Double Down on CSR: Not Despite the Pandemic, but Because of It
Two key insights from our company’s new research report, COVID-19 Mindset, underscore a belief many of us already share: What your company does today will have an indelible impact on its reputation moving forward. In light of that, it’s amazing that consumers in all six countries feel employers play just as big of a role as governments in fighting the coronavirus. But, how do they rate companies for the job they’re doing? At rock bottom.
The pandemic that has wreaked havoc on so many people is also the most significant corporate responsibility challenge to arise in generations. It has pushed to the forefront the deep linkages between companies and their many stakeholders. A likely outcome of this is heightened scrutiny of corporations’ role in society – from the way they treat people and care for our planet to the corporate governance of their businesses. In other words, they’ll increasingly be judged by their CSR/ESG* performance.
The pandemic has also led to the worst economic downturn since the 2007-2009 recession, putting nonessential expenditures on the chopping block. But companies that recognize the value CSR/ESG creates are driving their programs and reports forward, not in spite of the pandemic but because of it. (There’s precedent for that. In the wake of the Great Recession, nonfinancial reporting grew to all-time highs.) Expectations from your most important stakeholders have never been greater and will only continue to rise. Here’s a look at three of them.
ESG funds and equities fared better than standard investments in the recent coronavirus-induced stock market sell-off. That’s prompting the world’s largest investors to highlight the value of sustainable portfolios and the wisdom of switching some traditional assets to sustainable ones.
The ESG rating and ranking organizations continue to comb through reports, websites and other sources for the data that fuel their various surveys of companies’ CSR/ESG performance. If what they’re looking for isn’t publicly available, your company’s scores can suffer. What’s more, some raters recently announced they’ll be tracking corporate responses to the pandemic.
The most pronounced findings of our COVID-19 Mindset study focus on concern for and by employees. An overwhelming majority reported that the pandemic has changed how they view essential workers and their needs. One in every four surveyed said the way companies act during the pandemic will influence their loyalty to employers and future employment decisions. When you add to that an abundance of research that shows a positive connection between CSR and employee engagement, the message is loud and clear: The need to document your commitment to workers has never been more urgent. In these times, delaying or canceling your CSR/ESG report sends the absolute wrong message to employees looking for reassurance, continuity and recognition that their work matters.
More than 80% of companies report their commitments to responsible procurement have increased over the past three years, with the main benefit being risk mitigation. The International Organization for Standardization (ISO) further raised the bar in 2017 when it released its first standard on sustainable procurement.
COVID-19 has exposed how vulnerable global value chains can be. Weeks before the virus was declared a pandemic by the World Health Organization, three-quarters of large U.S. companies had already seen disruptions to their supply chains. Clearly, as we emerge from this crisis businesses will pay even more attention to how they source products and services. In fact, more than half of U.S. CFOs are already planning changes to make their supply chains more resilient. While much of that review and planning will focus on capacity, finances and physical location, the additional scrutiny supply chains will receive is all the more reason to make sure your company continues to have a strong CSR/ESG story to tell.
COVID-19 may not pose quite the existential threat that is climate change. But it challenges companies just as much to prove to all their stakeholders that they are moving forward in a purposeful and responsible way. Robust and timely CSR/ESG reporting is an important part of meeting that challenge.
*For purposes of this post, we are using the terms Corporate Social Responsibility (CSR) and Environmental, Social, Governance (ESG) interchangeably to encompass the broad range of considerations involved in creating value for all stakeholders.
View additional COVID-19 counsel from the FleishmanHillard global network here.