Will Covid-19 spark an ethical business revolution to #BuildBackBetter?

By Sophie Morello, Associate Partner

As we emerge from lockdown, we are staring down the barrel of the worst recession in 600-years with the prospect of significant hardship and rising unemployment for many. It’s a daunting prospect and businesses are facing unimaginable challenges. They must strive to survive, but at what cost? In this brave new world, is the purpose of business to simply make money, safeguard jobs and pay taxes, or is the way we do business and the ethics of the firm just as, if not more important? In the rush to emerge from recession, will our commitment to sustainability falter? Will we ignore the ever-present threat of climate change and kick the can down the road? 

All these questions confront businesses today and arguably pose much greater, longer term societal and economic challenges than COVID-19 if not addressed (particularly when it comes to climate change). Only this week Oxford Economics warned that global GDP could fall by more than 20% in the next 80 years if temperatures continue to climb.  So addressing climate change does make business and economic sense too. 

We must think carefully about how we recover and whether we can #BuildBackBetter, to secure our future and address the inequalities embedded in the current system. It’s a monumental challenge and today we hosted a virtual panel debate exploring whether we can emerge from this crisis with a more sustainable and socially responsible economy that is founded on a more ‘conscious’ form of capitalism. 

I'm pleased to say that our panellists were generally optimistic that momentum is building for positive change. There is inescapable pressure on businesses and regulators to act and ensure we move towards net zero emissions and reduce inequality. It was acknowledged that while COVID-19 has had a devastating impact on our economies it has accelerated a move towards a more responsible form of capitalism, giving us permission to think differently and reset. It seems we are at a pivotal moment, but we must keep up the pace as change has been far too slow moving, until now.

With consumers, investors and employees all demanding action, businesses are beginning to make positive changes, and ultimately they will have no choice but to serve all stakeholders if they are to have viable businesses in the long term. But responsible business must be proven through reliable disclosure and reporting mechanisms, or trust will be lost. 

When businesses do operate with a proven social and environmental conscience, they are making themselves more resilient to the impact of climate change, more attractive to investors and customers, and protecting their reputations. There should be no trade-off between better investment returns and responsible business. If IMPACT investing (investing made into companies, organizations and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return) is done well, it should outperform. But for ongoing meaningful change, short-termism must end to stop shareholder primacy and ensure businesses can fulfil their obligations to all stakeholders.

While there is a huge amount to be done and the UK government and businesses need to do more, there was general agreement that all the right elements are coming together to start moving the dial. If anything, the pandemic has emphasised our interconnectedness and collective vulnerability, spurring on a drive for change. It remains to be seen if enough will be done. The clock is ticking.

Thank you to our panel for a truly thought-provoking discussion:

• May Jaramillo, Head of Sustainable and Impact Banking Europe for Barclays Investment Bank;
• Richard Burrett, Chief Sustainability Officer and Investment Committee Member at Earth Capital;
• Adam Garfunkel, co-owner and Managing Director at Junxion Strategy
• Emma Kane, Chief Executive at Newgate Communications.