Sustainability Was Corporate America’s Buzzword. This Crisis Changes That.
6 minute read
From Unilever to Starbucks to GM, corporations pause some social-responsibility programs or put them on the back burner
Lauren Singer had spent the last eight years living a “zero-waste” life and building an eco-friendly business off of it. Then, the coronavirus pandemic confronted the chief executive of New York-based Package Free with an existential crisis.
“When the reality of Covid-19 set in,” she posted on Instagram, “I made some choices that went against the way I have lived my life for almost a decade.”
Ms. Singer, who prided herself on producing no trash that needed to be landfilled, stocked her kitchen with packaged food that would last for weeks. “I sacrificed my values and bought items in plastic. Lots of it.” She also learned a lesson: “I have many values and sometimes, as circumstances change, one of those values may take priority above another.”
Today, every occupant of every C-suite is trying to figure out what they’re willing to throw overboard as the economic storm spawned by the pandemic is swamping their ships. Businesses that were planning to help save the world are now simply saving themselves.
“Action expresses priorities,” Gandhi said. Amid extreme distress, one immediate priority overwhelms all others. Entities from one-cell organisms to multinational conglomerates shut down everything except what they need to survive. Efforts once deemed critical suddenly feel like luxuries. That feeling might last a month, a quarter or a year, but consequences can linger.
“Belief in a new ‘sustainability’ model of capitalism is growing but will it endure?” Paul Pellizzari, the sustainability chief for Hard Rock International, wrote in a piece published Monday on the environmental media site GreenBiz. “Will mad scrambles to save profitability and market capitalization stall or kill a new paradigm?”
History suggests this new paradigm is probably on the back burner.
Mr. Pellizzari said the Corporate Social Responsibility movement, or CSR, was just getting off the ground in 2001 when the 9/11 terrorist attacks happened. “CSR did not die,” he wrote, but “its immediate priority waned.”
When the financial crisis hit in 2008, companies again went into survival mode. “Spending on community and philanthropic programs and internal capacity building dropped,” he said.
As the economy roared back, CSR became chic. Investors like BlackRock Inc. pushed for more sustainable practices. Retailers and restaurants reduced waste because customers were willing to pay for greener options.
In recent weeks, however, executives have called a timeout. They’ve signaled that years of cost-cutting lie ahead.
“If the worst predictions for economic seizure prove true, many businesses will be worse off than in either 2001 or 2008,” Mr. Pellizzari wrote. “Those companies who retrench to starvation fundamentals almost certainly will freeze continued investment in impact and purpose for some period.”
Hard Rock’s corporate motto, “doing well by doing good,” has led it to create campaigns to fight hunger and contribute millions of dollars to disaster relief.
Hard Rock’s hotels, casinos and restaurants have temporarily laid off workers all over the country, according to press reports. It isn’t clear when those people will be employed again.
Companies have delayed sustainability reports. Airlines are asking for climate-regulations to be relaxed. New York, San Francisco and other cities or states have temporarily waived plastic-bag bans.
Some of these measures are in direct response to a health crisis. It’s hard to test robocars when engineers are stuck at home; hard to refill a coffee cup when a potentially contagious person used it.
But it’s unclear if consumers, businesses and governments will have the money or the appetite to save the planet with the same gusto that existed pre-pandemic.
General Electric CEO Larry Culp, already knee-deep in a turnaround, Wednesday laid out the balancing act most companies will have to replicate. The company has slashed at least 25% of its budget and could tighten further.
“We don’t want to spend one dollar more than we need to this year, all the while making sure we don’t shortchange the long term,” he said in an interview with CNBC.
Institutional shareholders recognize the deck is being reshuffled.
“When we exit this crisis, the world will be different,” BlackRock CEO Larry Fink wrote in his annual letter. “Investors’ psychology will change. Business will change. Consumption will change.”
BlackRock said it realizes “that in the near-term companies may need to reallocate resources to address immediate priorities in these uncertain times,” but it would be watching as the crisis eases. “Given our long-term approach to stewardship, we will continue to monitor company disclosures and expect a return to companies focusing on material sustainability management and reporting in due course.”
Judith Samuelson, a vice president at the Aspen Institute think tank, said the pandemic doesn’t give license to executives to simply go back to the old way of doing business.
“People have a long memory,” Ms. Samuelson said. “What companies do right now matters.”
BP PLC isn’t the first place one might look for a sustainability blueprint for this new era. But the battered oil company might actually have a plan that makes sense.
During a conference call this week, Chief Executive Bernard Looney said the company would slash spending by $3 billion, or 25%. The company is preserving its dividend and won’t cut jobs for now.
Another thing it won’t tamper with: its recent 2050 carbon-neutrality commitment. Mr. Looney said the short-term cuts will help BP recover quickly enough to keep intact a climate pledge that he deems strategically necessary.
“The pandemic I think only adds to the challenge for oil in the future. I think we’re all living and working very differently,” he said. Mr. Looney said the long-term outlook for BP must include lower dependence on fossil-fuels and a turn toward renewable options.
Ms. Singer, the eco-conscious CEO, told me Thursday she has spent the last month thinking how to shift plans. She realizes that many people won’t share her values coming out of the crisis, but she still wants them to be able to afford her products and a greener lifestyle.
Ms. Singer said she has spent the last month talking with investors and colleagues about potentially adding capacity to her business, find ways to make items more affordable or potentially raise another round of funding.
“If you’ve lost your job, you’re not thinking about sustainability,” she said. “The average consumer does not have the resources to shop in a way that always protects the environment.”
She needs to build a business that reflects a new reality. Taking on new investors or employing more of a mass-production strategy, however, will invite criticism.
“When you’re forced to prioritize, it opens up your business to scrutiny.”
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