Business Resiliency and Progress on Sustainability in a Post-Pandemic World
A closer look at the survival and resiliency of sustainability initiatives of consumer product companies during and after the COVID-19 global pandemic.
By the 50th anniversary of Earth Day, COVID-19 had taken the lives of more than 170,000 people worldwide, including nearly 45,000 people in the United States. What would have normally been a celebration of progress and a call for increasing large-scale sustainability leadership was overshadowed by a health epidemic that continues to devastate livelihoods and businesses around the world.
Fast forward to the US summer, a June 2020 World Bank Global Economic Prospects report predicts a baseline 5.2% contraction in global GDP in 2020. COVID-19 has over ten million cases confirmed and has taken over 500,000 lives and counting. The world faces what the World Bank called “the deepest global recession in decades.” As our society and businesses recover from the economic shock of COVID-19, consumer companies are asking themselves the question: Will sustainability efforts be abandoned for other strategic priorities to recover profits and conserve capital?
This was on the mind of Founder & CEO Neil Yeoh when he launched his consultancy, OnePointFive, focused on a sustainability-experts-in-residence model that could help businesses stay committed to sustainability. The consumer goods industry in particular is dealing with supply chain disruptions, retail store shutdowns and employee furloughs and layoffs. As the consumer goods industry recovers from this crisis, sustainability efforts face a risk of being deprioritized or abandoned. But according to Yeoh, they do not have to be, even in times of crisis.
“I see this as an opportunity to double down on both internal and external tactics to ensure sustainability remains a priority while businesses recover from this crisis,” Yeoh said.
Prioritizing Sustainability in a Pre-Pandemic Context
Prior to COVID-19, many consumer goods companies were involved in some form of sustainability effort. The UN Global Compact has over 100,000 companies committed to taking actions that advance societal goals and align their strategies and operations with universal principles on human rights, labor, anti-corruption and the environment.
A 2019 UN Global Compact survey found that 85% of 1,000 global CEOs agreed that business “should lead efforts to define and deliver new goals on global priorities and issues.” Failing to act on climate change just happens to be at the very top of the risk list, according to the World Economic Forum’s 2020 Global Risk Report.
In the years leading up to that report, corporations have made significant progress addressing sustainability-related challenges. From 2014 to 2018, the percentage of dedicated sustainability personnel tripled in facilities and supply chain departments. Additionally, more than 85% of companies in the S&P 500 Index have published sustainability or corporate responsibility reports.
But while progress had been made, Yeoh explained that sustainability efforts were still nascent and only beginning to gain momentum before COVID-19.
In 2019, 43% of CEOs from the world’s largest companies cited “competing strategic priorities as a top barrier in implementing sustainability.” Corporate sustainability budgets had only moderately increased over the past few years, and many sustainability programs were underfunded and under-resourced. In 2018, 26% of companies surveyed by Greenbiz with revenues greater than $1 billion had sustainability budgets of $1 million or more, which was 6% down from 2016.
Now, as COVID-19 impacts the consumer goods industry, Yeoh believes it is more important than ever to help ensure sustainability efforts are not abandoned in times of crisis.
Post-Pandemic: Re-Committing to Sustainable Practices
“The optimist will argue that despite a possible economic recession, sustainability initiatives still make good business sense and are necessary for market resiliency and long-term sales growth,” said Yeoh. Though he also understands that as consumer goods companies look to reduce costs and recover revenues, sustainability efforts may drop in priority without action from sustainability leaders.
Yeoh has a few recommendations for internal and external tactics and enablers that can help ensure sustainability remains a priority for consumer goods companies.
Step One: Internal Tactics
As COVID-19 has disrupted business as usual, it is common for CEOs and executives to send company-wide communications to their employees and stakeholders. As the health epidemic gradually resolves, Yeoh believes that sustainability leaders should take the opportunity to integrate sustainability messaging into these company-wide communications.
Informal interviews with sustainability leaders of various consumer goods companies, Yeoh found that most of these professionals highlighted the importance of C-suite advocacy and support when it came to fostering successful sustainability initiatives. Although 58% of sustainability professionals believe that sustainability initiatives would continue if the CEO were to leave, C-suite communications are still perceived to have a significant influence on whether or not employees support those initiatives, according to an article by John Davies on GreenBiz. According to Yeoh, well-timed, framed and worded communications can be a powerful way to keep corporate sustainability efforts top of mind and keep employees motivated behind a strong company vision.
The benefits of advancing sustainability initiatives can also be reframed in terms of resiliency, financial opportunity and business recovery post-COVID-19. According to NYU Stern’s Center of Sustainability Business, 50% of consumer packaged goods company growth from 2013 to 2018 came from sustainability-marketed products. The study further found that products marketed as sustainable grew 5.6 times faster than those that were not. Several consumer goods surveys even found that one-third of consumers are willing to pay 5 to 25% more for sustainable products.
In his discussions with consumer goods company leadership, he found that not one size fits all when it came to sustainability approaches for consumer goods companies. The survival of sustainability initiatives at consumer product companies will likely be determined by the degree that sustainability is embedded within a company’s business model and tying financial incentives to achieving sustainability goals can be key to ensuring sustainability goals are achieved, Yeoh found.
While considering ways to tie financial incentives to sustainability progress, however, it is okay for cost-constrained company leaders to focus on a smaller set of sustainability initiatives. A 2014 McKinsey Global Survey showed that while two-thirds of companies in a representative sample from the S&P 500 had 10 to 30 different sustainability-focused initiatives, companies with a unified strategy and no more than five strategic priorities related to sustainability were almost three times as likely to be among the strongest performers both financially and on sustainability.
“Consumer product companies can focus on critical sustainability initiatives that generate environmental impacts and create long-term value for their business,” said Yeoh. “The two aren't mutually exclusive.”
As industries prepare to restart, he explained, consumer product companies can take an opportunity to review and improve governance structures and processes for sustainability initiatives. This could include decision-making related to budget and sustainability initiatives or hiring processes that ensure sustainability teams hire the right expertise. With employees working remotely, Yeoh added, it could be opportune time to promote virtual training programs for team members to level-up their skills in sustainability.
Step Two: External Tactics
As COVID-19 throws the business world into a new level of uncertainty, consumers are looking closely to see how companies choose to respond to the crisis.
“Two major drivers of sustainability efforts are company reputational risks and customer demands,” said Yeoh. “Companies are seeing that consumers really do want products that align with positive core values of sustainability and transparency.”
That is why Yeoh argues that sustainability leaders within consumer product companies can advocate for the retention of sustainability initiatives on the basis of avoiding unnecessary risks to company reputation that would occur if they chose to abandon them altogether. Despite the fear that sustainability initiatives might be pushed to the wayside amidst the COVID-19 crisis, Yeoh found that most business leaders he spoke with felt that consumer demand for sustainable products and business practices will remain post-COVID-19.
According to the Harvard Business Review, consumer packaged goods that had a sustainability claim on-pack accounted for 16.6% of the market in 2018, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from 2013. That is not to say consumers’ purchasing behavior will not change, said Yeoh, but there is a potential for consumers to demand more transparency from consumer product brands, paying particular attention to the health and sustainability impacts of products.
“Sustainability leaders should continue to run education and awareness campaigns tailored to their customer segments,” said Yeoh. “Many younger consumers are becoming increasingly willing to pay more for sustainable goods and to support businesses that employ sustainable business practices.”
However, there is still a gap between an intention and the act of buying. One recent survey found that 65% of the consumers surveyed want to buy purpose-driven brands that advocate sustainability, but only about 26% actually did so. Narrowing consumers’ “intention-action gap” is important not only to meet corporate sales targets, but also to generate benefits from sustainability efforts, Yeoh explained.
In response to this, a Harvard Business Review article outlines five tactics companies can use to bridge this “intention-action gap.” The article explains that consumer product companies do not need to focus on perfection when it comes to sustainability initiatives, but on transparency of imperfect sustainability efforts. The article goes even further to explain that transparency of sustainability progress and challenges makes consumer product companies more relatable to values-driven consumers. It also reduces the ammunition for consumer criticism, and helps to build trust and brand loyalty.
These efforts will not go unrewarded. A 2019 consumer product survey found that the second highest reason consumers return to a brand is due to their sustainable and ethical business practices, following product quality.
As COVID-19 disrupts global supply chains, Yeoh notes that many consumer product companies have had to work closely with suppliers to resolve product manufacturing, warehousing, and transportation issues. Although sustainability may not be a priority for suppliers when industries restart, he explained, crises can bring suppliers and buyers closer as they realize their co-dependence for commercial success.
As new contracts are negotiated and business returns to normal, Yeoh feels there could be an opportunity for sustainability leaders to influence suppliers' business operations to encompass sustainability at its core and help consumer product companies achieve their sustainability goals in the process.
Step Three: Enablers to Support Sustainability Efforts
“Ironically, the most effective way for consumer product companies to improve sustainability is to encourage customers to consume less,” said Yeoh.
As businesses restart, he explained, consumer product companies can focus on slower, more intentional commerce. Rather than getting caught up on new product launches, Yeoh pointed out that consumer product companies can focus instead on existing products and more intentional sales. Consumer apparel companies such as Patagonia and Everlane have shown that customers are willing to pay more for products if sustainability is a core intention of businesses.
There has been significant progress in software that can measure life cycle analyses and materiality issues of products, Yeoh explained. While there are still challenges presented by data collection, digitization and data science to help consumer product companies make more informed sustainability decisions, it does look hopeful that this technology has the potential to improve the outcomes of their sustainability efforts.
What Comes Next: Reshaping Our Relationship with Our Planet After a Pandemic
Months into the COVID-19 global pandemic, one could hear birds chirping and see blue skies emerging for the first time in decades. Canals in Venice saw clear, deep turquoise water and smog disappeared from the skies over Los Angeles. Small symbols of hope in the time of global tragedy gave birth to dialogues on what efforts to heal the earth might look like moving out of a pandemic. COVID-19 has forced the world to slow down, and perhaps has helped many to realize the blistering and unsustainable speed of consumerism.
“With corporate sustainability at risk when industries restart, consumer product companies are uniquely positioned to take a leadership role in sustainability,” said Yeoh. “I hope they are encouraged and reminded to continue to push forward their values and commitment to taking care of the earth and its inhabitants.”
