Leo Varadkar and Sanda Ojiambo: Covid-19 proves businesses must act on sustainability
Firms demonstrating bold leadership on such goals will be securing their own future
Aim high: Pressure from policymakers, investors, customers and employees is growing for greater and more meaningful corporate sustainability action. Photograph: Nick Bradshaw
Covid-19 has forced many companies to reassess the way they do business. Most are studying how to prepare for the next global shock. This could be another pandemic, or a devastating natural disaster or the effects of climate change and biodiversity loss. Building resilience makes a business more sustainable. And being a sustainable business makes it more resilient.
Before the pandemic, more than 11,000 businesses alive to this threat had already committed to the United Nations Global Compact’s 10 principles and the 17 sustainable development goals (SDGs). This meant aligning their day-to-day activities with these aims, for example, by commitments to renewable energy or committing to greater gender equality within their organisations. But we are not moving at the speed or scale required to achieve our SDG targets by the 2030 deadline. Covid-19 also risks undoing much of the progress we have achieved since these global goals were adopted in 2015. We still have 700 million people in extreme poverty; we are on track for a 3.5 degree Celsius temperature rise by 2100 rather than 1.5 degrees; at our current pace it will take 257 more years to close the economic gender gap; and 8 million metric tons of plastic still enter our oceans every year.
Businesses already committed to greater sustainability recognise that they cannot thrive in a world of poverty, inequality, unrest and environmental stress. But many more businesses must raise their collective ambitions and join them. And if not just for the sake of the planet, then increasingly because sustainability also makes sound business sense. To help companies make this transition we met with business leaders in Ireland at a virtual event last week in an effort to engage more Irish companies in the UN Global Compact’s mission to drive sustainability and principled business globally. Our hope is that by working together we can help the business community in Ireland embed sustainability into the DNA of their organisations and drive ambition on the SDGs.
Cumulative relative returns
According to research carried out for the United Nations Global Compact, the world’s largest corporate sustainability initiative, businesses with a higher environmental, social and governance (ESG) performance saw cumulative relative returns 6.3 per cent higher than the bottom performers during the first four months of this year. Evidence also shows that businesses taking a sustainable long-term view are better at overcoming short-term challenges, too.
Firms demonstrating bold leadership on the sustainable development goals will not only become more resilient – they will also add value
While recent research also shows many CEOs understand this – 76 per cent believe sustainability and trust will be critical to competitiveness in their industry in the next five years – only 48 per cent are implementing sustainability in their operations. Just 21 per cent say business is playing a critical role in achieving the SDGs. This gap between rhetoric and reality needs to close fast.
Pressure from policymakers, investors, customers and employees is growing for greater and more meaningful corporate sustainability action. The expectation is for business to become more ambitious, adopt more sustainable practices and play a leading role in building a safer and more meaningful future for people and the planet.
To succeed we need a transformational approach. Businesses must unite behind the science and take rapid and ambitious action across their entire operations and value chains. This change must start at the top, with sustainability embedded into the leadership culture. We need to see a commitment to sustainability set out as a requirement for executive and non-executive appointments so it flows down through the organisation.
At present, just 4 per cent of appointments have this requirement. We need businesses to integrate sustainability targets not just to their own operations, but to their entire value chain. These should include cutting down on water and power use, recycling wherever possible, sourcing from sustainable suppliers, promoting gender equality at work, reducing inequality within their value and supply chains and through their products and services and working towards becoming carbon neutral. Business must then measure, manage and report on their progress.
Companies demonstrating bold leadership on the sustainable development goals will not only become more resilient – they will also add value. They will be securing their own long-term future and profitability while helping to protect life and prosperity across the globe.
Sanda Ojiambo is executive director and chief executive of the UN Global Compact. Leo Varadkar is Tánaiste and Minister for Enterprise, Trade and Employment