Purpose-led business 'key' to green Covid-19 recovery, say top CEOs
The chief executives of Danone, L'Oreal and Philips are among the signatories of a new open letter calling for the creation of an economic system that "puts purpose first, so our planet and society can thrive", through Covid-19 recovery efforts.
The letter is addressed openly to all public and private sector leaders, and provides a six-point framework designed by the Leaders On Purpose (LOP) platform. LOP claims would result in a “building back better” after the initial economic shocks of the pandemic.
Governments should “recognize the purpose-first sector”, the letter states, designing recovery packages which prioritise businesses with a strong track record of improving their social and environmental footprints, or which provide goods or services designed to further sustainable developments. Recognition can take many forms, including targeted policy incentives for purpose-led businesses, targeted policy barriers for high-carbon businesses, finance and capacity building.
Other organisations, including academics, philanthropists and investors can help businesses and policymakers to co-create these incentives and policies, the letter highlights.
Recognising the key role which finance will play in the delivery of key frameworks like the Sustainable Development Goals and Paris Agreement, the letter recommends that new incentives are developed to help the financial sector innovate its products, valuation models and risk assessment and ratings processes. New standards for measuring and disclosing value should, therefore, result. Since Covid-19 was first declared a pandemic in March, a string of banks and investors have bolstered their sustainability targets and requirements, amid rapidly rising interest in ESG.
Also included in the letter are calls for a “just” recovery, in which developing nations are not left behind and in which the upfront costs and long-term benefits of creating a sustainable future are fairly shared between socio-economic groups; and for charges to current systems surrounding education, training and collaboration, in line with the shift to a “purpose-driven” economy.
The letter’s final call to action is for governments and businesses to implement processes and develop cultures what will further the transition after the initial Covid-19 recovery period. Both businesses which have already embedded purpose, and those wanting to transform, should be supported in the long-term, it concludes.
A quote from UN Secretary-General Antonio Gutteres is included in the letter: “Everything we do during and after this crisis must be with a strong focus on building more equal, inclusive and sustainable economies and societies that are more resilient in the face of pandemics, climate change and the many other global challenges we face”.
The chief executives of Mastercard, Mahindra, Interface, Danone, DSM, Philips, L’Oreal, Natura & Co, Beiersdorf, Omnicom-Ketchum, ICC, Equity Bank, Fortune Media and Space Voyager Holdings have signed the letter. These companies collectively employ more than half a million people and record annual revenues of more than $100bn.
Support has also been offered by ex-Unilever boss Paul Polman.
In related news, asset manager Impax has published research assessing the implications of the pandemic on the transition to a more sustainable economy, with a focus on finance.
The report highlights how the pandemic has exposed supply chain vulnerabilities and heightened corporate awareness of systems-level risks, ultimately spurring the uptake of stronger climate, nature protection and worker protection measures.
It also exposes a trend towards businesses bolstering their sustainability targets and changing their business models in anticipation of changing legislation, with the majority of corporates believing that governments covering their operations will attempt to create a “green” recovery package or, at a minimum, change supports for high-carbon industries that were already struggling.
While noting that many businesses are likely to cut back on investment at the moment, it highlights particular investment opportunities in the fields of automation and digitisation as well as the obvious field – health, safety and wellbeing. Investors are also increasing their requirements for measurements and disclosures of climate-related risks and nature-related risks. The World Economic Forum has previously concluded that $44trn – more than half of global GDP – is exposed to risks from nature loss and global warming.
“The Covid-19 crisis has revealed complex, interconnected consequences, arising from an unsustainable economy,” Impax’s executive director and co-head of listed equities Bruce Jenkyn-Jones said. “Investors, policymakers, corporations and consumers have a chance to avoid the same missteps when the next high-impact crisis of this magnitude hits.”