Why ESG Is Critical To Business Resilience

Resilience reflects what we do before, during and after disruptive events—and it's built on effective governance practices.

Today, Covid-19 is upending how work is defined, what companies and organizations represent and what they do. Amid high market volatility, unprecedented peacetime pressures on the economy and existential challenges to businesses, large and small, some voices are asking how these developments reconcile with ESG.

We see ESG in the actions of businesses and other organizations in thinking how best to provide for—and more than that, drive—the long-term sustainability of the communities in which they operate. These communities underpin the foundation of society, the economy and the capital markets.

We see it in heightened awareness of the saying “people are our most important asset.” Today the “S” of human capital is constantly top of mind. Leadership is more important than ever. There is a tremendous need for leaders to assure and inspire workers, customers and other stakeholders. So much, too, rests on a healthy, confident and empowered workforce: Workers who feel protected and safe while serving on the frontlines of healthcare and critical business operations. And workers who are working from home, juggling the needs of young children and other family members, including individuals requiring special care.

Former workers, consumers and suppliers fill the ranks of the unemployed and those seeking assistance at foodbanks in an all-too-rapidly growing segment of the population—and one that doesn’t include the many who may soon join them. These same individuals simultaneously represent future workers, consumers and suppliers when the economy picks up pace. How do companies and organizations manage today, in the coming months and farther out?

Even as “S” challenges make headlines, large-scale environmental challenges continue. Climate change, resource limits and efficiency pressures, waste management and pollution, and other environmental challenges do not go away, even with the temporary ease in ecological pressures. Poor management of environmental challenges—which represent short- and longterm systemic risks—can carry significant costs and other repercussions for businesses and communities.

Today’s business models are customer-centric and built on global travel and population densities, digitalization and interconnectedness, complex supply chains and a substantial gig economy. It’s in this landscape that we are seeing more non-traditional risks appear more often and with greater impact—whether it’s “once-in-a-hundred years” weather events that occur repeatedly in a lifetime or an inconceivably damaging global pandemic.

ESG is critical to business resilience. This lens and accompanying stakeholder considerations help organizations to better identify non-traditional risks and opportunities; to flex, endure and recover from shocks and stresses; and to accelerate the changes needed for our global ecosystem to be more sustainable in the long run.

In times of crisis, there is an opportunity for boards and companies to think strategically about how they can achieve a better outcome for their organizations, from supply chains to their customers—and by extension, to greater whole that is society and the global economy.

In recent years, there have been more calls for an inclusive approach to capitalism—from corporate leaders to the common worker, policymakers, academics and other stakeholders. Historically separate stakeholders are increasingly collaborating on common goals—whether by working to move the needle on greenhouse gas emissions or other aspects of the UN Sustainable Development Goals. These efforts share the goal of leveraging corporate purpose to build longterm business and societal sustainability.

Companies and organizations are demonstrating this commitment in fighting the pandemic, taking action in alignment with long-term purpose, mission and vision. Some are retooling equipment and processes to assist healthcare workers; contributing time, expertise and services; or by making financial donations.  Some are fighting pain points by expanding healthcare coverage and sick leave, contributing to hospitals and foodbanks, or committing to “keep the lights on.” There are offerings of free data, technology and communications, and access to wellness services, fine arts and other entertainment.

ESG by itself isn’t the solution, but it gives room for optimism. Resilience reflects what we do before, during and after disruptive events, and it’s built on effective governance practices. The “G” applied with a view toward inclusive growth over the long term.

Our global vulnerability and experience with disruption today will likely accelerate calls to strengthen our resilience in the face of future challenges. It’s these future non-traditional challenges that stakeholders need to consider as we continue to adjust all of our existing processes, practices, and behaviors for the coming months and the recovery.

Let’s use this moment to improve our ability to mitigate and absorb the systemic stresses and shocks we’re now facing. And let’s harness the power of the crisis to focus, adapt, innovate and transform. We can start now to build something better for the long-term. We need to.

As individuals, as companies and organizations, and as a society, let’s work together to get through this and, in the process, create a better tomorrow.