By: Julia Zeeman and Puninda Thind, Consultants, The Delphi Group
As countries, businesses and individuals reckon with the devastating economic impacts of the COVID-19 pandemic, the call for a “green recovery” has been heard around the world. While governments deploy stimulus packages and businesses pivot and pivot again, advocates for a green recovery are calling for a focus on sustainability to accelerate the transition towards a resilient and low-carbon economy.
As we enter the sixth month of lockdown, a green recovery is no longer just an ideal, but a series of necessary and practical solutions embraced by governments, businesses, civil society and global institutions. In fact, a recent survey shows that one of the biggest longer-term outcomes of the pandemic may be a marked increase in the importance of corporate sustainability. Despite the urgency of the current pandemic and its immediate disruptive impacts, signs point to continued momentum towards a more sustainable, just and resilient future:
1. Companies are setting net-zero commitments: Companies like Uber, LafargeHolcim BP, and Google, have announced that they’re doubling down on climate goals. At a global level, the UN Race to Zero campaign, launched in June, is bringing over 1,000 businesses from over 452 cities together with a goal to achieve net zero carbon emissions by 2050 at the latest. Not to be left out, investors are also increasing alignment with a low-carbon trajectory. Just last week, Climate Action 100+, a group of the world’s biggest investors representing $47 trillion in assets, called on the large corporate GHG emitters to move their businesses towards net-zero carbon emissions.
2. The sustainable finance market has surpassed $1 trillion globally: During the pandemic, ESG and sustainability funds have proven to be more resilient, outperforming the rest of the market. Loans, bonds and other financial instruments linked to sustainability outcomes have continued to increase, helping companies finance their sustainability strategies and decarbonization goals. Here at home, the Toronto-based company Brookfield Asset Management is expanding its ESG investments, notably hiring former Bank of England governor Mark Carney to lead an ambitious expansion into environmental and social investing.
3. Heightened focus on social factors: employee health and well-being, diversity and inclusion, and supply chain resilience are all priorities that have been brought to the fore as a result of the pandemic and grassroots advocacy for anti-racism, civil rights and reconciliation. Many companies are moving to a ‘people first’ model through new or transformed initiatives addressing social justice, equity, diversity, inclusion, and employee physical and mental well-being. This shift in perspective is being heralded as a ‘purpose-led recovery’ and is a logical complement to the green recovery.
Given these trends, it is clear that the green recovery is an opportunity for organizations to re-think and re-evaluate business strategies in order to enhance long-term value.
1. Set credible and ambitious sustainability targets: Setting an ambitious and long-term sustainability target is about signaling a commitment to focus on business transformation. If you have environmental and social targets already, consider enhancing the ambition of those targets and developing pathways to meet those targets.
2. Understand future climate risk scenarios and opportunities: The COVID-19 crisis can be seen as a stress test for the much larger climate crisis. The facts remain unchanged—according to the IPCC, the leading body on climate science, we have 10 years to halve global emissions and keep global warming to 1.5°C. The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) suggest that businesses should examine future physical, policy, and market risks and opportunities, based on how their organization would perform under various future climate scenarios. There is a strong indication that adoption of TCFD recommendations is poised to grow. For instance, the Canadian government stipulated that large companies applying for financial support during the pandemic through the LEEFF program will be required to report on climate risk in alignment with TCFD.
3. Integrate short-term financial investments with long-term sustainability priorities: As recent research from Harvard Business School notes, “business leaders today face two questions: how to survive and how to capitalize on new opportunities.” A growing body of evidence is also underscoring a strong correlation between sustainability and financial performance of organizations. The green recovery opportunity is a shift towards a new normal—companies should re-think existing business processes and drive further integration of sustainability priorities with overall business strategy by closely collaborating with their finance teams.
The balance sheet speaks for itself. By joining the green recovery and making long-term sustainability commitments, businesses are reducing: costs, liabilities and future risks, while also enhancing: long-term value, stakeholder relationships, competitiveness, shareholder value and overall resilience. Don’t let this crisis go to waste.
Julia Zeeman and Puninda Thind are Consultants with The Delphi Group. For more information about how your company can be part of the green recovery and/or to grow your organization’s climate leadership, feel free to reach out to any one of them directly: Julia (firstname.lastname@example.org) | Puninda (email@example.com).