urgency.
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This has manifested in several different, yet meaningful, ways. For example, the fast-moving consumer goods (FMCG) industry is seeking to better manage working conditions for their workforce across the supply chain, financial services providers are finding ways to provide better risk-adjusted returns to investors, and the IT and digital consultancy sectors are focused on matters like digital reskilling, delivering stronger data privacy and information security. Now seems a perfect moment to restate this; society has granted corporations a ‘license to operate’ and corporations, in turn, need to abide by the unwritten rules of that social contract and use their might to move us all forward. Here are three places to start:
1. Serving the preservation of our planet. The debate around climate change and its impact on the spread of infectious agents is multifaceted. Environmental degradation, including deforestation and destruction of natural habitats to make way for development, displaces creatures in a way that brings them into contact with animals they otherwise wouldn’t, and that creates opportunities for pathogens to enter new hosts and potentially humans too. According to the World Economic Forum's COVID-19 Risks Outlook, growing evidence suggests that large-scale infectious disease outbreaks may become more frequent as viruses stored in permafrost or polar ice shields are released due to global warming.
Policy-makers in many parts of the world, after their initial lassitude in tackling the pandemic, have come to see the enormity of the risks we are all up against. COVID-19, in a way, is a condensed metaphor for the potential of climate change to alter human existence. This realization needs to re-energize our exploration of new ways of working and reducing our own carbon emissions. A simple understanding of the basics of both direct and indirect emissions will make us think harder on how we impact the planet in more ways than one. By developing smarter processes and cleantech solutions across sectors, we can and must step up our efforts to transform the built environment into one that is net-zero emissions, circular, healthy, inclusive and resilient.
2. Developing people to serve the progress of all. Coronavirus is indiscriminate in who it infects, but its impact is not the same for all. A Pew Research Center survey in the US has found that, overall, one-in-four adult Americans are struggling to pay their bills since the outbreak, one-third have dipped into savings or retirement accounts to make ends meet, and roughly one-sixth have borrowed money or relied on support from a food bank. All of these are more common among adults with lower incomes, those without a college degree and amongst certain demographic groups. On the other hand, corporations are coming to grips with a new normal in which consumers are embracing the use of digital technology to shop, learn, work and even to socialize. Clearly, the need has never been greater to reskill and empower disenfranchised people with new capabilities, including digital skills, to make them more employable in these changing times.
3. Improving corporate governance to serve the interests of business stakeholders. COVID-19 has made corporate governance a more nuanced task. Since the onset of the pandemic, boards have had to deal with a multitude of issues that range from rewriting their strategies, in many cases, to tracking a wider set of operating and performance measures, overseeing a long-drawn menu of risks, rethinking policies governing compensation, and even reimagining employee wellness and experience. The tone for a business that delivers for all must be set at the top and driven by a empowered, diverse and skilled board of directors that not only provides strategic oversight, but also outlines and exemplifys the company’s values with full accountability. This accountability must then be upheld across the value chain by all, including employees, partners and vendors.
Today society depends not just on governments, but also on well-functioning companies to meet its needs — whether that is protecting shared ecological wealth, fostering equitable growth, creating mass employability or safeguarding the interests of consumers. i.e. the social contract and license to operate. It's in this context that Infosys announced its ESG 2030 Vision. Collaboration between the public and private sectors has helped ease some of the world’s most urgent challenges, including the ones associated with the pandemic, opening doors to accelerated resolutions. Every ESG investment, then, holds forth the promise that proactive action today will shape a more welcome, more livable next normal rather than one that may develop simply as a consequence of events unfolding. And no business can shy away from doing its bit to unleash the potential for a new era of prosperity.