Comment: Pauliina Murphy of the World Benchmarking Alliance says hitting the pause button on the global economy has highlighted societal demands for more transparency from companies on their social, economic and environmental sustainability
Companies are a vital part of the social fabric. They provide livelihoods, their outputs power economic activity, and their goods and services are depended upon the world over.
But Covid-19 has thrust many into crisis mode, putting thousands of jobs at risk and causing many business activities to be paused or cancelled. We are already experiencing the devastating short-term effect this has had on the global economy. Make no mistake, long-term economic health will also be frail. We cannot, therefore, ignore the plight of companies at this time. But neither should companies ignore the societies that depend on them.
When looking at the world’s biggest corporations, it is difficult to define where a company’s influence begins and ends. Such companies have vast global supply chains and extremely complex value chains to match. While this enables many to benefit in times of growth, the system can also mask responsibility and accountability, particularly in more challenging times. What makes the Covid-19 crisis unique is that never before have parts of the global economy simply come to a complete standstill overnight. Healthcare systems have been tested to their limits, consumer choice has been removed and governments and governance been directly challenged.
The pandemic has brought long-term social, economic and environmental sustainability demands to the fore
The International Labour Organization (ILO), estimates that 195 million jobs worldwide will be lost due to Covid-19, and that, as of April 2020, more than 80% of the global workforce had been impacted in some way by the economic shut down. The ILO also expects to see a near 11% reduction in working hours in the second quarter of the year. These estimates are shocking enough on their own, but when you consider that two-thirds of the global workforce is dependent on the informal economy – without the protection of workers’ rights or the guarantee of an income – the situation becomes even more stark.
With few people left untouched by the pandemic, hitting the pause button has done more than simply jeopardise business. It has brought long-term social, economic and environmental sustainability demands to the fore. One of these demands is the need for better and more transparent collaboration between the private sector and policymakers.
Where these partnerships are possible, society has responded with positivity. For example, in the UK, where the government is footing the bill for wages to the tune of almost £22bn, a recent poll shows that 85% of workers feel happy about how they have been treated by their main employer during the pandemic. While this level of state support is not necessarily open to all countries and people, we should prepare for a ripple effect as the boundary lines between policymakers, the money makers and companies shift.
Keystone companies, such as those identified in the World Benchmarking Alliance’s (WBA) SDG2000, which lists the 2000 global companies that have most influence on achieving a sustainable future, have more influence than ever in today’s society. This influence is often most keenly felt among the most vulnerable: from the women working in a Bangladeshi garment factory to a mineworker in the Democratic Republic of the Congo, or those trying to make a living in the gig economy in the UK.
Today’s crisis has revealed that their plight is the result of corporate failures to even understand the entire value chain or perceive it beyond a functional supply chain of supply and demand, to be turned on and off like a tap. Covid-19 means there is more focus on people and human rights now, and we are seeing the companies that continue to look after their people – be it in their operations or supply chains – will lead the global recovery from an employee engagement and brand perspective.
But while most companies do understand that something does need to change, many have not yet fully understood how this change needs to happen. This is evident in the number that have failed to implement any meaningful social sustainability measures to date. WBA’s 2019 Corporate Human Rights Benchmark (CHRB) revealed that most companies are failing to demonstrate respect for human rights, with nine out of 10 companies achieving a score of 50% or less. Household names including Starbuck’s, Foot Locker and Costco Wholesale are among those that scored less than 10%. If this was the state of play before Covid-19, the pandemic must be the catalyst that kickstarts these companies into action.
Companies have been going through a period of transformation for many years. Covid-19 is a tipping point for those that were lagging behind
Some companies have taken steps in the right direction. In apparel, brands such as H&M and Inditex, which owns fashion brand Zara, have agreed to financially honour orders. This act will provide some relief to the 60 million Bangladeshi garment workers who supply such brands, but it is not enough. What we have seen from other benchmarks, including looking at the most influential automobile and seafood companies in the world, is that governance and measurement are critical.
For complex seafood giants, even understanding the end-to-end operations from companies across multiple geographies, sites and named or unnamed subsidiaries is key. What we see from the auto sector, which can be applied to many businesses, is the need to look ahead to future-proof the business and manage risks. Companies at the top of this benchmark have not only embedded sustainability into core business now, but are looking ahead to trends for a cleaner greener future, for example, by decreasing demand, car-shares and increased mobility.
Companies have been going through a period of transformation for many years. The Covid-19 crisis is a tipping point for the companies that were lagging behind, or on the fence. Businesses are now scrambling to reinforce and demonstrate their commitments.
Through our work at WBA, what is becoming clear is that the biggest challenge in moving forward lies in measuring these commitments and how corporations can and should communicate them to global society. This must happen if real resilience is to emerge.
Most societies recognise the need for and role of business. This has been demonstrated by the support for governments announcing fiscal packages and calls for global organisations, such as the International Monetary Fund and World Bank, to act in cases where national GDP cannot provide such provision.
For companies to build trust through this pandemic they must find a mechanism for getting their message out there. Acting on and committing to long-term social, economic and environmental sustainability is the first step to adapting and survival.
There is just a decade to run on meeting the UN’s Sustainable Development Goals. The 17 targets flag up what society both expects and needs from private corporations, which must prioritise their role in society, putting “people and planet first” as core to their financial performance.
Pauliina Murphy is engagement director at the World Benchmarking Alliance
pandemic Build Back Better CWBA CHRB SDGs ILO Bangladesh Garment Manufacturers Human rights supply chains