Can COVID-19 and ESG co-exist?
The COVID-19 pandemic is having a severe impact on employment figures, consumer demand and supply chains throughout the world.
While the climate emergency remains as pressing as ever, it nevertheless appears difficult to affirm that this COVID-19 crisis will facilitate the ecological and energy transition. Governments and central banks are logically giving priority to the preservation of hard hit companies and jobs (industries that are often carbon intensive) at the same time the fall in oil prices is at least temporarily making green energies less competitive. Additionally, delaying transition investments can become a source of substantial cost savings. In simple terms, it is our role as responsible investors to continue to engage, talk and act with economic players to avoid that this theme does not join the list of good resolutions that are quickly forgotten. However, it is also our role as citizens, consumers, employers and savers to express this demand for transition.
The good news is that the levers of social and societal responsibility are already being activated. The recognition by companies of the need to accompany all the stakeholders in this complicated period is clearly tangible. It is reflected first by the participation of numerous companies in collective health crisis efforts: production of alcohol-based hand sanitizers, disinfectants, mask, ventilators and respirators, donation of intellectual property covering tests and the virus, donations in-kind or of equipment to hospitals (Schneider, Merck, Sanofi, Linde, Roche etc.).
In addition to these measures, we are seeing major and rapid adjustments in the allocation of the loss of economic value caused by the economic shock: changes in management remuneration (Sodexo, Hermès) but also in that of shareholders through the reconsideration of dividends (Hermès), maintaining of employee salaries (Chanel, L’Oréal), payment facilities offered to suppliers (Unilever), deferred payments for customers (Iberdrola)… All this with the support of regulators and authorities that themselves wish to reach a fair balance between the interests of the different stakeholders. This is the price to be paid in order to insure that a rapid and inclusive recovery can occur.
There is no question that the companies that have established a good balance between all their stakeholders and a strong corporate culture over the last several years are better positioned to deal with the current crisis. These companies also have the best chances to come out of this crisis more rapidly and stronger. Employees who are teleworking or isolated on site are all the more effective and motivated when they adhere to their employer’s strategy and are proud of its societal contribution. For their part, suppliers are prepared to adapt and make additional efforts if they know that their relationship with the company is long-term in nature. Customers will also be all the more loyal if the brand is socially responsible. Finally, company leaders will be able to focus on management and strategy thanks to risk control reinforced by this ecosystem.
The health crisis, which is turning into an economic shock, must not result in the suspension of company efforts in favour of the integration of all the stakeholders into their strategy. Companies’ roles as sustainable and responsible players must instead be reinforced and the trajectory established over recent years must be confirmed as structural.
Companies that have placed a societal and collective project at the heart of their development models are the drivers of the investment process at our Mandarine Active fund. We are convinced these companies will make positive contributions to society as well as investor savings.
By Growth team, April 2020
Image source : Pixabay