Our recent research into the implications of the pandemic on sustainable business and ESG uncovered four strong themes (see here for summarised findings). Each has important implications and insights for our sector. In this article, we look at another one of these in more detail – the supercharging of social sustainability.

The companies we spoke to were clear; this crisis has seriously tested the social side of their strategies, placing various interconnected social issues firmly in the spotlight – from employee welfare and the treatment of vulnerable customers through to supply chain sustainability and providing essential support to frontline workers and the most vulnerable in our society. Perhaps even greater tests are still to come when the impact of Covid-19 on jobs and incomes becomes clear.

And here’s the thing, the companies which understand the needs and expectations of their employees, customers, suppliers and communities have been better able to respond and adapt to this situation. They’ve found it easier to make decisions that protect jobs and income, transition to new ways of working, and employ existing structures, technology and resources to support employees from afar. They’ve taken proactive steps to protect their SME suppliers and customers who are isolated or in financial difficulty, and they are collaborating effectively with existing partners to understand local priorities and deploy resources and volunteers effectively.

As a result, these companies have been better able to weather these storms and are proving more resilient to the immense disruption almost every business has faced. At the same time, the crisis has highlighted the role of business in society and expectations are heightened as a result. There is increased scrutiny for how a company treats its stakeholders and serves local communities and society more broadly. For investors, it has highlighted why the ‘S’ in ESG really matters. A recent poll of UK Independent Financial Advisors found that over three-quarters believe investors will divest from companies that have failed to support their employees through the crisis and in a separate survey, almost nine in 10 wealth managers believe that the pandemic will result in increased investor interest in ESG investing.

This has significant longer-term implications for the social aspects of sustainability. Here we explore three key considerations.

1. Building a more stakeholder-centred approach to business

As we’ve seen, Covid-19 has highlighted the value of strong stakeholder relationships in overcoming challenges. Reputation and trust have been won and lost on how companies have treated employees, customers, suppliers and local communities, showing the importance of putting stakeholder needs at the heart of good business. And this will be as important, if not more so, as restrictions are eased, government support is withdrawn and businesses strive to recover quickly.

The impacts of the pandemic on stakeholder relationships also shouldn’t be underestimated and it is highly likely that many expectations of a business will have permanently changed. Lots of employees will have got used to more flexibility, greater autonomy and a better work-life balance. Others will have been away from the business for an extended period and will be anxious about their return, safety or job and income security. Customer circumstances will have changed, increasing the risk of certain vulnerabilities, the ability to pay for or access services. Their expectations about how services should be delivered may have changed. Key suppliers may be facing a cashflow crisis and risk going out of business. Community partners may be facing similar and will be grappling with increased demand for and how to deliver their services. The public has new-found awareness of how business can support those on the front line and the most vulnerable in our society, and stronger opinions on how it can act more meaningfully on the big social issues of our day. Investors will push for better governance and more action from those they invest in on issues like mental health, gender and race equality and sustainable supply chain, that impact long-term financial value.

In response, companies will need to develop and demonstrate a more stakeholder-centred approach to business to ensure long-term success. Proactive engagement strategies, designed to reach a broader range of stakeholders, will be needed to fully understand and respond to these new dynamics and evolving expectations.

2. Developing a relevant and integrated social strategy

This crisis, along with the rise of the Black Lives Matter movement, has again highlighted the inequalities and divisions in our society. Individuals and groups of individuals who – because of their race, gender, age, socio-economic status, a certain vulnerability or any other marker of difference – are not treated equally. They might be unable to access the same opportunities as others and subject to prejudice and discrimination. They are also more likely to be disproportionately affected by the kind of crisis we are experiencing now. For example, the ONS has found that black people in the UK are 1.9 times as likely to die as white people from Coronavirus, with social factors such as deprivation and occupation thought to play a big part in this disparity. There was also a stark reminder recently of the lack of progress in UK workplaces on equality issues, with new research from Business in the Community finding that Black employees hold just 1.5% of senior roles, an increase of just 0.1 percentage points since 2014.

The result is a growing expectation on businesses to lead on change. A US poll in June by Edelman for example found that 60% of Americans would now boycott or purchase from a brand based on its stance on racism.

Against this backdrop, it is becoming even clearer that many social aspects of sustainability strategies and commitments have not evolved sufficiently or kept pace with the issues we face in society. This includes racism, discrimination, poverty, inequality, mental health, obesity and social mobility. It is particularly stark when compared to environmental equivalents which have begun to advance in the face of looming threats such as climate change, biodiversity loss and resource depletion.

Added to this, in our experience, it is also common for companies to view and manage environmental and social considerations as separate entities when they must be seen as one: ensuring for example that the transition to a low carbon economy does not leave anyone behind or compound existing inequalities.

Faced with this reality, companies must now question whether:

• their social strategies are focused in the right areas. Are they centred around great jobs, opportunities for all, healthy, happy & fulfilled people, truly inclusive workplaces and diverse workforces at all levels?
• their commitments and goals are suitably ambitious. Will they drive urgent action that results in meaningful change?
• social and environmental considerations are full aligned and managed holistically. How will the pursuit of one affect or support the other?

3. Accelerating action on inequality in the world of work

What is more, we seem to have finally reached a point where calls for social equality – where each and every person is treated fairly and given equal chance without discrimination – can no longer be ignored. Business has a vital role to play in the pursuit of social equality which starts in the workplace. People increasingly want to see tangible evidence of the actions a business is taking and the practical difference this is making in tackling issues of inequality and racism. Even before the pandemic and the rise of the Black Lives Matter movement, global polling earlier this year showed how growing inequality is eroding trust in institutions and highlighted the growing expectations on business to speak out on key current social and environmental issues.

The first step is making a firm commitment to tackling inequalities that exist. Yet businesses must go beyond statements of intent and solidarity – there must be a shift in mindset to go beyond the bare minimum (keeping employees safe, policies around non-discrimination for example) towards much more proactive and practical measures that make a difference. They must take the time to really understand the issues of inequality and the impact (positive and negative) that their business has on these. It requires consideration of every aspect of the way they operate: from policies, processes and behaviours through to who they spend money with, in order to identify where there may be barriers to individual opportunity and plan how to overcome these.

Workforce data is crucial – understanding who is applying for roles, being interviewed, getting hired, progressing in the business, accessing training and development opportunities and diversity and pay at every level of the organisation. Examining how company indicators compare with local and national indicators can be a good place to begin identifying imbalances, exploring the reasons why and setting goals and plans to overcome these.

Companies also now have an ideal opportunity to rethink the kind of workplace they want and need for the future. The future of work has long been a key business concern – with demography, technology, climate change and shifting values all resulting in an increasingly complex landscape for businesses to navigate. With many of these trends having significantly evolved and accelerated due to recent events, companies are resetting and reviewing their workplace plans and projects. Putting social equality goals at the centre of how they respond and adapt will be crucial for society, the economy and for businesses that want to build and maintain the trust of those they rely on.

Our recent research into the implications of the pandemic on sustainable business and ESG uncovered four key themes (click here for summarised findings), each with important implications and insights for our sector. In this article we look at the first one of these in more detail: The tension over sustainability need and investment.

A major concern for in-house sustainability professionals coming from our research is that key projects and programmes will be delayed due to current financial and resource constraints. Reductions in capital investment and the potential watering down of ambitions and plans are significant risks that teams are facing up to. And this in the knowledge that these can be ill-afforded given the urgency of issues such as climate change and biodiversity loss and the seismic shifts required – and in many cases already underway – in every economic sector to transform how they do business.

So while cashflow is king and access to Boards may be limited, here we use our findings to explore how sustainability teams can use this time most effectively to ensure critical long-term plans not only remain on track but are enhanced. We highlight three key areas below.

Reinforcing the case for sustainability

A lot has changed over the last three months. There is new, compelling evidence available and practitioners will play an increasingly key role in helping their business to understand how sustainability underpins long-term, commercial success and evolve their approach accordingly. This is a unique opportunity to reinforce and restate the case for sustainable business.

There are various considerations. A good starting point is how the pandemic has highlighted our collective vulnerability due to the systems we rely on – from Just-In-Time (JIT) to fossil fuels. How quickly this speeds up transitions that, in many cases, were already underway remains to be seen. However, when the likes of BP announce they are devaluing their assets because it predicts an acceleration in the transition to a low carbon economy as a result of the pandemic, it’s time to sit up and take notice. No company wants to be left behind or to be as exposed again – and a lack of investment now is storing up a raft of (potentially much more expensive) issues further down the line.

With financial restrictions currently in place for many businesses, attention also naturally turns to efficiencies. For sustainability teams this should mean capitalising on the short-term financial, environmental and social gains made over the last few months – reduced travel, better work-life balance and lower resource use for example. Effective engagement, measurement and review of what has worked well will help to ensure things don’t drift back to where they were as enforced restrictions are eased. If this period has shown what can be achieved, then this can and should be leveraged to reinforce the case for renewed action and greater ambition.

With companies operating in a uniquely challenging environment, resilience – the capacity to adapt, respond and recover quickly from difficulties – is also being fully tested. Businesses will be reflecting on how well (or otherwise) they have weathered these storms and what their sources of resilience are. Then attention must turn towards how resilience can be built in an increasingly uncertain world. For example:

• This situation has shown that those already taking proactive steps to understand and integrate the, often complex, needs of different stakeholders into the running of their business have been able to leverage strong and trusted relationships with employees, suppliers, partners and customers. This has been key in responding appropriately and collaboratively; adapting quickly and making better decisions in challenging times – critical for both business continuity and reputation.
• Similarly, businesses that already have full oversight over a wide range of environmental, social and governance (ESG) issues and have taken steps to manage and plan for any associated risks, have been far better equipped to deal with this crisis so far. This is a wake-up call for the strength and breadth of a company’s approach to ESG risk management system.

As hallmarks of a robust and strategic approach to sustainability, now is the time to highlight how this underpins resilience and to promote the unique skills of sustainability professionals to support the recovery.

In turn, it has been well-documented that investors will inevitably now focus on corporate resilience when making investment decisions – this means companies will increasingly have to demonstrate the resilience of their operations and business model in the face of key ESG risks such as climate change, biodiversity loss, labour and supply chain practices.

ESG performance has become a more important indicator than ever before, hitting the headlines for all the right reasons as the evidence builds for how businesses already prioritising sustainability have outperformed during this period of intense volatility. (Just one example of many – in May, BlackRock reported in ‘Sustainable Investing: Resilience amid uncertainty’ that 94% of a globally representative selection of widely-analysed sustainable indices outperformed their parent benchmarks in the first quarter.)

Sustainability teams should be gathering all this new evidence as it relates to their business, to reinforce and restate their case for renewed action and investment.

Reflecting, refocusing and repositioning priorities

By and large, companies we spoke to reported that the appetite for sustainability remains undiminished. The broad message is not to dial down on ambitions but to use the time to really think through priorities. There is certainty that issues such as climate change, social inequality and responsible supply chain will be back stronger than ever – with the pandemic having highlighted systemic weaknesses and employee, customer and investor interest continuing to soar.

However, it is highly likely in the near-term that financial and resource constraints will mean not everything can be achieved. In the context of this new operating environment, it will be more important than ever to pinpoint what really matters for the business. This may require a re-evaluation of which projects and initiatives will best support long-term goals and which short and even mid-term projects and plans can be shelved for now. Doubling down on these proposals will be crucial, ensuring that the investment case is rock solid and, as outlined above, bringing new evidence from the pandemic and its fallout to bear. Aligning to recognised frameworks and standards can also be helpful, particularly those that already have momentum and where there is pressure to conform – The Task Force on Climate-related Financial Disclosures (TCFD) was frequently referenced in this regard. Above all, teams should be aware aware of the critical importance of timing, using this period to get ready to submit renewed proposals and plans.

While for many businesses now might not be the right time to launch new goals and initiatives, important work should continue behind the scenes. Pausing projects and a slow-down in the day to day activity of sustainability is a valuable opportunity to reflect on objectives and plans – scrutinising their relevance and building in additional efficiencies where needed. Change is also a good time to focus on integration into the nuts and bolts of internal operations with fresh eyes – the mechanisms and levers that can be used to progress and embed sustainable business into the thinking and doing of the organisation. What has worked well to date, what has not and what still needs to be done?

Advocating for a green recovery

Businesses broadly agree that government intervention will be a key piece of the jigsaw. There are growing calls on governments to prioritise a green and socially just recovery, one that includes: channelling investment into clean technology, setting conditions for bailing out sectors and individual businesses, and involving the creation of green jobs and reskilling those most affected by the pandemic. Furthermore, with a backdrop of the UK hosting COP26 next year, this is not only gaining momentum but there are strong signs the UK government is leaning in this direction.

Leaders in organisations of all shapes and sizes are now proactively advocating for this – in the last two weeks, two letters signed by more than 300 UK business leaders have urged the UK Government to invest in a Covid-19 recovery that prioritises the environment, social justice and sustainable development. Many of these businesses are also working behind the scenes to support this, engaging with government to push this agenda and explore what is needed.

This represents a unique opportunity to accelerate the environmental and social shifts that are already underway. It is down to sustainability teams to use this momentum to engage leadership and support the business to do what it can to join these calls in the most proactive, collaborative and targeted way possible. In particular, working with other businesses both within and outside sectors to pinpoint and communicate where government policy and investment is most needed.

Much has already been written about the significant challenges posed by the current situation and how businesses are responding and adapting. There are stellar examples of companies putting the interests of people, suppliers, partners and communities first, just as there are horror stories of companies that have acted less honourably. Make no mistake, reputations are being won and lost, perhaps permanently.

At the same time, many links have been drawn between the pandemic and sustainability. These range from our general disregard of the natural environment increasing the risk of pandemics and the most vulnerable in our society being disproportionately affected, to our renewed appreciation of nature and increasing calls on governments to prioritise a green and socially just recovery.

Against this backdrop, we undertook a small research project with a cross-section of our clients representing a range of sectors including financial services, construction, aviation, manufacturing, professional services and retail. We wanted to understand how corporate sustainability has faired through the crisis, what the short and long term outlook is and what we can learn as businesses start to plan for recovery.

Here we summarise the four key themes that emerged. In a series of articles to follow, we will explore each theme in more depth.

1. The tension over sustainability need and investment

There is widespread concern that, with cashflow and financial constraints top of mind, larger-scale capital expenditure on sustainability projects and programmes – the kind of investment needed to accelerate the transition to a net zero economy for example – may be delayed. Sustainability teams are using this time to reflect on, refocus and reposition priorities, aware of the critical importance of timing for submitting renewed proposals and plans.

There is confidence however that the longer-term view on sustainability will not change, and an awareness that new evidence offers a big opportunity to build and restate the case for sustainability: a groundswell of interest in ESG for example, with increasing investor interest in how it underpins business resilience and performance, especially during uncertain times. And specifically, the need to build resilience to future crises.

As a result, companies know they can ill-afford to lose ground in tackling issues like climate change and decarbonising their operations. Many are pinning hopes on, and supporting the case for, government intervention to keep sustainability moving despite the economic challenges. In the meantime, teams remain pragmatic. They understand that they must bide their time, that access to leadership and business units is currently and understandably limited, but they know they need to be ready with the right advice and the right proposals at the right time.

2. The pandemic has supercharged the social side of sustainability

For the most part the treatment of employees has come first, with decisions designed to protect jobs and income and ensure safety and wellbeing amid drastically different economic conditions and ways of working. Customers come a close second with short-term responses and policies designed to protect vulnerable customers, in particular, prioritised. But there is also widespread recognition that the pandemic has disproportionately affected certain sections of the customer base – perhaps for the foreseeable future – and companies are grappling with these changes to understand how they will affect the nature of customer relationships in longer-term.

Social programmes have come to the fore and played an important role. We identified significant advantages for companies with established social programmes and partnerships, giving them the ability to leverage strong networks and collaborative working to respond to the crisis quickly and in meaningful ways. For these companies, the focus has now shifted to how they can continue delivering programmes and supporting partners in new and different ways as well as working with partners to understand how the crisis has affected the nature of the social issues being addressed.

We also found companies used to prioritising the needs of different stakeholders have been able to use relationships that are built on trust to respond and adapt quickly and effectively. This link to business resilience is becoming more established due to the pandemic and is further highlighting the value of human and social capital; the ‘S’ in ESG. Added to this, the longer the crisis goes on and as restrictions are slowly eased, the more important the treatment of employees, customers, suppliers and local communities will become. As ever, these are the biggest trust issues that businesses will face and the world is watching more closely than ever.

3. Things won’t go back to the way they were

The pandemic has accelerated shifts that, in many cases, were already underway in companies and this is likely to result in permanent changes to business models – in particular, flexible working and the digital transformation. It has shown employees, managers and customers that businesses are capable of radical change, at pace, and that there are significant benefits to many of these changes. Many will not want a return to the way things were. Now there will be a period of reflection, and in some cases consultation, as restrictions are eased and businesses plan their recovery.

The enforced use of digital and smart technologies and new ways of working have significantly improved resource efficiency. A key priority now is to double-down on these efficiencies and capitilise on the short-term gains made over the last couple of months. Where this period has shown what can be achieved, teams are keen to use this to reinforce the case for sustained action, longer-term behaviour change and greater ambition.

It is anticipated there will be big increases in flexible working long-term – with obstacles removed, benefits felt and companies proving it can work, it will be hard to go back. It is likely that many businesses will review the need for, and purpose of, big corporate offices. We can expect a shift towards smaller ‘hubs’; less for individual work and more for collaboration and bringing teams together.

Digital capabilities have been tested and strategies accelerated, with different services often being delivered remotely for the first time. In some cases this has led to significant improvements in the customer journey and efficiencies for the business. Many expect changes will be sustained but, as with any such permanent transformation, companies will need to fully assess any unintended consequences to ensure that decisions account for the complex, and often competing, needs of different stakeholders.

4. A true test of values and purposeful leadership

Companies are acutely aware that decisions made during this crisis are being closely scrutinised. For those with strong values, these have helped to guide complex moral and business decision-making; those that take account of the interests of different stakeholders even in such challenging times. Purposeful leaders have become more visible, stepping up to reassure and reaffirm commitments to concerned and anxious stakeholders. In many cases we heard how communications have improved despite the physical restrictions – typically becoming more open, honest and inclusive as a result of this situation.

Now there is a common view that stakeholders will expect more and different things from companies coming out of the crisis – from renewed calls for purpose-led business to issues across the broad sustainability agenda increasing in importance. It is felt this is a further aspect that, if leveraged, can be used by teams to strengthen the case for sustainability. It will also present a further test of company values and leadership – how in touch a business and its leadership is with each stakeholders evolving needs and concerns – as restrictions are eased, state support is wound down and businesses recover.

Above all, we can expect even more emphasis on fair, inclusive and responsible. The ability of a business to understand the changing dynamics and nature of its key relationships both in the short and longer-term will be crucial. Then to use this to navigate the difficult, moral decisions that remain through and beyond this period is likely to define its winners and losers. In this respect, the crisis is far from over and the ability to rebuild and maintain trust will be key.

In today’s world, sustainability and corporate responsibility reporting is gaining traction faster than ever before. It’s no longer enough to make claims about sustainability, there is now an expectation on companies to provide meaningful and engaging reporting that provides detail around its commitments to, and impacts on, key sustainability issues for the business.

The urgency around some issues and the rise in stakeholder interest, especially from customers and the investor community, has shifted reporting from a ‘would like to do’ to a ‘must do’. As a result we’re seeing more and more companies embarking on their sustainability reporting journey for the first time.

But the reporting world is complex and we know first-hand that it may seem intimidating at first. According to the World Business Council for Sustainable Development, there has been a more than ten-fold increase in the number of corporate reporting requirements on Environmental, Social, and Governance (ESG) issues over the past 25 years. Today there are thousands of non-financial reporting guidelines, frameworks and requirements, and although many developments are welcome, it has made the sustainability reporting landscape confusing, time-consuming, and fragmented.

We have helped many first-time reporters to navigate this complexity so here we’ve put together our top tips on developing robust, accessible and engaging reporting designed to respond to the expectations of your stakeholders.

Consider the best channel

Be very clear from the outset about the purpose of reporting. For example, which key stakeholders are you trying to reach, inform and engage – from employees and partners, to investors, customers and other stakeholder groups – and what do you want them to do with the information?

Remember that the outcome of successful reporting is that internal and external stakeholders have the information they need to base their decisions about the company on. Do you want to build brand awareness and reputation among customers? Are you seeking to share stories about your commitment, or celebrate the work of your employees? Are you reporting to satisfy investor requirements?

This will then help to guide the best way to communicate with each group. You may then consider using one or more of the following channels:

• Sustainability website pages
• Annual report chapter
• Stand-alone sustainability report
• Social media

If reporting is aimed towards investors for example, a chapter in the annual report may be most suitable. On the other hand, if informing customers is paramount then website pages and social media may enable you to better achieve your goals.

Be open and authentic

A sustainability report, whatever form it takes, should exist to build trust with stakeholders. Too often, companies are hesitant to talk about things that either haven’t been completed or challenges that show the company as less than perfect.

Yet in reporting, openness and transparency are key, and presenting a balanced, genuine and authentic story, rather than a polished and perfect – but often unbalanced – picture, is essential to building trust with stakeholders.

First time reporters often look to the Global Reporting Initiative (GRI) Guidelines to cut through the complexity but are scared off by the large number of different criteria set out in the disclosures. If a company isn’t ready, we will suggest that understanding and using the GRI reporting principles, which sit behind the guidelines, really helps to build the foundations of a robust first report.

The principles are split between those to be considered when defining what information to include in the report (Principles for Defining Report Content), and those to be considered when deciding how to collect, prepare and present information in the report (Principles for Defining Report Quality), and they can help guide a reporting structure, or even your data collection process.

Include performance data, wherever possible

Storytelling in sustainability reporting and communication is a vital way to engage your audiences but reporting must also be evidence-based. We know that many first-time reporters may not yet have a complete set of performance data relating to the areas they want to talk about and can be reticent to put data in the public domain. However, we always support our clients to scrutinise the data and encourage them to include what they can in order that stakeholders have as complete a picture as possible and to demonstrate a commitment to transparency.

Where there are gaps or where data doesn’t show an improving picture, the reporting narrative should openly address this, discussing the nature of the issue, any challenges the company is facing and the actions it will take as a result.

In short, staying quiet on sustainability is no longer an option for most companies. The most important thing for first-timers is to put a marker in the sand and produce reporting which is open, honest and transparent so that stakeholders can use this information to inform their decisions about the company. This can then be used to build on and improve disclosure year-on-year to provide an increasingly robust and rounded picture of companies sustainability performance, incorporating materiality, the Sustainable Development Goals, and context – but more on that in our next reporting blog!