How can businesses recover from the pandemic sustainably? Karen O’Regan of Accenture Ireland points to new ways of working and refreshed strategies.
The pandemic has massively impacted how we work and how we conduct business. At the heart of those changes is a ‘big value shift’, according to a recent Accenture research report, which may help companies adopt a green Covid-19 recovery.
Karen O’Regan, Accenture Ireland’s strategy lead, believes sustainability will need to become a priority for companies in a competitive market. The motivation behind Accenture’s research into shifting behaviour and values, she says, was to help understand the long-term impacts of the pandemic.
“It is so important to understand how consumers have been reacting to the pandemic so that we can better forecast the long-term effects,” she says. “A message we continue to emphasise is that the economy will start to return to pre-pandemic levels, but the composition of the pie will be markedly changed.
“For example, what are the habits that consumers are building now as a result of spending more time at home for work or leisure? Or spending less time in public spaces and accessing all the usual amenities that go with that?
“The more we can understand the likely enduring changes and these long-term effects, the better placed we are to understand how businesses and societies need to respond – how they need to renew their strategies versus responding to changes and resetting to the old ways.”
Do companies still care?
O’Regan says the finding she found most surprising in Accenture’s report was also the most pleasing to her – that the importance of sustainability hasn’t dipped for consumers or companies.
“Despite the pandemic being a health crisis, we have seen a significant shift in consumer awareness, consciousness and commitment to sustainability-focused actions – such as reducing food waste – over the past year, and it’s become more important than ever.
“Equally, sustainability hasn’t taken a back seat for businesses. In many respects, the pandemic has only demonstrated how interconnected the world is and the importance of sustainability to company stakeholders. For example, our research found that 66pc of consumers expect that the pandemic has strengthened the need for greater business involvement in improving social and environmental outcomes.
“Another sign of continued importance is that green financing flows held up reasonably well in 2020 and we have seen a continued investor focus on environmental, social and governance (ESG), even though we’ve experienced the worst recession in the post-war era.”
The environmental impacts of remote working
Some have seen a silver lining for sustainability in the pandemic. There have been fewer commutes, a drop-off in international travel and less electricity used in powering large office buildings.
Global CO2 emissions fell by 6.4pc in 2020 and Ireland’s carbon emissions were down 5.9pc. “While this is significant, it is smaller than many climate researchers expected,” O’Regan says. “To put it into context, the UN estimates that emissions must decline by 7.6pc annually to avoid the effects of climate change.
“The fundamental shift we are seeing in the ways of working is interesting as it indicates that there will be less travel – at least business-related travel. Our research suggests working from home will remain once the pandemic has passed, with half of respondents currently working from home wanting to continue to do so at least once a week. As people work from home, they commute less and travel less for business.
“However, although these easily identifiable sources of emissions are expected to decline, remote working also presents its own unique environmental challenges due to how data is stored and transferred around the world. Many countries have reported significant increases in internet traffic since March 2020, which has its own implications. Therefore it is really important that we balance this impact by thinking green in all ways.”
One action that can make a difference, she adds, is driving migrations to the public cloud. This can reduce global carbon emissions by 59m tonnes of CO2 each year, according to Accenture research, which is the equivalent of taking 22m cars off the road.
“This magnitude of reduction can go a long way in meeting climate change commitments, particularly for data-intensive businesses,” O’Regan says.
Reaping the benefits of greener business
Companies that commit to long-term climate action could ultimately see better business results, according to O’Regan. When Accenture looked at ESG performance ratings, it found that businesses that scored higher consistently outperformed those with lower scores – with operating margins 4.7 times higher than low ESG performers and generating 2.3 times higher returns to shareholders.
“This trend held true during the first four months of the pandemic, including at the height of market turmoil, with the top ESG performers experiencing a cumulative relative return 6.3pc higher than bottom performers, in addition to lower volatility of returns,” says O’Regan.
“In short, the proof is there to show that companies that pursue more sustainable approaches outperform their peers, in both margins and returns to stakeholders. We expect this trend to accelerate given the increased focus the global pandemic has placed on our need to embed sustainability into core business to drive societal resilience.”
‘Businesses can no longer afford to overlook long-term sustainability over short-term financial returns’
– KAREN O’REGAN
Where should companies start? The first step, O’Regan explains, is initiating a sustainability strategy refresh and putting it at the core of business models, management and actions. Leaders will need to prioritise employee protection and embed diversity and inclusion principles in policies and products.
“Although this will be a gradual process, businesses shouldn’t delay the start any longer,” she says. “In the long term, it’s very much about driving the right type of growth and ensuring a broad-based recovery for all.
“For asset-heavy clients, this could be investing in new projects which promote the energy transition. For other companies, it may be targeted hiring for particularly hard-hit parts of the population to expand economic value for all as we enter the 2020s.
“The reality is, as in the short term, all industries’ paths to net zero will look different and businesses should set science-based targets aligned to the IPCC’s 1.5 degree Celsius decarbonisation pathway and accelerate bolder ambitions wherever possible.
“This will include a focus on reskilling the workforce with digital and cross-functional skills required for the fourth industrial revolution.”
Choosing a green Covid-19 recovery
Looking ahead, O’Regan is hopeful that Covid-19 will shift the needle in a positive direction. “I hope the pandemic increases businesses’ sense of urgency in addressing climate change and environmental degradation. Businesses can no longer afford to overlook long-term sustainability over short-term financial returns.
“I do believe there is a growing consensus among business leaders that the recovery can be done in a way that drives the energy transition, is broad-based for all demographics and drives sustainable economic growth.”
A crucial point of action will be serving and protecting the people most affected by the pandemic, she adds. “More importantly, I hope that the pandemic encourages businesses to consider the people affected by systemic changes and disruptions.
“The E in ESG has long been the focus of sustainability efforts as it seems more tangible. However, the pandemic and its disproportionate impact on the world’s most vulnerable has shown that protecting people and workers – the S in ESG – in addition to the environment is equally as important, and I definitely hope that trend continues.”