When we launched our call for business to help redefine the social contract in late 2019, we had no idea what the next 18 months would bring.

  • The once-in-a-century pandemic has exposed deep problems with the social safety net. Over the past year, we have seen how inadequately prepared our institutions are to handle issues, from unemployment and loss of income to access to health care. 
     
  • The economic toll of COVID-19 has fallen most heavily on certain populations. As garment workers lost thousands of jobs along with access to vaccines and palliative care, governments around the world struggled to set up programs and policies capable of providing a measure of relief. This has affected so many women, in particular, producing a “shecession,” or disproportionate impact on women, from which we are still struggling to emerge.
     
  • COVID-19 continues to rage, with profound impacts now causing widespread death and illness in India and other countries in South and Southeast Asia.  This continues against the backdrop of a lack of consensus about how to make vaccines available equitably across the globe.
     
  • The murder of George Floyd and other Black Americans, an epidemic of racially motivated attacks on Asian-Americans, police violence in Europe, as well as hate expressed against disadvantaged groups across the globe has provided a wrenching reminder of the unequal status and treatment of so many of our fellow citizens.
     
  • An ongoing “democratic recession” has resulted in widespread global reductions in human rights protections and access to free and fair elections.
     
  • The speed at which disinformation travels and our reliance on the digital world raise acute questions about how to deploy these highly valuable tools, affecting our physical and emotional health, how we work, and social interactions.
     
  • The world of work has also been upended. Essential workers have faced serious risks. The rise of remote working creates a fundamentally different environment. Increased use of e-commerce is likely to accelerate non-traditional forms of work with less access to universal benefits.
     
  • There are also growing questions about intergenerational equity, which is most pronounced in aging societies, but is present globally and raises serious questions about social safety nets, health care investments, and educational and employment opportunities in a changing economy.
     
  • In the United States, 2021 has brought about one of the most significant expansions of the social safety net in decades. While this has been most immediately responsive to the disruptions of COVID-19, it is also seen widely as a shift to address gaps that have widened inequality and interfere with social and economic mobility and security.

2020 has taught us many new lessons. COVID-19 has shown—in a tragic way—how interconnected the world is. All the events of the past year and a half have also reinforced and deepened the urgent need to redefine the social contract and the key role business must play in that effort.

The core principles we set out last spring are even more compelling today.  

It is more essential than ever to build long-term value for all stakeholders as the north star for business. The need to ensure that Boards are dedicating more attention to ESG issues has accelerated. Massive public investments needed to restore economic vitality are quite rightly focusing on a transition to a net zero economy, economic and social mobility and security, and advancing equity. It is also essential for the private and public sectors to ensure people have the skills needed for 21st-century livelihoods. It is essential to make even greater progress toward an inclusive, equitable clean energy economy. And social consensus on new technologies remains essential if we are to take full advantage of innovation. Finally, the need to ensure equity and inclusion is of paramount importance and must be integral to all the principles of the renewed social contract.

It is also essential that the historic developments of the past year be integrated into how we think about a modern social contract. Here are five developments that are crucial to modernizing the social contract, particularly as it relates to the relationship between business and society.

1. Climate Justice Ascendant

At long last, the debate over climate action has embraced social and economic justice. The transition to net zero will only be possible if it is built on the basis of preserving livelihoods, addressing the needs of communities whose health and well-being has suffered in an economy dependent on fossil fuels, and enabling equitable access to the clean energy economy. Net zero plans that do not include net zero economic opportunities for all will be insufficient.

2. Equity and Opportunity in a Hyper-Digital World

It has become a cliché to say that ten years of digital adoption occurred in 2020 alone. The world of work has been remade. Our reliance on digital tools has skyrocketed. This has immense impacts on multiple aspects of our lives, from privacy and human rights, to access, to mental health and well-being. There are also unintended consequences of this shift, such as the crisis facing public transportation systems. Business should take an active role in reimagining work, and the second-order effects of remote work, and establish human rights reviews of technologies coming to market. Otherwise, new business and work models could reinforce inequality and lack of access.

3. Capital Market Reforms Accelerate

The long-desired shift to a harmonized set of rules guiding reporting and disclosure appears closer than ever. It is fundamentally important that business leaders continue to push for capital market reforms that align incentives with long-term value creation embracing ESG principles. The rise of the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Standards Board of the IFRS Foundation are excellent steps in this direction, and widespread business support will hasten the creation of a more rational and powerful system for measuring value.

4. Supply Chain Social Contract

Supply chain workers have been devastated by the economic disruption of the past year. This has been most acute in the apparel sector, where millions of workers, the vast majority of them women, have lost income and livelihoods. Many global companies have scrambled to offset some of these losses, but this cohort of people are often least protected by social safety nets. Most companies believe that due to inequitable vaccination rates, COVID-19 will continue to impact key sourcing locations—and the people who depend on supply chains for their jobs and income—for several years. A new bargain for supply chain workers is badly needed.

5. Democracy Protection

Democracy and human rights remain under immense pressure in many parts of the world. In the U.S. in particular, many have spoken out against voter suppression and are being called upon to combat ongoing efforts to disenfranchise people, especially people of color.  Businesses have also been considering how to respond to human rights restrictions in China, Myanmar, and elsewhere. Business has a massive stake in protecting rule of law, and this is a time when it is badly needed.

All the events of the past year and a half have also reinforced and deepened the urgent need to redefine the social contract and the key role business must play in that effort.

Some of these elements are outside the traditional comfort zone of business. They are, however, squarely in line with the expectations of business. The 2021 edition of the Edelman Trust Barometer, for example, shows that 86 percent of respondents believe CEOs should speak out on societal issues, and 65 percent of respondents believe CEOs should be held accountable to the public, and not only the Board and stockholders.

The changes we outline here are essential to building more resilient societies, at a time when we have all been stretched to the limit. In order to do that, it is high time for companies to dedicate themselves to building resilient business strategies. Over the past year, resilience has gone from a buzzword to an imperative. But no company can be fully resilient if the societies in which they operate are not resilient. The need to build and adapt modern social contracts fit for our fast-changing world is therefore a business necessity and the foundation on which business success depends.

The destructive power of 2020’s events is clear. So too is the fact that people, communities, businesses, and governments have re-prioritized their actions and investments. This shows what is possible, even when a crisis is not upon us. 

What we choose to do with what we have learned during this intense time of challenge and innovation will determine how we will be judged by history. It is time for business to recommit to the core principles we outlined as the key elements of a social contract that enables a just, inclusive, and sustainable economy and that creates a strong foundation on which business can innovate and thrive.