As the crisis continues to unfold, ESG topics will continue to grow in importance. Companies will be judged by their ability to withstand financial shocks, but also by how they’ve treated their employees, clients and communities.
Over the past decade, interest in how companies manage environmental, social and governance (ESG) issues has grown considerably. Investors, consumers and employees increasingly expect companies to account for issues such as worker safety, climate change and financial transparency. As the world finds itself in the midst of a pandemic, these stakeholders are now adding a company’s response to COVID-19 to the list.
Specifically, what are they looking for in a company’s response to COVID-19?
Ratings agencies and other organizations are starting to issue guidance. S&P Global provided insight on how it might adjust its ESG evaluation. Sustainalytics has produced research that examines the impact of COVID-19 on ESG. The UN Principles for Responsible Investment has published resources for investors to engage companies around their COVID-19 response.
Based on this information so far, stakeholders will be looking for insight on the following:
- Governance of COVID-19 response: How is the company managing its overall response to the pandemic? Is there a specific management team? Does the board have oversight?
- Workforce: What is the company doing to keep employees, suppliers, contractors and other key stakeholders safe? How is the company maintaining productivity during this time? Has the company been forced to adjust its headcount; and if so, how is it supporting those affected?
- Community support: What is the company doing to help address challenges brought about directly or indirectly by the virus? Support could include monetary giving, as well as in-kind donations of product and supplies. Is a company’s philanthropic response aimed not only at the health crisis broadly, but also at supporting communities where the company operates and where employees live?
- Supply chain continuity: How is the company identifying and managing potential disruptions in the supply chain due to the virus?
- Customer loyalty and satisfaction: What is the company doing to engage customers during this time — through product innovation, outreach and other efforts?
- Stakeholder engagement: How is the company listening to all stakeholder groups during this time? What is the company doing to respond to concerns?
The impacts of this crisis are both immediate and long term. Companies must be proactive, diligent and dedicated to a business strategy that protects and enhances recovery — and ultimately, their reputation. Three steps your company can take today include:
- Audit: Assess where your company stands on key COVID-19-related ESG topics such as workforce, community support and supply chain continuity.
- Act: Take action where necessary to build initiatives and programs to mitigate any identified risks and act on opportunities.
- Communicate: Tell your company’s story — be specific about what you’re doing under the topics listed above, and other stakeholder concerns.
As the crisis continues to unfold, ESG topics, such as the safety of employees and community engagement, will continue to grow in importance. Companies will be judged by their ability to withstand financial shocks, but also by how they’ve treated their employees, clients and communities.