The corporate world at the time of Covid-19
How the pandemic has accelerated the transition process of companies towards a more sustainable and resilient economy
The Covid-19 pandemic has not only affected public health and the global economy; individual behaviour has also undergone a massive change due to measures such as social distancing, reduced movement and the use of new business models and ways to work. The social and economic fallout of Covid-19 has shown that natural disasters can occur suddenly and unexpectedly and that we are more vulnerable than we could have possibly imagined. The pandemic and subsequent economic crisis have given rise to various challenges, such as greater sustainability in conducting business, the digitalisation of organisational and production processes and the emergence of new ways of supporting companies. In current times, sustainability may seem overwhelming for many small companies having to face daily challenges and corporate survival, especially given the ongoing Covid-19 crisis. However, the pandemic has demonstrated the urgent need for more sustainable and resilient business practices and supply chains, as well evolving financial and business support tools.
Regarding sustainability, which has become increasingly urgent in the post-pandemic period, SMEs are far less active today than large companies in the environmental, social and governance (ESG) sectors. According to the sustainability report from the Global Reporting Initiative (GRI), only 10-15 percent of all sustainability reports in 2017-2018 came from SMEs. The main causes of this can be traced back to streamlined management models, with key personnel and owner managers carrying out various roles in the daily running of the business; a lack of internal resources to plan for the medium-long term and face challenges such as sustainability; a lack of awareness among entrepreneurs and employees about the importance of sustainability and its potential positive effects; access to financing. The Covid-19 crisis has highlighted the social dimension among the ESG factors. Decisions concerning workers, especially employee health and social protection, smart working or unemployment policies have become increasingly crucial within the organisational and decision-making process of companies and investors. Corporate action that favours the environment and the fight against climate change is also among company and investor goals.
In response to the coronavirus pandemic, many international institutions, such as the International Monetary Fund (IMF) and the European Union, have launched a series of initiatives which, in addition to supporting companies affected by the crisis, allow for a radical change towards greater sustainability. The new Green Deal, announced by the EU prior to the outbreak of the pandemic, and the Next Generation EU plan, created to face the consequences of the pandemic, will have funds tied to the achievement of sustainable goals. The European Central Bank also announced its support for projects related to a circular economy with an aim to accelerate the fight against climate change.
A further issue related to sustainability and the resilience of companies, and therefore of economies, in the post-Covid era is digitalisation. The pandemic has given rise to an unprecedented opportunity to take advantage of digitalisation, remodel finance in line with the needs of citizens and finance the Sustainable Development Goals (SDGs). Digitalisation that improves production processes and widens access to services, especially financing, is crucial for companies, particularly those in developing countries. The UN Task Force’s report “People’s Money: Harnessing Digitalisation to Finance a Sustainable Future” published on the 26th of August 2020 on digital financing of the SDGs seeks to provide global leadership in helping to place sustainable development at the centre of finance’s disruptive, digital evolution, which is considered key in enabling a transition towards the sustainable development of the future. According to the report, the pandemic is highlighting the immediate benefits of digital finance and the disruptive potential of digitalisation in transforming finance: mobile payment technologies have turned cell phones into financial instruments for over a billion people. Moreover, digital supports big data and artificial intelligence in promoting cryptocurrencies and crypto assets, peer-to-peer loans, crowdfunding platforms and online markets. In light of this, there is therefore an unprecedented opportunity to exploit digitalisation to connect citizens and companies with end owners of financial resources.