30th June 2020Managing a responsible recovery

2020 marked the beginning of what the UN called the decade of delivery, the 10 years where governments, institutions and individuals would work with intent in order to achieve the sustainable development goals (SDGs) the UN had set forth. Meaningful action had built momentum thanks to activists and, increasingly, investors. As we all know however, the start of 2020 did not go as planned.

Instead the decade of delivery has begun with a global health emergency, along with massive economic and social disruption. Businesses have been forced to rethink and, in some cases, completely overhaul their operations in a span of time most would have deemed impossible. Some have changed their business models in order to meet demand where it exists, when the demand for their product or service evaporated.

On an individual level, the pandemic has forced many of us to reconsider how we conduct our daily lives, including what we buy and how we socialise and work. Many are also re-evaluating what is important to them, deciding what will be taken with them into the next “normal”, and what will be left behind.

While the scale and speed of change can be daunting, it presents an opportunity that is just as unprecedented. Businesses and their advisors should work together to seize it. As businesses begin to move out of crisis mode, there are several areas to consider.

Rethinking the role of business

Consumers’ expectations of brands have grown increasingly higher in recent years. This is now being layered with heightened concerns for their health, safety and wellbeing. Results of a recent Kantar survey show the majority of consumers expect brands to consider health and safety as a core element of their product and services offerings, across a range of sectors. Meeting these expectations will mean earning their trust.

More broadly, consumers are watching more closely how brands behave. While they may not know the SDGs by name, they care about how businesses treat their employees, the environment and the communities they operate in. The recent rise in activism and subsequent ‘calling out’ of brands is evidence of people leading and consuming with their values first.

Risk managing with a new lens

The largely unforeseen nature of Covid will change the way risks are looked at. Plans will need to be put in place for future outbreaks, and lessons learned from the initial wave must be applied to controls and risk assessments.

Looking beyond the immediate term, other threats that seem far off or unlikely should be reconsidered. The impact of climate change is the elephant in the room in this respect. Warning signs exist and companies should prepare accordingly, in ways they were unable to with Covid. Systemic risks simply cannot be ignored or underestimated.

Balancing profit and purpose

Clothing brands making face masks, medical device manufacturers and even flooring companies making medical-use PPE, hotels providing shelter to rough sleepers, and gin distilleries making hand sanitiser. There have been plenty of examples of businesses focusing on the greater good during Covid. Not all changes will be sustainable in their current form over the long term, but those that serve an ongoing need, such as help for rough sleepers, have shined a light on broader societal issues.

With many businesses contemplating how they will operate going forward, purpose is an element that should be looked at together with profit, rather than separately to it. When trying to balance profit with purpose, remember to:

  • Establish your values – what do you stand for as a company and what are you working towards?
  • Focus on building value, rather than on short term gains. In crises, particularly those involving liquidity, this is difficult. McKinsey recently gathered advice from long-term investors about how companies can successfully survive a crisis. The main advice was to look after employees first, followed by customers and suppliers. Use this as a starting point and invest in people.
  • Consider the importance of reputation in growing your business, and how purpose drives reputation.
  • Identify business opportunities inspired by your purpose – look across stakeholder groups and up and down the value chain for new opportunities.

Resetting responsibly

As accountants, we work ever more closely with clients in times of crisis. As we continue to move through these trying times, our profession has a significant role to play in ensuring the viability of businesses in the immediate term. However, a greater responsibility lies ahead.

Covid has created an opportunity to reset. Our role as accountants is clear – we are here to help balance the dichotomy of profit and purpose. It won’t always be easy, but it is important, and we should work together to ensure it is seized in a way that moves us towards a sustainable future.

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