While the global coronavirus pandemic has created a global tipping point, upending multiple social systems, governments and the private sector have an opportunity to ensure that a post-COVID transition that is green, and a lower carbon transition that is just.
The COVID-19 pandemic and anti-racism movements that have emerged in cities around the world underscore countries’ interconnectedness and interdependence. In this context, during the recovery from the pandemic and transition to a net-zero carbon economy, we can expect to experience greater speed and increased scope for proposed changes.
During these times of significant disruption, it is critical for the public and private sectors to anticipate emerging trends and respond to uncertainty in a way that considers the impact on all stakeholders. Stakeholder capitalism, a model championed by the World Economic Forum, has gained prominence in the business community. A company’s purpose is to create shared and sustained value, not solely for shareholders, but for the benefit of all stakeholders – employees, customers, suppliers, local communities and society.
COVID-19 has created a global tipping point, upending multiple social systems and creating an opportunity for transition that goes beyond the pandemic. Governments and the private sector have an opportunity now to address the much longer-term crisis of climate change, and ensure a post-COVID transition that is green, and a lower carbon transition that is just – a Just and Green Transition.
Across environment, social and governance (ESG) considerations, the pandemic offers three key lessons:
The current situation offers an opportunity to transition out of the pandemic in a way that is also just, charting a transition to a lower carbon economy that leaves nobody behind. A green recovery accomplishes the dual goals of maintaining global reductions in greenhouse gas emissions while economic activity resumes accounting for job creation in specific industries such as construction, manufacturing and clean energy. As the International Energy Agency’s (IEA) June 2020 Sustainable Recovery Special Report indicates it is possible to simultaneously spur economic growth, create millions of jobs and put emissions into structural decline.
The idea of a green transition from COVID is already embedded in several government relief programmes for large corporations. For example, the Canadian federal government’s Large Employer Emergency Financing Facility offers bridge financing that is contingent on a commitment for companies to publish annual climate-related disclosure reports consistent with the Task Force on Climate-Related Financial Disclosures. Bailouts for French airlines included stipulations that companies renew fleets with more efficient aircraft, commit to sourcing sustainable fuel and reduce domestic air travel to encourage less emission-intensive travel by rail.
The pandemic has highlighted the importance of social sustainability issues, which we expect to continue. Companies have come under scrutiny for their practices in areas such as worker health and safety, sick leave, flexible work arrangements, fair wages and job security. Impacts from the pandemic have been more acutely experienced by specific groups of the population that are more likely to be engaged in employment arrangements that do not offer these social benefits, including the elderly, low-wage workers, ethnic minorities and women.
With an increased focus on social sustainability, the spotlight on the livability and workability of our societies during the transition to a lower carbon economy will receive more attention. If left unmanaged, a climate transition could result in adverse and unequal socio-economic impacts for specific demographic groups and communities. The International Labour Organization (ILO) has identified women, Indigenous Peoples, ethnic minorities and people with disabilities among those most at risk. And the potential for supply chain disruptions would adversely affect small- and medium-sized enterprises, putting entire communities at risk of losing corporate partnerships and employment opportunities.
However, the climate transition holds the potential for positive societal benefits. There is a pre-COVID-19 forecast by the ILO of a net increase of 18 million jobs with the growth of specific industries – construction, utilities, manufacturing and renewables – playing a mitigating role against job losses in historically brown sectors. Planning for the transition in a way that manages the socio-economic risks and opportunities, which focus on workers, businesses and the community, is at the core of stakeholder capitalism.
To learn more about how sustainable finance can support a just transition listen to the Just Transition, Sustainability Leaders Podcast.
Climate change has local implications but global influence – it unites us as contributors to the problem and potential victims of the consequences. We are also experiencing this phenomenon with the pandemic where a coordinated response across societal actors is critical. During the pandemic, as self-interest was overcome to flatten the curve, effective arrangements emerged. In the Canadian banking sector, financial institutions collaborated with each other and the Government of Canada to implement relief initiatives, including mortgage deferrals, access to emergency benefits for individuals through online banking and to small businesses through the Canada Emergency Business Account (CEBA) programme, partnering with the Business Development Bank of Canada and Export Development Canada to operationalize the federal government’s Business Credit Availability Program (BCAP), and others.
This approach to solving big challenges is critical to apply to sustainability issues. Doing so will help ensure that the needs of impacted stakeholder groups are identified, considered and addressed during the transition. As a result, we can build resilience into corporate strategies and the socio-economic system.
Purpose, impact and resilience in a post-COVID world will become core aspects of sustainability strategies. As sustainability practitioners, we will be called upon to anticipate trends and connect the dots among the environmental, social, economic and governance dimensions.
By Rani Pooran, Senior Advisor on Social Sustainability Issues, and Whitney McWade, Senior Advisor for Sustainability Strategy, Disclosure and Impact Measurement, at BMO Financial Group.
The opinions expressed herein are solely those of the authors and do not necessarily reflect the official views of the GGKP or its Partners.