It’s now or never: after Covid-19, managers must put ecological and social issues at the heart of business models and strategies

Now more than ever, is the time for companies to entirely rethink their business models and strategies, and consider the commitment to a positive impact on the planet and on society – not as a constraint, but as a driver for long-term profitability, says André Sobczak

The Covid-19 crisis has dramatically impacted businesses worldwide. To support them, governments have invested historical amounts of money. But, for the long-term performance of business and the benefit of our society, it is crucial that these funds are used to reshape business models and strategies putting ecological and social issues at the forefront.

The crisis has shown that businesses that had already taken social and environmental challenges into account have been more resilient during the pandemic and have also had more trusting relationships with their stakeholders. Companies with a good social dialogue have shown more agility when it comes to adapting to new working conditions and organisation. Those who had developed telework in the past, could build on their experience. Similarly, those companies who have mainly worked with local suppliers and have a strong relationship with them, have been much less negatively impacted by the closure of international borders than those that have built global supply chains and defined short-term cost-reduction as their top priority.

Recent studies have shown that during the crisis, companies that implement a sound CSR policy and respect their stakeholders have performed better than those that don’t. So, now more than ever, is the time for companies to entirely rethink their business models and strategies, and consider the commitment to a positive impact on the planet and on society – not as a constraint, but as a driver for long-term profitability.

The need for change

The crisis has indeed underlined the need for change and the willingness of stakeholders to act. For example, during the pandemic, customers have shown interest in responsibly and locally-sourced products. Shareholders too have maintained or even strengthened their support for those companies committed to developing climate-neutral solutions and sustainability.

Taking into account the COVID-19 experience, an increasing number of investors understand the urgent need to integrate the expectations of employees, customers and civil society, to maintain the company’s license to operate, and make what investment is necessary for such a transition, even if it may impact their short-term profits.

Finally, governments will certainly ramp up the pressure on business for such change, demanding social and environmental assurances in return for financial support. If we don’t use this window of opportunity now, it may be too late.

It is no longer sufficient for businesses to take baby steps to improve the social and environmental impacts of their activities. They need to immediately put a stop to any activities that do not comply with the climate change targets defined in the Paris Agreements, and that destroy biodiversity or go against social justice principles. They must also develop new avenues that create value for all stakeholders and comply with the United Nations Sustainable Development Goals.

Such a transformation impacts all aspects of business. It means that companies have to revisit their supply chains to guarantee that all their suppliers and subcontractors are aligned with these goals, but also to see if more local suppliers might be preferable in order to minimise transport use and carbon emissions. It means that companies have to design their products in a responsible way, ensuring limited use of raw materials and energy, improving the repairability rates and creating a more service-based economic model favouring the long-term use of the same product for different users.

It means that companies have to rethink how their products and services are used, and test them for sustainability.

Finally, it means that companies have to redefine their vision, their mission and sometimes their legal status to require managers to create sustainable values rather than to focus on short-term financial performance.

Managers are at the heart of such a transformation

To ensure that the vision is implemented, managers need a concrete and sound action plan. Managers need to embody the new vision and communicate it to the various stakeholders. It is paramount that they inspire all employees, from R&D to production and marketing, accounting and human resources. Finally, they need to build and strengthen partnerships with other public or private stakeholders to accelerate the transformation, even if it sometimes means cooperating with competitors. It is crucial that managers develop the relevant skills for such a shift, which means that business schools also have to undergo a profound transformation and to review their curricula.

The agenda and the timing are extremely ambitious. But we have no choice. And, together, we can succeed. The Covid-19 crisis has already shown that by working together we are able to face enormous challenges and to adapt existing models within a few weeks. If we have been able to do so to fight the virus, we have the capacity to do so to address the huge environmental and social problems that also urgently need our attention.

Let’s start now.

André Sobczak is Associate Dean for Faculty and Research, and Holder of the CSR Chair at Audencia Business School.

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