As the pandemic hit global markets back in March, many expected this to be the end of corporations’ sustainability efforts. As Ryanair CEO Michael O’Leary put it, “I suspect an awful lot of the environmental agenda and targets will be put on the backburner for a number of years”.

And yet, the evidence gathered so far points to the contrary. The pandemic has forced many companies to re-evaluate what matters in a world where business as usual doesn’t work anymore. There has been quite a bit of corporate introspection when companies were forced to choose between short-term profits and doing what is right by their employees, their suppliers and their communities. CEO’s have had to consider what the fundamental purpose of their organisation is.

Stakeholder capitalism in the face of the pandemic

For instance, in an episode of the excellent ‘Outrage and Optimism’ podcast series, Unilever CEO Alan Jope outlined how the company chose a stakeholder-led response to the pandemic, including:

  • guaranteeing their workers’ safety by mandating all office workers to work from home as early as March 12;
  • committing €100m to curtail the spread of coronavirus through the donation of soap, sanitizer, bleach and food to help protect the lives and livelihoods of consumers, suppliers and its workforce;
  • offering €500m of cash flow relief through early payment to small and medium-sized suppliers; and
  • guaranteeing the pay of all employees and contractors.

These are clear applications of stakeholder capitalism, where a company is managed for the benefit of all stakeholders, rather than having a singular shareholder focus.

Climate change remains at the centre of corporate strategies

The past few months have also seen a sway of long-term corporate commitments to sustainability showing that in spite of the critical and urgent reality of the COVID-19 pandemic, many businesses have retained, even strengthened their carbon reduction commitments fully aware that climate change and its risks to business continuity won’t go away because of the pandemic.

Other examples of companies making long-term commitments to sustainability during the pandemic include:

It should be noted that our own firm, Freshfields. has been carbon neutral since 2007 and is committed to remaining so.

Three reasons why sustainability delivers value

Those that have chosen to follow a purpose driven approach seem to have flourished. Indeed, ESG funds are one of the success stories of the pandemic. There are a number of reasons for this:

  • Investor returns have proven positive for ESG funds which have outperformed the market since the crisis began. As I outlined in a previous blog, this is primarily due to range of factors: Companies that have strong sustainability credentials benefit from greater loyalty from key stakeholders including employees, customers and suppliers (see the Unilever example above) and they also tend to be reliant on debt financing putting them on sounder financial footing in the event of a crisis.
  • Consumer preferences have increased during lockdown according to a consumer study by Targus. Based on a survey of thousands of respondents in the France, the Netherlands and the UK, consumers remain committed to sustainable purchases with 71% of French, 54% of Dutch and 46% of British consumers being willing to pay more for sustainable products. And they expect the same from the companies they purchase from, with a vast majority of consumers (up to 88% in France) expect sustainability to be a top priority for business.
  • COVID-19 recovery packages in many regions of the world are advocating to ‘build back better’ and support a sustainable recovery as I highlighted in July. The most prominent of these is the European Commission’s proposed €750Bn recovery package which focuses on Digitisation, the European Green Deal, and a Fair and Inclusive Recovery for all.

As business slowly returns to ‘usual’ - albeit forever changed – one thing that has remained unchanged for leading companies is the commitment to sustainability.

And that is good news for people, planet and profit.