Building resilience for a real recovery: The challenge is six fold
It is too early to guess what the new normal will be for business, however it is clear that resilience will take centre stage.
As we focus on the safe restarting of businesses, the context in which we operate has altered fundamentally. The team at Sancroft and I have thought long and hard about what a post-Covid world looks like and have identified several key areas that we see as crucial to business success and survival.
We believe that the business response to the sustainability and resilience challenge is six-fold:
Supply chains: Make them work better in a fast-changing world.
When the pandemic history books are written, will they focus on the empty supermarket shelves? Or will we learn more about how those firms that knew their supply chains outperformed others, as they knew where things come from, how they are made, and who made them? Secure, resilient supply chains will become a new area of competitive advantage and a bulwark against future threats.
Resources: Use less stuff, get more value.
Even before the pandemic struck, our attitude towards the materials we use was undergoing a revolutionary change. The shift in consumer attitudes to single-use plastic that prefigured a wave of product redesigning, packaging initiatives and regulatory overhauling is very much still underway. The simple fact is that some materials will become increasingly harder to obtain, or will grow prohibitively expensive, through shortages, taxes and fees. Businesses need to rethink their approach to resource use right across the board.
People: no business without them.
Unemployment, reduced spending power, increased vulnerability to exploitation will press home the social responsibility of business. A successful business environment depends upon improving the opportunities for colleagues, partners and customers. Re-training and re-skilling will be key to resilience.
Waste: Stop throwing away your profits.
Waste is a failure of value creation – the more material we produce that has no purpose, that must be landfilled or burned, the more value we have failed to realise from the resources used. Regulatory initiatives will continue to drive toward materials that are 100% recyclable, 100% recycled after use, and eventually, made from 100% recycled content – moving ever closer towards a future of zero waste. The sooner a business can reflect these aspirations, the more value it can accrue from the transition.
Climate change: Adapting business now to the changes that are on the way.
The next frontier for managing systemic risk is surely climate change; indeed, many commentators have gone as far as to predict that the Covid crisis is nothing compared with the widespread upheaval and suffering we can anticipate from unchecked global heating. No industry is immune to its effects, which will affect availability of materials, regulations, consumer markets and a host of other issues which must be anticipated and managed if we are to build businesses fit for the future.
ESG Reporting: Tell the markets what they need to hear.
While today a majority of the largest companies in the world are already engaged in sustainability or ESG reporting of some kind, this is widely perceived to be strong as a marketing tool and weak on substantial change. In the post-Covid world, pressure will increase to make such reporting more consistent, rigorous, subject to strong verification, and – above all else – mandatory. A sustainable economy requires sustainable investments and that demands more transparency than we have ever previously achieved.
If the moral imperative for a sustainable, resilient recovery is not enough on its own, the business case is becoming increasingly clear. As our Chairman, Lord Deben urges, leaders must confront systemic risk with greater urgency and accept that responsible, resilient and sustainable business practices – far from being too costly – are the very structure that underpins long-term business viability and success.
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