ESG in Turbulent Times: Difficult Decisions in Difficult Moments

ESG in Turbulent Times

ESG is more than a guideline for the good times, when companies can afford to be benevolent. Rather, it is a roadmap to sustainable value creation. “Beyond the crisis horizon, more evidence is emerging that companies that follow more narrowly defined ESG standards, on average, outperform the market,” according to the World Economic Forum. (September 2020) Yet, as world economies emerge from the overlapping crises of climate events, social unrest and a global pandemic, organizations that adhere to the ESG ethos have had their commitments tested.


What do boards see as their responsibility in times of intense challenge? Their first order of business is making sure there is a business.

Mpho Nkeli is Director at Search Partners International/AltoPartners in South Africa. “The responsibility of boards during a pandemic or crisis of this nature is multifold. Number one is to make sure that the business survives, if the business doesn't survive, everything else is secondary. When companies become cash strapped, the question is, what do you prioritize?”

“This is not just about your environmental footprint or how green your operations are. It is about fundamentally striving to do the right thing by all stakeholders. It is about how you treat your employees, how you engage your customers and how you interact with your local communities. At its core, it is the belief that business can help solve the systemic social and environmental challenges that hang heavily over our world.”

- Clarke Murphy, CEO, Russell Reynolds Associates, "Building a Better World Through Sustainable Leadership”, June 2020

Nkeli explains, “If there are any new capital projects that were about to be implemented, for either growth or ESG, these are likely to take less priority because of cash conservation measures. It is important though to retain sustenance capital expenditure because if you stop this, it will only catch up with you later.”

She adds, “When a company doesn’t have enough cash, then they have to choose: Do I protect my employees? Do I retrench? And those become the difficult and strategic balances that a company has to go through.”

The devastating 2019-2020 bushfires in Australia forced companies to balance their commitment to ESG principles even before the pandemic. “This has been an extraordinary 18 months in Australia,” says Jane Bridge, Senior Partner at Johnson Partners. “They've been very, very turbulent.” As ESG is ultimately about the long-term performance of an organization, she says, “The organization has to stay sustainable, it has to stay operating in the environment that it's operating in, and it has to be looking after its people. In that regard, I'd say every single organization should have ESG at the top of the agenda.”

Bridge notes some of those ESG-agenda driven decisions. “I've worked with a few boards in the last several months that are carrying a vacancy.” She adds, “There have also been a lot of voluntary wage decreases,” in order to ease the cash-flow stressors on a business.

“Leaders have been faced with many different decision points.” Ritu Kochhar leads Spencer Stuart’s Financial Services and Boards practice in India and Private Equity practice in Asia Pacific. She asks, “Do you pay dividends? Don't you pay dividends? Do you retrench people, reduce pay, do you live with lower profits? Do you invest in energy transition and long-term environmental commitments? These have definitely been testing times in that respect. Do you make payments to suppliers or think about your own survival in terms of cash flow?”

Companies have definitely become more mindful of discussing those tradeoffs,” Kochhar says. “If there’s one thing that I think this pandemic has done, it's actually led to organizations at least discussing these dilemmas and also making sure that they are trying to be effective and accountable to a broader set of stakeholders than just shareholders. To me, that's actually a positive change in itself.”

One such positive change is the level to which ESG-minded companies are holding themselves accountable to community stakeholders. Nkeli says, “The pandemic has highlighted the income gaps in our societies, poverty fault lines become quite evident around us. Corporate citizenship has become more important. What happens when your business retains profitability during the pandemic and communities around you are decimated because of COVID? Do you sit back and continue driving your profits? A lot of companies have actually spent a lot more funds to support communities around them in different ways than they had in the past. This is a good and responsible move.”

What Nkeli describes is more than being a good neighbor in hard times. Sinziana Dorobantu and Dennis Flemming wrote in the Harvard Business Review, “Building and sustaining local stakeholder support for a major investment is the new frontier of successful management and risk assessment. New research is pointing in the same direction. A study of 19 publicly traded junior gold-mining companies found that one-third of their market capitalization is a function of their stakeholder relations.” (Harvard Business Review, “It’s Never Been More Important for Big Companies to Listen to Local Communities. November 10, 2017)


Many companies chose to go all-in to support their communities during the height of the COVID outbreak. Consider the manufacturing companies that chose to pivot to make and distribute ventilators and PPE, as well as collaborative efforts to develop and distribute a COVID vaccine. Smaller, localized efforts to help during times of crisis are no less heroic.

Bridge describes the actions of a boutique vintner in a rural area affected by the catastrophic bushfires of 2019-2020.

"They just opened up their doors and said, ‘anybody who doesn't have anywhere to sleep, come here.’ At one stage there were about a hundred people camped in this vineyard, which was out of bushfire range, and they provided equipment, fed them and provided a safe space for recovery.”

During COVID, Bridge says, “One of the areas that was really hit hard in Australia was high end, fine dining. In the big cities, a lot of people go out regularly to eat really well in a beautiful restaurant, and of course these restaurants were all closed down. And while the corner cafe found it very easy to keep going serving coffee or providing takeaway food, these fine dining places were really hit incredibly hard and a few of them actually decided to provide food to the homeless and/or deliver food to refuges, as well as develop a new line in take home or cook at home products. Cooking classes with chefs via ZOOM also popped up.”

“It was just extraordinary,” Bridge says. “Using the skills, using the labor force, using the facilities you've got for some absolutely different purpose. Now that those restaurants are starting to open again, you can imagine the following. People just stayed with them because they've watched this.”

Nkeli describes the extensive community efforts of large industrial businesses in South Africa. “Mining houses in particular that large well efficient health centers and hospitals within their mining environments, have opened these to their surrounding communities. They also offer quarantine facilities for people who live in such densely populated areas that if somebody has COVID, they've got no way of quarantining or self-distancing.”

Nkeli says, “Companies have played a big role in trying to reduce the suffering of communities around them.”


Times of economic stress and upheaval can be revealing of an organization’s strengths and weaknesses. For example, the onset of COVID restrictions exposed organizations’ level of digital transformation, with companies ahead of the curve enjoying a tremendous advantage in terms of transitioning to work-from-home, shifting to ecommerce, or adapting operations and processes from the ground to the cloud.

In addition, “COVID has exposed businesses that actually had good governance and had a good business proposition and were well-run,” Bridge says. “Most of those have survived and prospered, and other businesses that were fundamentally not run well, although they may have been making a profit, we have seen some of those just completely fold and go under and close, probably never to be seen again.”

The near-constant uncertainty during the pandemic has both revealed and demanded a level of agility and creativity from companies and their leadership.

“This is a time for quick and nimble thinking,” Bridge says. “We've seen a bit of that on boards in some of the companies I've worked with, but mainly the board's role has been about giving management and the executive license to really imagine, how can we work on this together? It's been a much more collaborative exercise than traditionally. It's been a ‘look, let's just all roll our sleeves up and see what we can make happen here to keep this thing running.’”

How important is that quick and nimble thinking? Kochhar explains, “One, we're seeing business cycles get shorter. Second, with globalization, your risk is no longer localized. We have to think way outside the box on the types of risks and events impacting businesses, including black swan events. Therefore, business leaders have to be more nimble, more agile. CXOs have to take quick decisions with not enough information at times.”

For Nkeli the current black swan event also presents an opportunity. “During a crisis, this is the time for you to innovate, this is the time to try doing new things, or doing things differently. This is the time for you to change your reputation. So if you don't use the crisis correctly to reshape your business, to do something different, to innovate, to clean up your reputation, I think it's a crisis well wasted. I'm not aware of any company whose reputation has become worse because of COVID, now.”

What is the test of a company’s decision-making under pressure? Kochhar asks, “Have you been fair? Have you been transparent? Have you engaged the stakeholders who are going to be impacted by these decisions in the right manner?”

She explains, “It's not just about what decisions, but it's also the ‘how,’ that has become equally important. And we've seen that play out in organizations that have had to take some very tough decisions, otherwise they wouldn't have survived this year. But they still have customer loyalty, they still have employee loyalty, just because of the way they've done it. People understand why they had to take those decisions. And they did it in a very fair manner.”

Many organizations have been able to weather this year in crisis without jettisoning their ESG principles. From Bridge’s perspective, it’s likely that an ESGfocused company “had a really good risk management lens on the world so that they were actually prepared. They could, they did respond. Consider the whole issue of continuity planning; they kept going, even though they might have had to change shape or upscale or downscale or whatever, they kept going, and they had some planning and they treated their staff well throughout, even though it may mean that some of them had to go on leave.

Nkeli’s faith in ESG-guided organizations remains firm. “Companies that invest well in their ESG bring a higher return over a period of time, and there's increased shareholder activism around ESG and forcing companies to be a lot more ESG aware and active. So companies that continue to invest in ESG during a time like this will benefit from that in the long term,” she says.

The Conference Board agrees. “The case to pursue environmental and social impact alongside profitability and growth remains strong. Solid sustainable business practices can create value through revenue growth, reduced costs, and risk mitigation. They can also help create intangible value—for example, strong brand equity.” (The Role of Business in Society: A European Perspective on Achieving a Sustainable and Inclusive Transformation,” ConferenceBoard.Org)

ESG in Turbulent Times


During the pandemic, stories of organizational and individual struggle and survival touched nearly everyone. In many workplaces trust and engagement took the place of supervision and obligation. With reduced air and road travel, the air cleared. Strictly professional relationships became more personal with glimpses into each other’s living rooms on screen. Priorities have changed and as a global society we are facing a difficult decision: Once the pandemic is safely under control and the world has an opportunity to go back to the way things were, will we?

“It's very hard to put the thing back in the box and close the lid,” Bridge says.

Remote work has proved largely successful, keeping many businesses open when their offices closed. As lockdowns ease and people return to restaurants and retail, will they return to the office? Some of the workplace flexibility that was in growing demand before the pandemic will be nearly impossible to claw back.

We know remote work works for many. “Managers are learning how to manage output rather than input,” Nkeli says. “Some managers have managed inputs rather than outputs and remote working has forced them to transition to output management, a difficult concept for many. There is a maturity in people management that has come up quite nicely.”

The Pew Research Center survey found that, “More than half of employed adults who say that their job responsibilities can mostly be done from home (54%) say that, if they had a choice, they’d want to work from home all or most of the time when the coronavirus outbreak is over.” (“How the Coronavirus Outbreak Has—and Hasn’t—Changed the Way Americans Work” Pew Research Center December 9, 2020)

Hand in hand with remote work and the stress of the pandemic is the rising focus on employee wellness. Employers are addressing the need by providing virtual counseling and therapy services to address stress, anxiety, depression, and behavioral health. And virtual services give patients added privacy and convenience.

This shift to telehealth is not likely to revert back. Harvard Staff Writer Alvin Powell reports “before COVID, just 7 percent to 8 percent of care was done remotely. Overnight that number jumped to 95 percent, forced by the immediacy of the pandemic — though enabled by years of technological development.” He quotes Thomas DelBanco, the John F. Keane & Family Professor of Medicine at Harvard Medical School, “I think it will become part and parcel of medicine,” Delbanco said. “There are times when doctors, nurses, or therapists really need to see you — no question about it. But there are also times when they really don’t.” (Alin Powell, “What will the new post-pandemic normal look like?” The Harvard Gazette, November 24, 2020)

Another outcome of working from home and virtual meetings is a new level of personal familiarity. Bridge suggests, “Maybe the levels of formality we knew before COVID will reappear, once meetings are held person to person, again. The way virtual meetings are held now, you've got board directors at home in casual gear, not necessarily getting dressed up to have meetings. How much enthusiasm will there be to go back to all the protocols that have historically existed?”

Bridge suggests the extent to which meetings revert in formality may be related to the culture. “It will depend on the character and tone of the board and the organization itself. I suspect some that are all flying in from six countries to meet somewhere will probably have more formality than those who are on local boards and have all seen each other in t-shirts.”

A major decision point for companies and communities is whether and how to preserve the environmental improvements seen during COVID lockdowns. “During the tightest lockdown everywhere, when there was limited flying, if any, and there were limited cars on the road, mother earth took a breather,” Nkeli says. “There was less air pollution, less noise pollution, less pollution in every way. And I think that said to many of us, it can be done. For certain companies, that has propelled them to do something even quicker: to retain, or to capture the benefits we've enjoyed during lockdown. That is the benefit of the world coming to a stop. Mother earth took a breather.”

If that is the global consensus, government spending is not in alignment. A UN study, “Are We Building Back Better? Evidence from 2020 and Pathways for Inclusive Green Recovery Spending,” published in March 2021 found that only 18% of government spending on COVID economic recovery is going toward environmentally sustainable projects.

Individual and corporate choices can still make a difference. “Many people have enjoyed the cleanliness of the environment, and if someone was contemplating getting an electric car versus a petrol car, circumstances have helped this decision along. Nkeli says, “I believe that car manufacturers will increase their pace to manufacture low emission cars. Where change had been slow, now change is going to be quicker.”

Communities, employees, and customers may be coming into alignment on ESG related issues, and companies are listening.

"Companies are realizing that they work in an environment,” Kochhar explains. “It is important for them to focus on these aspects for the long-term sustainability of their businesses. They're doing this for their own survival rather than just doing good. At the end of the day, there is a clear cut, long-term benefit for them.”

Stressors like heat, pressure and time change matter: bread becomes toast, coal becomes a diamond, a seed becomes a tree. Stressors transform people, organizations, and economies as well, and the last year has both forced and accelerated tremendous change.

“If we had to apply an ESG lens to it, society is being shaped,” Nkeli says. “The S being social, the society is being shaped in many ways. From individuals to family units to groupings are being shaped by the impact of the pandemic and the reprioritization of what is important.”

Expectations have changed, and companies need to meet them. For Kochhar, “This pandemic, if anything, has made leaders realize that they can have the best plans but if they don't think about longer term sustainability of organizations, engaging the community, they're not going to build followership across multiple stakeholders and at some point, their own survival will be in question.”

Whether investors, employees or customers ultimately punish or reward companies for their decisions made under stress is yet to be seen.

“It's a real Dickens story, isn't it?” Bridge says. “‘The best of times and the worst of times.’ So I think these turbulent times do provide an opportunity to really see how people and organizations act under stress. And I've been more impressed by the good stories than the bad ones.”

“The context in which businesses now operate has been transformed by climate change, nature loss, social unrest around inclusion and working conditions, COVID-19 and changing expectations of the role of corporations. Further, the global pandemic has exacerbated underlying and longstanding failures regarding equality and access to economic opportunities. To continue to thrive, companies need to build their resilience and enhance their license to operate, through greater commitment to long-term, sustainable value creation that embraces the wider demands of people and planet.”

“Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.” World Economic Forum White Paper, September 2020

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