October, 9, 2020
By: Ayoma Sumanasiri (PhD)
During the COVID 19 pandemic, corporations across the world stopped a while to rethink how sustainable their behaviours were towards the ESG (Environment, Society and Governance). Before the pandemic, corporations around the world were blowing their own trumpets and vaunting their sustainability initiatives by publishing information on their sustainability performances on financial reports, advertisements, corporate websites, and CSR projects. However, the ongoing COVID 19 pandemic has challenged the truthfulness of many of these companies regarding the steps taken to protect the three pillars of sustainability.
After the onset of COVID 19, many organisations had to revise and regenerate their sustainability initiatives. In particular, they had to strengthen their managerial decision making to ensure sustainability in every organizational initiative. While consumer demand for sustainability is also increasing, it has caused managers to perceive the COVID 19 pandemic as a chance to revisit and rethink the future sustainability of their businesses while preparing to adapt to such unexpected situations in the future.
To achieve corporate sustainability in a turbulent environment, leaders should become more sustainable in their leadership. The five leadership dimensions depicted below enable sustainable leadership in organisations.
Concern for employees
A positive organisational culture is an advantage during a crisis like COVID 19. In crisis situations, CEOs and senior management face challenges when attempting to influence operational performance, talent development and organisational reputation. Corporate leaders must envision how they are to develop their business models in the post pandemic scenario and must work from now on to create the organisational culture in which they would like to work best. Sensitivity and response towards virus related issues definitely influence organisational culture in the post pandemic era.
Within days after the pandemic hit, online meeting platforms such as Zoom became predominant around the world, and many public and private sector organisations seized the opportunity to use such technological tools so that their employees could work from home. This has substantially reduced the requirement to travel to office, and has made social distancing more practicable. The pandemic has provided alternatives for companies to allow their workers flexible working options, paid sick leave, voluntary redundancy, early retirements, and flexible work schedules and locations.
Consumers desire businesses to increase their concern for employees, customers and society, particularly during the time of this pandemic. Young consumers, in particular, perceive their leader’s sense of purpose as being more important than the salary they will receive when choosing a company to work for. These young people are not satisfied with mere donations that their business leaders are making towards sustainability but want to see their employers making ethical decisions on behalf of society. In the global context, for example, Target increased its staff wages per hour when they found a particular team member to be at high risk in spreading the virus. In another example, Enel has offered an insurance policy to its workers to protect them when they fall sick.
In the Sri Lankan context, many organisations still use the Zoom meeting platform, even though the lockdown has been temporarily lifted. Sri Lankan managers have realised the time saved by using these techniques and many have decided to continue these online meeting platforms even in emerging economies like Sri Lanka. On the other hand, less traveling directly results in less air pollution and improves the financial performance of the organisation as well, because the travelling cost to the organisation has now reduced to zero.
After the pandemic, many organisations were ready to use online platforms to discuss their issues rather than involving their members in a physical visit. This demands that business leaders start providing greater flexibility to build blended strategies that support different segments of the workforce by combining in-person and distributed working.
In the post pandemic period, managers began to think that the flexible workplace policies instituted as a response to COVID 19 should be continued further. Employees have already begun to challenge the long-standing presumptions about work that needs to be done in person. The pandemic allowed employees to demonstrate that work can be delivered efficiently and effectively even while staying at home. For example, some traditional workplaces in Sri Lanka with rigid work cultures such as government owned utility services and local universities have also directed their staff to work remotely during the pandemic. Traditional work practices became obsolete during this period and virtual working slowly penetrated the work cultures of many organizations. The decision to work remotely was taken mostly to ensure employees’ health and to stop the spread of the virus in society, but a study confirmed that employees felt they can collaborate more easily and be more productive when working virtually. Under these conditions, business leaders need to be concerned about creating new employee value propositions that develop their employees, enable inclusion and encourage economic development, especially in situations where the business operates in underserved communities.
With the pandemic spreading across the globe and international trade grinding to a halt, the Sri Lankan garment industry was severely affected. The Garment Exporters Association of Sri Lanka has announced that the services of nearly 30% of all garment industry workers will be in danger if the pandemic continues. Major initiatives were put in place by the Sri Lankan government to protect its apparel sector employees’ rights and wellbeing during this difficult time. This included paying apparel sector employees who were badly hit by the pandemic a Rs.5000 subsidy to cover their essential needs during the worst period of the pandemic. The Board of Investment of Sri Lanka and trade unions in the industrial zones jointly built an integrated mechanism to collect complaints regarding the basic needs of workers, their health and their safety in order to comprehend the problem and offer speedy solutions. The collaboration between the government and private sectors and the unions strengthened during this period and remedial measures were implemented without delay.
Concern for external stakeholder engagement
The coronavirus pandemic brought companies to a crisis situation where they had to strengthen the relationships among diverse stakeholders. At this difficult time, donations from around the world lent a helping hand in strengthening the relationship between parties at the government level and those at corporate levels. Through stretching a helping hand to each other, countries and international organisations have demonstrated their compassion towards other countries. There were even some instances where the Sri Lankan Government donated health equipment to other countries during the pandemic. The pandemic has provided many lessons about sharing and reminded the world to collaborate with public-private partnerships to control the spread of the virus, to re-build the lives of the people who were affected, and to educate the public about good health and wellness.
In responding to the pandemic, many MNCs such as Unilever-Sri Lanka have initiated virtual connections with their customers whenever possible to minimise the risk of spread of the virus. Further, they have commenced donating hygiene products to support the fight against the disease.
At the international level, the pandemic has not interrupted sustainable investors from considering the ESG. In the US, the Securities and Exchange Commission has rejected several requests from companies to stop or delay shareholders’ motions on the climate. Quite surprisingly, it was evident in the US market that those companies that were highly engaged in sustainability initiatives were undisrupted during the pandemic. When the pandemic initially hit, many investors were more concerned about issues like how their companies are looking after their employees and continuing to provide employee benefits, undisrupted supply chain operations, and corporate concern for environmental and social wellbeing. These leading sustainability issues are pressing companies to structurally and systematically change towards sustainability even during the COVID – 19 pandemic.
In line with corporate responsibility towards stakeholders, a group of four CEOs from the World Economic Forum have requested the members of the Forum to sign for the six stakeholder principles for life after COVID -19. The pandemic has also impacted all members of supply chains. During the pandemic, companies had to be concerned about their vulnerable suppliers. Business leaders applied diverse strategies such as changing a supplier’s payment terms, and offering credit to loyal customers to motivate them to stay with the business. For example, Unilever has extended its support to its small-scale suppliers through facilitating an extended credit system to enable them to stay with the company.
Managers ought to rethink new mergers and acquisitions during the pandemic period as vulnerability in financial markets has become a sensitive issue. Strategic alliance has become a key factor leading to success in this difficult time, where managers are realising the advantages of joining together rather than distancing and competing with each other. The pandemic has also created opportunities for big companies to buy small scale businesses and start-ups; however, managers should be vigilant enough to partner with sustainable businesses that align with their core CSR strategies.
Resistance to change
The pandemic has created disruptions to many countries, governments, organisations, families and individuals. This disruption is, of course, inevitable. Those companies that were ready to face unexpected situations such as the COVID 19 pandemic were quick to respond through re-positioning their strategies to face the situation, while others had to halt their operations for a while, suffering losses. While the pandemic is still spreading across societies, corporate leaders can play a major role in rethinking and reshaping their existing workplace cultures, norms and strategies to improve the productivity of their employees through engaging them fully in their new workplace cultures. Many executives say that the COVID 19 pandemic has actually been an opportunity for them to move towards sustainability by investing in the ESG. They believe that sustainability has become a top strategic priority in the post-COVID 19 era.
To work in the new normal, several strategies are being adopted by organisational leaders across the world.
The most important lesson that needs to be kept in mind is that though the risk of another pandemic is ever present, businesses should be resilient enough to respond to such unexpected situations as they emerge in the future. In other words, business processes and strategies should be flexible enough to quickly adapt to the needed changes when they are demanded.
When the coronavirus crisis hit many companies, managers began to be more concerned about their cash flows since the pandemic hit their sales as well as their manufacturing processes very hard. Mere survival in the market became a big issue for most corporates. Managers were worried about their short term survival and began to re-imagine their market positions in the unstable and unpredictable long term. This managerial challenge shifted attention from ESG to an unknown, unpredictable future.
Despite this situation, global and local businesses of all scales continued to be successful while still maintaining interest in the ESG. Below are some examples from the Sri Lankan context to explain the diverse ethical managerial practices needed to maintain concern for the ESG during the pandemic.
Concern for the environment
Surprisingly but shockingly, governments around the world have allowed businesses to consider only their short term survival during the pandemic while relaxing government regulations on pollution (the environment). For example, in the US, the Environmental Protection Agency has temporarily relaxed its pollution enforcement to allow US companies to concentrate on their survival. This is alarming as in the US, a plastic industrial group has requested the government to halt the state level ban on using plastic bags. Again, in another instance, a petroleum lobbying group has demanded the relaxation of greenhouse gas emission enforcement during the pandemic. These opportunistic behaviours of the private sector reflect their profit motive, disregarding the impact on the triple bottom line. On the other hand, the business sector could not adequately plan strategies to take advantage of the fallout from the pandemic such as oil price reduction, working from home, and flexible working conditions.
The European Council has urged that its movement towards strengthening the environment not be slowed down due to the COVID 19 pandemic. In another instance, New York State in the US has passed legislation to accelerate its movement towards climate change.
However, the question now is whether companies are forgetting the commitment made before the pandemic to the triple bottom line or the movement towards corporate sustainability. Interestingly it has been confirmed that consumers still prefer brands and companies that consider sustainability.
Concern for society
Managers working during the pandemic should redirect their facilities towards such areas as crisis management and critical activities. Corporates are responsible for supplying and donating essential items to needy organisations and groups such as schools, hospitals and the poor in the community. Managers can send their teams of employees to contribute labour towards the completion of ongoing CSR projects that help to control the pandemic. For example, Derana TV, Sri Lanka completed a large number of CSR projects (Manusath Derana) during the pandemic with the help of many other CSR teams (Ex: employees from the Prisons Department). Some organisations donated ventilation machines, wash basins and hand sanitizers to needy hospitals and local schools during this period.
Interestingly, earlier unwelcomed and unexpected corporate relationships emerged during the pandemic. For example, the Sri Lankan ride sharing company PickMe joined with Sri Lanka SATHOSA, the government owned supermarket chain, to deliver its products online to customers. Further, PickMe began to include the temperature of the driver of the delivery vehicle to confirm that he/she has not been exposed to the virus.
The spread of fake news has caused many headaches to governments and private citizens during the pandemic, and therefore, tech companies and media companies should be more concerned about ethical communication and take responsible measures to stop spreading misinformation about the pandemic, and about political and social issues. Social stress and mental ill health have already become worrying factors to many. Thus, media companies should be more responsible in the way they deliver messages to their viewers, and should prioritize protecting the mental health of the general public during the pandemic.
Concern for governance
This pandemic has challenged certain traditional governance principles and practices. In response to the pandemic and crisis related issues, corporates need to act more responsibly, and the law, corporate stakeholders and public policies have to be responsive towards controlling unethical corporate behaviours. Boards of Directors must urgently re-assess and re-evaluate the impacts of the pandemic to design future strategic changes to be implemented in appropriate circumstances. Boards need to realise that in situations like the COVID 19 pandemic, it is not possible or even ethical to place all the blame on and delegate all tasks and responsibilities to the management, where the board has a huge responsibility in overseeing that the business still runs sustainably. Boards and senior management should evaluate the business resilience of their companies, especially in major functions of the business. Boards and senior management can re-check the company’s preparedness for emergency situations such as this crisis and make sure that response strategies are fully coordinated at the board level. To this end, boards should periodically review business continuity, physical security, cyber security and risk management during difficult times.
Where internal speciality is lacking, boards of directors should consider bringing in external consultants to formulate strategies without delay. The business loss accrued by delaying expert advice will be more than the consultancy cost. Senior managers/ Boards should reconsider the importance and the role of an Enterprise Risk Management Committees (ERM). Also, company Compensation Committees will need to see how CEOs are managing executive compensations during the pandemic. These can even include decisions like not paying anything during the crisis. Long planned executive pay and other benefits can be halted for a while or given a fresh look that will continue to motivate executives. For example, boards can think of retirement plans or suspend new benefits during the crisis. The mobile leadership model of many companies made a hard decision to evaluate the performance of company executives during the pandemic. Moreover, many CEOs have been challenged when attempting to retain their best executives and to satisfy them during this pandemic.
CEOs have to ensure that they have an effective emergency technology plan in house. It is necessary to regularly test the technology to ensure that it runs smoothly in a crisis without damaging the day to day operations of the business. Technology and systems should be accessed off-site and backup technological support has to be confirmed as working effectively. To this end, managers should have an idea how long these technologies can run smoothly during a crisis. Thus, it is vital to identify the steps needed to obtain alternative or replacement technology, equipment and personnel.
The way forward
Current CEOs should act without delay to plan for a better future. They should aim to control the negative effects of the pandemic while managing the sustainability of their businesses. To this end, corporate leaders need to engage in self-analysis and continue to raise questions like the following: “What have we learned from this crisis? What lessons can we learn and discuss at length to develop and include in our business strategies?, What happens if anything goes wrong again? Are we prepared? Do we need to do things differently now? How should we go forward? What should our business look like in the post-pandemic era?” For these questions we cannot guarantee one size, right or wrong answers as they are context and culturally specific.
During the crisis, CEO’s and business leaders should be more concerned about their employees and treat them generously and equitably since they are the most important asset of the business. It is crucial, then, to prepare safety protocols to protect employees and teams. If employees show symptoms of illness, it is necessary to facilitate flexible working systems and allow them paid sick leave. When management has decided that cutting staff salaries and bonuses is unavoidable, these salary and bonus cuts should apply equally to managerial and lower level staff members.
This pandemic is a learning point for many CEOs and other managers to experience the risk faced by a business in its struggle to survive and the losses that could ensue. This learning experience could be used to assess the company’s response to future crises and could be utilized to learn how to respond to such crises sustainably. The COVID 19 pandemic has proven that misconceptions about the business environment can cause disruptions in the smooth flow of operations and can halt a part or all of the operations of a business. So, it is the right time to bring the questions that were earlier thought impossible and incidents with low probability back into board room discussions. It is possible to question how far we have included these incidents in our business strategies, and whether we have allowed flexibility and alternatives in our strategies.
While struggling to survive in the short term, managers should start planning from the medium term to the sustainable long term in the post-COVID period. Senior managers should revise, prepare, and strengthen corporate strategies that would best respond to future crisis situations. Testing these strategies before use is also advantageous.
Managers can rethink whether they need to travel abroad as the pandemic has taught us that it is possible to stay at home and make effective decisions. The pandemic has also enabled new options that are cost effective in decision making during and after the crisis. These cost saving options would enable businesses to go the extra mile that they lost during the pandemic.
Companies can think of shifting to near shore or onshore production to respond quickly to global pandemics such as this one. Also, companies are re-imagining ways to shorten their supply chains as this will reduce emissions and operating costs further. Firms are also experimenting with new ways of implementing these options which will result in the reduction of greenhouse gas emissions. Movement to these options will create new business opportunities, mergers and acquisitions in the future.
The pandemic has also created behavioural changes among consumers, and they now demand products and services that are different. Therefore, companies need to re-think their product designs, contents, ingredients, and processes as consumers have become more fastidious than before as they are now very concerned about what they add to their lives.
All said and done, it is obvious that the pandemic will end, sooner or later, but corporations need to take the lead by providing sustainable solutions to the present situation. Companies that minimise their impact on the EGS during the COVID 19 pandemic will end up stronger, with a larger number of loyal customers and employees, thus improving their corporate image which will bring a competitive advantage. On the other hand, those organisations that are unable to do so will find it difficult to survive. Hence, corporations and their leaders should work for the betterment of their employees, customers, suppliers and other stakeholders as responsible citizens in the ecosystem. Being ready to change the existing ways of doing business under conditions of the new normal while maintaining ethical leadership in every aspect of the business comprises the major part of corporate sustainability.