Companies across all sectors are making bold commitments related to environmental, social and governance (ESG) programs, announcing publicly how they’re tackling some of the challenges associated with COVID-19. The social element is of particular importance these days because the pandemic has impacted so many people around the world. Whether a company’s goal is to support employees, communities, suppliers, customers or others, the recent wave of commitments brings much-needed assistance in this unprecedented time of crisis.
These commitments should be recognized and celebrated, especially in cases where companies remain focused on sustainability programs that help address fallout from COVID-19 now and in the future. According to PwC’s CFO Pulse Survey conducted in early May, 51% of CFOs say their companies have increased community and societal efforts with financial or other contributions to nonprofits or pro bono goods and services. What’s more, in that same survey, 22% of CFOs believe their companies will be stronger coming out of the crisis because of greater community and societal engagement. While those public announcements tend to foster goodwill and improve brand and reputation, they may not be without risk — especially if companies don’t follow through.
In the months to come, we can expect the push on ESG to continue, with the social and governance aspects getting a greater amount of attention. Investors still want to know that companies are focused on addressing the appropriate material ESG risks and opportunities for their industry and incorporating those issues into the overall strategy. There may also be increased pressure for companies to disclose their ESG efforts in a way that gauges their progress and makes it possible to compare companies within and across industries.
A recent Trust Barometer report, updated in the midst of the COVID-19 crisis, showed that 65% of the respondents agreed that “how well a brand responds to this crisis will have a huge impact on my likelihood to buy that brand in the future.” Not only that, but one-third of respondents said they have already convinced others to abandon brands they feel have not responded appropriately to the pandemic.
There are a variety of ways to respond and help mitigate the crisis — donating products and services to help assist in the fight against the disease, continuing to pay employees’ salary and benefits, making a no-layoffs pledge, cutting executive pay, deploying volunteers, creating relief funds and more. When done effectively, the way you can leverage your assets to address the crisis and communicate with key stakeholders about what you’re doing has the potential to help generate brand value today and in the future. However if you fail to deliver on those commitments, your company’s brand could suffer — and so could your bottom line.
 The Importance of Disclosure – For Investors, Markets and Our Fight Against COVID-19, U.S. Securities and Exchange Commission, April 8, 2020
“Investors are not the only ones who are interested in how companies will adjust their affairs as we pursue our collective fight against COVID-19. …Broad and extensive coordination across workers, firms, investors and governmental officials will be critical to successfully emerge from this fight”
Here are some questions to help you navigate the risks and opportunities surrounding COVID-19 commitment announcements. Before you announce anything, you should put thought into what you’ll do. Include people at the company outside the boardroom to promote engagement and commitment to deliver results. Once you’ve announced your plans, you should be able to show that you’ve followed through, then communicate your progress to help mitigate risks, build trust and increase the positive impact on your company and stakeholders.
1. Does the commitment or claim align with your strategy and long-term view?
In order to increase the impacts of your initiative, there should be a strong alignment with company strategy and values. You might even consider integrating certain commitments into a formal part of your ESG program for continuous implementation. For example, you could evaluate the benefits and risks of making wage premiums permanent. At the same time, a governance structure with approvals by appropriate leaders, in and out of the Boardroom can help prioritize the initiatives and optimize the allocation of resources.
2. Does it align with the needs of your employees and/or communities?
The prioritization and selection process should include an assessment of the environment and needs to be addressed. Some needs may be temporary, specific to the COVID-19 emergency, while others may be ongoing needs exacerbated by the current situation. You should consider what’s creating the need, whether the proposed initiative or solution is temporary or permanent, and what you should do if what seems like a temporary need becomes permanent. For example, if you decided to cover the cost of COVID-19 testing for employees early in the outbreak and there’s a surge in cases, will you continue offering that benefit?
3. Do you have an effective monitoring process already in place or ready to deploy?
Just like any other goal, the ability to efficiently measure and report on progress over time can allow companies to demonstrate authenticity. This should include clear, documented definitions and accounting policies to support consistent measuring and transparent, timely disclosures. In the testing example above, the company would document how many employees have gotten free tests on a monthly or quarterly basis and — ideally — include metrics to show the benefits of the initiative.
4. Are you ready to stand up to the hype?
Now that you have made the commitment, your company may get kudos and build social capital from the announcement. Confirm that you have the right operating model, policies, procedures, controls and resources in place to help deliver on those commitments, track progress over time and communicate your progress clearly and regularly. At the same time, you should also be ready to address potential criticism by demonstrating why an initiative is relevant to you and your stakeholders. If you make a no-layoffs pledge, for example, make sure you can honor it — and, if need be, set parameters, such as a time frame in which there should be no layoffs or boundaries around a certain percentage or cohort of employees to whom you can guarantee job security.
5. How can your employees contribute to your success?
Your employees can be your biggest advocates — especially if they’re benefiting directly from the commitment. By creating excitement and pride around the initiative and giving your people the opportunity to participate in its deployment, they may gain a better understanding of your purpose, which is likely to result in higher employee engagement and create ripple effects with your stakeholders.
6. How is this complementing and adding to the impact of your current ESG program?
Consider also communicating how the initiative aligns with your overall ESG program, as well as quantifying the impact on your company and on the initiative's beneficiaries. For example, in addition to committing to shift 3-D printing capabilities to medical devices used for COVID-19 treatment or testing, consider disclosing how many devices were produced, how many employees were trained in new, valuable skills, and how the shift contributed to increasing your supply chain resilience.
Company leaders clearly grasp the importance of ESG goals, even amid the pandemic. In the CFO Pulse survey, 35% of CFOs said they increased initiatives focused on social good to meet temporary needs, but expect to go back to former program levels once the crisis stabilizes.
As you come up with commitments related to COVID-19, tackling any concerns and constraints prior to publicly communicating them should be key. But the reality is that many organizations may not have the governance structure in place to help mitigate the risks and/or capitalize on the opportunities. Establishing strong processes around COVID-19 commitments out of the gate should help your company ensure the commitments are in line with your overall strategy and — when you show you’re making good on your promises — build trust with your internal and external stakeholders.