Search Results

Blog | Wednesday May 20, 2020

The BSR Conference Reimagined

Preview

The COVID-19 pandemic is more than a health crisis, affecting nearly every aspect of society. From the economy, to education, to the way we use technology and how we conduct public and civic life—society is being reshaped in unprecedented ways.

Our work with you has never been more relevant. At BSR, we remain focused on our commitment to help businesses succeed, to become more resilient, and to build a more just and sustainable world. Indeed, we are more convinced than ever that sustainable business is the key driver of business value, and one of the best ways that companies can meet the moment and build the future.

One of the biggest ways this is affecting us, of course, is our ability to convene in person with our members, partners, and other friends in the sustainability world.

The health and safety of our community and society at large is our top priority. For this reason, the BSR Conference 2020 is going virtual.

While we are disappointed not to be able to gather in person, we are excited about the opportunity to reimagine every aspect of our annual event. We will shift, for this year, to a digital experience that will connect our global community in brand-new ways, with content and participants who will join us from our eight locations in Asia, North America, and Europe. There is no silver lining to a pandemic, but the virtual platform will give us an opportunity to cover some important emerging topics and to invite new participants and voices to join us in a truly global conversation.

Planning is underway to deliver a great experience that will feature the best of our in-person gathering, presented in new ways. We will keep you updated every step of the way. The Conference will be held from October 20-22, and a more complete agenda will be announced next month. To stay informed on the latest developments, sign up to receive announcements right in your inbox or visit bsr20.org.

We look forward to “seeing you” in October.

Blog | Tuesday May 19, 2020

A Post-COVID-19 Agenda for Sustainability Reporting

Preview

As COVID-19 continues to cause significant turbulence for business and now collides with the arrival of spring “peak reporting season,” companies are experiencing a moment of introspection and posing several questions to themselves: What business risks did our Form 10-K miss? Which nonfinancial data would have helped us better determine our exposure or resilience? How might our definition of what constitutes a "material issue" change? What COVID-19 related information do stakeholders need to judge the effectiveness of our response?

The world of sustainability reporting after COVID-19 will be very different than the world that preceded it. What should change?

How Companies Can Improve Sustainability Reporting Moving Forward

Reexamine the materiality assessment and its integration into enterprise risk management. Materiality assessments are the building block of a good sustainability report, enabling companies to identify sustainability issues that are important to both their stakeholders and to business success. As society emerges from the current crisis, materiality assessments can be overhauled in two main ways: First, the clear financial impact of "nonfinancial" environmental, social, and governance (ESG) issues during COVID-19 reinforces the need to better integrate sustainability into Enterprise Risk Management (ERM). Second, companies can use materiality assessments to explore the relationship between a company’s impacts on a sustainability issue and the impact of that issue on the business. Rather than seeing, say, supplier diversity as a “nice to have” that might fall in the middle of the pack relative to other sustainability topics, how does the issue interact with the core business or change a company’s risk exposure?
Determine what information stakeholders need to judge the effectiveness of company response to COVID-19. Stakeholders will eventually look back on how companies responded during the COVID-19 pandemic—and this will require new disclosures to help readers understand how well a company responded. Stakeholders will look for new information on important sustainability issues and insights into company decision-making processes, so companies would be well served by consulting with stakeholders to find out what information they may seek in the future. For example, stakeholders may wish to understand how a company considered the needs of its most vulnerable employees or local communities, whether it undertook human rights due diligence of COVID-related decisions, and how it balanced short-term needs with long-term resilience.
Significantly increase connectivity between sustainability and financial reports. A sustainability report provides an annual account of how a company responds to issues of material significance to stakeholders and serves as a reference point where companies can provide a formal description of their strategy, approach, and performance. COVID-19 has revealed just how impactful nonfinancial ESG issues can be on the financial performance of a business. Now that this connection has been made so evident, companies should use this as the impetus to more closely link nonfinancial and financial reporting. This may imply incorporating more Sustainability Accounting Standards Board (SASB) metrics into financial reporting or increasing cross-references between sustainability and financial reports. This is especially significant in the context of the EU Non-Financial Reporting Directive, which presents an opportunity to further align complementary approaches to the disclosure of sustainability information.
Take inspiration from climate reporting to disclose on company resilience. COVID-19 has increased attention on risk factors, including public health threats, supply chain disruptions, and operational flexibility. To improve reporting on resilience, companies can draw inspiration from the Task Force on Climate-related Financial Disclosure (TCFD). The TCFD recommendations provide a compelling framework for companies to report their climate-related risks and strategies to mitigate them, but the COVID-19 pandemic clearly illustrates that systemic nonfinancial risks extend beyond climate change and span a wide range of social and other sustainability issues. Given the significant traction gained by the TCFD’s four-pillar framework (governance, strategy, risk, metrics and targets), we believe that a similar approach can be deployed across social and sustainability issues in order to report and manage such risks. This can include the use of scenario analysis to set out a range of plausible futures and describe how the company may respond to each, with the goal of improving resilience to the sustainability challenges society will likely face in the years to come.
Collaborate with industry peers to ensure comparable COVID-19 disclosures. Stakeholders today benefit from companies using the Global Reporting Initiative (GRI) and SASB standards and TCFD recommendations. These frameworks enable companies to provide reasonably comparable and useful information. However, no such template exists to compare how companies have responded to COVID-19. Rather than every company creating their own report in their own way, companies can look for opportunities to work with industry peers to create consistent COVID-19 reporting taxonomies, disclosures, and metrics so that investors, stakeholders, and policy makers can make easier comparisons.

Though COVID-19 has caused unprecedented disruption for many companies, we believe that more integrated, comparable, and standardized reporting will be needed to “build back better.” Such reporting can both meet the new information needs brought to light by COVID-19 and strengthen companies’ decision-making, risk management processes, and overall performance in the long term.

As we recover, the question of whether or not the reporting field truly moves forward hinges on the extent to which financial and sustainability reporting converges and on whether reporting standards and nascent regulation accelerate this convergence.

Blog | Friday May 15, 2020

Mitigation and Resilience Building: A Response to the COVID-19 Effects

Preview

More than any crisis in recent history, the COVID-19 pandemic has demonstrated the urgency of creating more resilient businesses and economies. Countries, businesses, supply chains, workforces, communities—all are being affected by COVID-19 and other issues relating to resilience and COVID-19’s cascading economic, social and personal impacts, starting of course with those who have fallen ill or tragically passed, as well as caregivers and other front-line responders risking their lives.

COVID-19 is leaving tremendous disruption in its wake in other long-lasting and grievous ways. The required economic shutdowns mean loss of income and depletion of savings, not to mention the specter of widespread hunger. The cascading impacts on supply chains are manifest, as key inputs (from meats to component parts) slow to a trickle, causing broader business disruption. Meanwhile, the impacts of social distancing and remote working include, among others, acute family care challenges and rising rates of domestic abuse.

COVID-19’s Impact on Supply Chains: Meet the Moment

Understanding the impacts of COVID-19 within the countries and supply chains producing your product are important to determining how your company can play a role in responding and mitigating current issues and investing in future resilience. The efforts your company undertakes now will have impacts on the safety, security, and livelihoods of those making your product in your operations and supply chains around the world. When looking at mitigation needs and opportunities, here are three important ideas:

Honor your contracts. Pay for what you’ve ordered and do not externalize additional financial liability on to your contractors and, via the contractors, the workers who produce your products.
Seek support payments for the impacted workforce. Vulnerable workers at the bottom of supply chains in your production line will be impacted the most by the COVID-19 crisis. Work with your industry, relevant governments, and international aid agencies to find money, resources, and other forms of support for those who need it most.
Triage and build lifelines. Help find support for the factories most important to your business today and in the coming future. Are there ways to connect loan guarantees, order histories, and future orders to factories to enable their resilience and workforce support?

COVID’s Impact on Supply Chains: Build the Future

The current crisis isn’t the first nor will it be the last. Investments in the resilience of your partners and their workforce will be important to overcome the next, inevitable crisis.

Seek to avoid the next crisis. Today it is a virus, next year it may be a typhoon, or a drought, or an earthquake, or a tsunami, or something else. Impacts from climate change are here and will continue. Business continuity planning is important to invest in at the site level, the firm level, and the supply chain resilience level. In addition to building your own business resilience, work with your vendors to build continuity plans covering their own businesses, extending to their community, and explicitly including the workforce.
Understand potential impact, particularly those most at risk. Planning for the future means understanding the potential impacts on people—and in particular those most at risk. COVID-19 has shown, for instance, the sharp challenges faced by migrant workers, by those with the least resources, and often by women in facing economic, social, and personal hardship and even death.
Invest in worker and employee resilience. Work to ensure 100 percent of workers in your factories and your own employees are paid via digital wages to enable easier access to financial resources and support during times of crisis. Create incentives to ensure your factories are educating their workers in the things that matter—from workplace skills training to financial literacy and savings, to health and hygiene, and including respect and the avoidance of workplace violence. Mirror this in your own operations, as the front lines of COVID-19 are everywhere and change rapidly. Invest in the skills, competencies, authority and culture of your own organization and staff to meet the moment and build the future. They are key to your future success.

Investments in the resilience of your partners and their workforce will be important to overcome the next, inevitable crisis.

Connect and build factory systems. Utilize and connect existing factory systems to create resilience and early warning capabilities. Your supplier’s health clinics should be appropriately resourced and trained, connected to local health authorities, and able to support their workforce. Factory community engagement strategies, staff, and resources can also be connected to disaster mitigation efforts and planning. Connection of broader supply chains to Sustainable Development Goal (SDG) targets, climate action plans, and resilience efforts will help to build resilience valuable to the supplier, the community, the workers, and the supply chain itself.
Reprice risk in your supply chain. COVID-19 uncovers many of the hidden challenges of lowest-cost sourcing models. Unpriced risk may be embedded in the model and COVID-19 is illuminating these risks—from supplier financial resilience, workforce and community resilience, and component traceability and availability to preparedness for the next, inevitable challenge. Understanding pricing and integrating these risks into your supply chain models is important to enabling longer term resilience.
Break the boundaries and innovate to meet the future. The challenges we will face in the future, from climate change to pollution, a growing global population, and, in some places, aging societies, will require new thinking, innovation, and experiments. The efforts of today have obviously not succeeded at the level we need, and the imperative change is of ever greater importance.

BSR works with our member companies and their value chains via our global consulting practice and COVID-19 response. BSR’s HERproject directly connects via local partners to workers, particularly women in global value chains. In this decisive decade, we welcome the opportunity to meet the moment and the challenge of COVID-19 and build the future—and a more just and sustainable world.

Blog | Tuesday May 12, 2020

A Human Rights Impact Assessment of Facebook In Cambodia

Preview

Earlier today, Facebook published an executive summary of a human rights impact assessment (HRIA) BSR conducted on behalf of Facebook in Cambodia and their response to those recommendations. This follows Facebook’s previous publication of BSR’s HRIA of Facebook in Myanmar and human rights review of the Facebook Oversight Board. Today Facebook also published executive summaries of HRIAs conducted in Indonesia and Sri Lanka.

BSR’s HRIA made 22 recommendations for Facebook in Cambodia across the five areas of Community Standards enforcement, protecting civic space, engagement with stakeholders, promoting systemwide change, and preparing for upcoming risks and opportunities. Facebook’s response to the HRIA clearly sets out the meaningful steps the company is taking to implement the recommendations and its plans for more in the future.

We welcome these disclosures as part of Facebook’s increasingly strategic approach to human rights due diligence, one that covers the main elements expected by the UN Guiding Principles on Business and Human Rights (UNGPs): assessing human rights impacts, taking action, tracking effectiveness, and communicating externally.

Taken in combination, these disclosures indicate three trends in business and human rights that we believe will take hold over the coming years.

Reporting the results of human rights assessments, not just the process. Over recent years, companies have increased public communications that describe their human rights due diligence process, such as when, how, and where human rights assessments are conducted. However, it remains rare for companies to disclose the findings of these assessments and the actions that are subsequently taken. The proposed new Global Reporting Initiative Human Rights Standard includes reporting on the actual and potential adverse human rights impacts identified and actions taken, and so we both welcome Facebook’s disclosures and see them as a sign of things to come. Facebook’s decision to publish executive summaries, rather than the full HRIA, also points towards an approach that allows for increased disclosure by companies while protecting stakeholder safety and commercial confidentiality at the same time. It’s a good balance, and we expect increased alignment around this approach. Google’s recent HRIA of a celebrity recognition tool is another notable indicator of this trend.
Considering respect for human rights in entire systems, not just individual companies. Facebook’s HRIAs identify the company’s actual and potential adverse human rights impacts—however, they also situate these impacts as part of a broader system. The recommendations contained in the HRIAs are notable for the extent that they involve action by multiple parties, not just Facebook. As we have previously written, while HRIAs are typically undertaken for a single company, the solutions often need to be applied at the system level. This also implies that not only do multiple actors need to be involved, but that single companies have the potential to exact positive influence on the entire “protect, respect, and remedy” human rights ecosystem.
Connecting global and local approaches. While the HRIA BSR conducted was focused on Cambodia, we made five recommendations on topics, such as human rights defenders, child rights, and advertising on Facebook’s platforms, that are relevant everywhere. While each country has its own unique context, Facebook’s increasing portfolio of country-level HRIAs provides good insight into the direction that a global human rights program can take.

The UNGPs state that companies should track the effectiveness of their human rights approach by drawing upon feedback from external sources, including affected stakeholders. We hope that the publication of these HRIAs and Facebook’s response to them enhances this feedback process and informs improved dialogue among all stakeholders. We look forward to seeing progress over time.

Blog | Tuesday May 5, 2020

COVID-19 and the Climate Crisis: Building Resilience with People at the Core

Preview

In what feels like the blink of an eye, COVID-19 has dislocated our daily lives, our economy, and the way we do business, with little visibility on when the crisis will be resolved. Our experience with this pandemic makes one thing very clear, however—we need to become more resilient, and people have to be at the core. Despite warning after warning of a potential pandemic, we weren’t ready for this public health crisis: governments, businesses, and people alike.

We’re similarly unprepared to respond to the climate crisis, especially as we enter the “decisive decade,” where action to reduce greenhouse gas (GHG) emissions and to adapt to immutable climate change impacts has never been more critical. Business has a critical role to play in helping to create a system that is better prepared to prevent and cope with the crises to come.

Another thing is clear: systemic socioeconomic inequality further exacerbates the dangers posed by both COVID-19 and the climate crisis to vulnerable populations. Both expose the underlying inequalities that exist today, creating disproportionate impacts on low-income communities, people of color, women, the elderly and those with pre-existing health conditions, who are more susceptible to both the virus and its knock-on effects.

Systemic socioeconomic inequality further exacerbates the dangers posed by both COVID-19 and the climate crisis to vulnerable populations.

In some parts of the United States, people of color are more affected by the virus, including lack of access to medical care and other long-standing inequities within health and economic systems. Low-income populations are less likely be able to work from home, increasing their potential risk of exposure. Vulnerable populations are similarly disproportionately affected by the impacts of climate change. When Hurricane Katrina hit New Orleans in 2005, low-income people and women of color and their children bore the brunt of the disaster, forced to flee their homes to often unsafe, temporary living situations and exposing themselves to increased gender-based violence.

People with disabilities and the elderly may be more likely to struggle in the face of COVID-19 response measures, such as social distancing, since many rely on the support of others for essential tasks and often already have compromised immune systems. These factors can pose similar challenges in the face of climate-related disasters.

The COVID-19 crisis has also greatly affected migrant workers and refugees, preventing those seeking asylum from gaining access to countries as borders closed over fear of virus spread. This leaves refugees in unsafe situations without basic needs. A similar situation is unfolding with the climate crisis, which is projected to increase the number of refugees, adding stress to already overburdened development and aid systems.

Whether it’s a pandemic or climate-related impact, those with the least, and those faced with the most extreme socioeconomic barriers, will suffer the most. The impacts these populations face have the potential to disrupt business, from operations and supply chains down to the vital communities on which business depends.

COVID-19 and Climate Change Responses: Shared Learnings

Both the pandemic and climate change manifest themselves in physical impacts. And although the impact of the pandemic is here and now, while climate impacts vary in degree and timeframe (i.e. acute events like extreme weather events, flooding, drought, and changes in vector-borne diseases; chronic events like sea-level rise), there are clear similarities in the infrastructure and systems required to mount an effective response.

One common learning is that we need to redesign the way we recover from these shocks. In both cases, our recovery must be just and inclusive of the most vulnerable, taking a more holistic approach and putting people at the center of our forward-looking plans, both in the short and long term.

Planning for a more uncertain future from unknown shocks, including those caused by climate change, will help businesses and society become more prepared with less stress on people and the planet.

The economic downturn has only begun, but it is obvious that the economy and jobs, people’s livelihoods, are critical to our recovery from the pandemic, as well as when we design climate solutions. More than 30 million Americans have filed for unemployment, with certain industries more affected than others. Our recovery must be designed to ensure that people don’t bear the brunt of the adjustment cost of getting back to work post-pandemic. This is also true within the climate crisis as we transition away from fossil fuels to renewable energy. It’s critical that we ensure that the people and communities dependent on high-carbon jobs aren’t left behind. Addressing the climate crisis has the potential to create new markets and jobs within the renewable energy sector—jobs that won’t depend on the volatile carbon market or carbon-intensive assets. Creating preventative plans and systems that both address current unemployment from COVID-19 and help society respond better to future inevitable climate impacts will create a more resilient and healthier economy.

And finally, with the pandemic halting business as usual, we’re already seeing reduced GHG emissions, even if temporary. While we know that this isn’t enough to keep global warming in line with the Paris Agreement goals, it’s likely that some changes will remain in practice and that can have a lasting, positive effect on society. These include the increase in remote working and decrease in demand for in-person meetings, with technologies having already improved in the weeks during the pandemic (although equitable access to technology remains an issue in many communities and households). Planning for a more uncertain future from unknown shocks, including those caused by climate change, will help businesses and society become more prepared with less stress on people and the planet.

Resilient Business Strategies for a Better Recovery

There is a tremendous opportunity for business to take the lead. While this pandemic has revealed opportunities where we can improve our approach to resilience planning, it has also proven that both businesses and governments can act, and they can act quickly. Imagine the difference in our response had there been a holistic plan to address the pandemic? We can and must prepare for the next pandemic, or the impacts of climate change, with resilient business strategies that put people at the center.

Here are some mutually reinforcing interventions businesses can take considering COVID-19 and the climate crisis:

Understand your company’s vulnerabilities to short- and long-term shocks across your entire value chain by undertaking the necessary risk assessments and scenario planning. This strategic foresight can help to identify potential future shocks and lead to the development of more holistic resilience strategies. This includes the consideration of how sudden changes can magnify one another, including how climate change can potentially exacerbate a company’s existing vulnerabilities. BSR’s Sustainable Futures Lab helps companies understand how these changes can affect businesses, and the Taskforce for Climate-Related Financial Disclosures (TCFD) embeds scenario analysis into its recommendations. The benefits go beyond looking at future climate impacts but also examining how multiple shocks can compound each other.
Strengthen your company’s resilience plans through collaboration with other relevant stakeholders, including other businesses, government, and civil society. For example, BSR’s Value Chain Risk to Resilience platform collectively aims to build resilience holistically through climate risk assessments, business integration, and governance from the top to their on-the-ground communities fundamental to their existence.
Ensure that the most vulnerable are at the center of core business resilience planning. Invest in the resilience of these vital and surrounding communities, including employees, within your business’ operations, supply chain, and markets—the solutions should address the inequalities, health systems and well-being of the people.
Help create jobs post-pandemic by investing in renewable energy—this will provide new, long-term jobs. Transitioning away from fossil fuels and procuring renewable energy should be done through an approach that puts people at the center by respecting human rights and that leaves no one behind.
Formalize new ways of working that have co-benefits both for your people as well as the environment, starting with less business travel and better videoconferencing. Embedding this into your system now will help reduce your emissions and climate impacts.

As we scramble to contain the current public health crisis and the growing recession, we cannot afford to wait to address the climate crisis. It is clear that solving any future crises, and being truly resilient, will require all hands on deck for the type of systemic change necessary. Efforts will be needed from governments of all levels and from business of all kinds, including those with massive supply chains and those that make up the local communities on which we depend for our daily existence, and it will also come down to the decisions that we make on an individual basis. Redesigning our systems to address the systemic inequalities and vulnerabilities our society faces will help us to manage, and to recover from, the next crisis. Let’s come together to do the work now for a better future—one that boosts the resilience of those that need it most.

Blog | Monday May 4, 2020

Sustainability Reporting and Early Lessons from COVID-19

Preview

Public scrutiny of how businesses are responding to the COVID-19 pandemic is bringing renewed attention to the importance of corporate transparency on sustainability issues. Effectively meeting these expectations starts with understanding two key dimensions of sustainability reporting: how companies are responding now and defining how companies should respond in the future.

We have observed several trends emerging from the pandemic and compared them with best practices on reporting. We are sharing these insights here to assist company sustainability teams as they strive to keep stakeholders informed—despite, in many cases, the reality of limited time and diminished resources.

What We’re Seeing Now

Companies adjusting their reports. COVID-19 has shaken all businesses, causing some to delay or scale back their formal sustainability reporting. Companies that recently released a 2019 report or are in the final approval stages are primarily acknowledging COVID-19 in one of three places: the CEO letter, as a call-out box or case study within the report itself, or in the report’s corresponding press release. Companies are also linking to informal and regularly updated webpages that provide specifics on their immediate COVID-19 responses.
Investors watching closely. Investors remain eager for the latest performance data and have reiterated the importance of engagement on long-term environment, social, and governance (ESG) issues despite the havoc wreaked on businesses’ day-to-day operations. BlackRock notes this proxy season will focus on board composition and quality, environmental risks and opportunities, corporate strategy and capital allocation, compensation that promotes long-termism, and human capital management. JUST Capital is tracking how employers are treating stakeholders amid the current crisis, and Truvalue Labs has introduced a free Coronavirus ESG Monitor that captures impact using the Sustainability Accounting Standards Board's (SASB) material issue categories. The ESG issues that investors were looking at prior to COVID-19 still hold—indeed, the current crisis has amplified their importance to investors’ decision-making.
An emphasis on social criteria. The COVID-19 crisis is placing heightened importance and increased scrutiny on how companies are addressing the “S” in ESG. News outlets and investors alike are focusing on companies’ treatment of employees, suppliers, and the communities in which they operate, naming and shaming (or faming) good and bad actors along the way. Reputation is an important driver of this focus, but business continuity, economic inclusion, and public safety considerations are also critical. Given mounting investor, civil society, and media attention, companies are increasing their focus on social issues to demonstrate responsiveness to the top priorities of the day.

What We’d Like to See in the Near Future

Consistency and completeness. Investors still want comparable year-on-year data and will be especially interested this year in gauging companies’ resilience to shocks. Although managing COVID-19’s immediate impacts remains top priority for many public companies, reporting historical ESG data and performance remains essential. While a slight delay of this year’s reporting is understandable, companies should still strive for the same level of coverage as previous years and continue to improve their disclosures moving forward, with the expectation that their performance on key social issues will be even more thoroughly examined than usual.
Accountability during the new reality. Reports should provide an enduring account of how companies are responding to the COVID-19 crisis. The extent to which companies do this now or in the future depends on where they are in their reporting cycle: reports near completion today (e.g. by companies that operate on a calendar-year basis) will provide less insight than those with more time available (e.g. by companies with a fiscal year that doesn’t match the calendar year and report later in the year). Regardless of reporting calendar, companies will need to explain decisions made during this time and make forward-looking statements about how they intend to help "build back better" in the future. Sustainability reports will become an essential venue for accountability when looking back at company actions during COVID-19.
Numbers backed by narrative. Stark reductions in business operations and travel as a result of COVID-19 will likely reduce companies’ greenhouse gas emissions and other environmental impacts, in many cases accelerating progress towards sustainability goals. Similarly, COVID-19 will impact many other metrics, such as diversity, employee engagement, and supply chain labor compliance. Going forward, it will be essential for companies to provide a narrative that identifies what change in historical performance relates to COVID-19 factors and what change results from previously existing plans—numbers on their own will be impossible for readers to interpret. It will also be important to provide a forward-looking narrative explaining their potential trajectory once COVID-19 is behind us.
Meeting stakeholders’ information needs outside the annual reporting cycle. Honest and timely communications are more important now than ever. Reporting is about meeting the information needs of external stakeholders, and in the current crisis, that may entail disclosure outside the boundaries of the formal sustainability/annual report, such as dedicated COVID-19 webpages. While not a substitute for formal reporting, well-designed websites and other responsive communications can be a powerful tool to distill the most material information to stakeholders, enabling them to make informed decisions and provide feedback to companies in the near term.

Sustainability reporting exists so that stakeholders can make informed judgments about how companies impact the world around them and understand how the changing world impacts the sustainability performance of companies. In this sense, sustainability reporting is more important now than it has ever been, and looking forward, it will be critical to understand how COVID-19 may impact sustainability reporting over the long term. Stay tuned for a follow-up blog post on how to “build the future” of post-COVID sustainability reporting.

Blog | Wednesday April 22, 2020

ESG Isn’t Going Anywhere: Investor Expectations in the Age of COVID-19

Preview

One of the most important topics in corporate sustainability is the dramatic increase in attention by investors on the integration of environmental, social, and governance (ESG) considerations.

The COVID-19 pandemic has created a global health crisis, upended the economy, and led to major stock market declines. As a result, many investors are reevaluating both short-term and long-term portfolio strategies, and companies are reevaluating their sustainability priorities. This raises an important question for corporate sustainability professionals: how will the rise of COVID-19 affect ESG investing strategies both in the short term and the long term, and what does it mean for companies?

Preliminary indications are that the COVID-19 pandemic has—if anything—increased investor attention on corporate ESG management. In particular, investors have been even more vocal about their expectations on issues such as employee health and safety, workforce policies, job security, and business operational and strategic resilience. Front and center are investor concerns about responsible corporate governance, specifically related to COVID-19 response.

Preliminary Indications Are That Investors Are Full Steam Ahead on ESG

Leading asset owners and institutional investors are renewing their ESG investing commitments. The Government Pension Investment Fund (GPIF) of Japan, the world’s largest asset owner, and other major asset owners remain steadfast in their expectations of ESG and long-term investing. Even as the virus and market turmoil spread in mid-March, a new round of major asset owners joined GPIF’s letter.

Larry Fink, the CEO of BlackRock, the world’s largest asset manager, also released a letter at the end of the first quarter in which he emphasized that “the pandemic we’re experiencing now highlights the fragility of the globalized world and the value of sustainable portfolios. We’ve seen sustainable portfolios deliver stronger performance than traditional portfolios during this period.” Blackrock is also continuing to take ESG action as a shareholder even during the crisis, notably voting against a board member at a natural gas distributor based on the company’s inadequate climate-related risk disclosure.

Early data seems to show that ESG funds are performing better and proving more resilient during this turbulent moment in time. S&P Dow Jones' analysis notes that ESG portfolios have delivered better returns during the COVID-19 crisis and over the longer-term as well.

BSR has partnered with Polecat since 2017 to deliver real-time corporate reputation and ESG intelligence from global online and social media discourse. Our review of data from Polecat indicates that many ESG topics (e.g., climate change, indigenous rights, etc.) are being reframed in relation to COVID-19, increasing their urgency and reach.

The Wall Street Journal also envisions that the pandemic could elevate ESG factors in investment decisions, characterizing remarks from the head of research at the British investment bank Barclays: “Companies should expect more investors to ask questions about resilience and contingency planning, viewing the issues in light of the pandemic as relevant to a company’s long-term performance. Down the line, those conversations could evolve to broader ESG discussions…”

More broadly, COVID-19 has also highlighted enormous disparities in society and corporate performance on the “S” in ESG. As the world assesses the challenges and rebuilds—and invests the capital to do so—it is likely to be guided by the imperative to “build back better” with a more just and sustainable economy. Companies will be evaluated by how they address those challenges in their businesses and being part of global solutions will be both a competitive differentiator and an ESG differentiator.

COVID-19 Will Demand Emphasis on Different Areas of ESG

Many, if not most, corporate sustainability materiality matrixes will need some updating. The pandemic has demonstrated that many companies might generally have identified the right set of issues but may not be prioritizing them correctly or setting the right agendas to address them. For example, many service companies have not thought that employee health and safety was a high risk for their business. This thinking is obviously now changing.

In this regard, BSR has seen a variety of material issues emerge as areas of particular interest to ESG investors. These include employee health and safety outside as well as inside the workplace, supply chain and resource risk and resilience, and employer-employee social contracts. It will be noteworthy to see how companies begin to report on COVID-19 in relation to these material issues, especially with the impending release of many corporate sustainability reports.

COVID-19 has also put a spotlight on building resilient business strategies through scenario planning and considering second or even third-order effects. Issues that may have been deprioritized because they seem attenuated have—by the nature of the virus and its related effects on labor, supply chains, etc.—highlighted that a one-dimensional view of risk is not sufficient in designing resilient business strategies. Using scenario analysis in materiality and integrating the process with enterprise risk management are examples of ways that companies can better identify emerging ESG issues, some of which could manifest as quickly as COVID-19—and manage those risks accordingly.

COVID-19 Is a Reason to Accelerate Efforts on ESG, Not to Pause Them

Companies that are more strategically and operationally resilient and that treat their workforces better will likely be more attractive to all investors. In the short term, that means companies should increase efforts to integrate ESG investor expectations, ratings, and perspectives as part of sustainability initiatives, stakeholder engagement, and resilient business strategies. Corporate leadership should also be conversant in ESG topics that relate to the COVID-19 response as investors ask tough questions and stakeholders evaluate companies on their effectiveness, credibility, and leadership on those material topics.

Longer-term, COVID-19’s effects and the responses may also become a testbed for ESG analysis that helps create a new understanding of ESG impacts on business. For example, many investors have struggled with how to model and quantify the “social” aspects of ESG (whereas “environmental” are quantitative and more understood), and this may improve understanding of the financial impacts of major social disruptions. If this happens, companies should expect to see an increase in the quality of ESG investor expectations for corporate reporting.

As we look ahead to the day when COVID-19 is no longer front-page news every day, it will be imperative for companies to learn and apply the lessons of this crisis. We believe investors will in turn hold them to higher ESG expectations. It will only become more important for companies to turn corporate sustainability principles into action, placing robust approaches to ESG at the center of resilient business strategies.

Blog | Monday April 20, 2020

Women in Supply Chains: On the Frontlines of COVID-19’s Impact

Preview

The COVID-19 pandemic has quickly transformed from a global health crisis into a financial crisis, particularly for low-income female workers in global supply chains. However, companies can effectively deploy preventative measures to support workers and workplaces to protect their health and strengthen their financial resilience.

Developing countries—where many supply chain production sites are located—are not equipped with the economic resources and medical facilities and commodities required to mount an effective public health response. Compounding this issue, businesses faced with the mass cancellation of orders from global brands or government lockdowns are closing their business doors and laying off low-income workers.

In the context of a health emergency, the implications of gender inequality are stark. COVID-19 is no exception and will affect women and girls disproportionately. With approximately 190 million women working in global supply chains, the outbreak is especially concerning for low-income female workers, resulting in:

Added economic hardship on a population whose financial status is already stretched too thin and put at risk of being unable to pay for bare survival necessities;
Exacerbated risk of violence against women, increasing the level of stress and the disruption of social and protective networks and decreasing access to protective services;
Being relegated to traditional gendered roles as primary caretakers by both solely looking after children during school closures as well as the sick and elders;
Increased exposure to COVID-19 as those most in contact with sick family members and elders (who are most at risk of the virus) and also likely nexus of transmission by being primary caretakers.

Women already have limited financial means and struggle to meet expenses under normal circumstances. With many of them paid in cash wages, sudden workplace closures or layoffs can also mean pay delays or reductions or worse. In Cambodia, workers in garment factories suspended due to COVID-19 will only receive $70 a month (about 37 percent of their monthly minimum wage), a shock which could have a dramatic and long-lasting impact on their lives. In Bangladesh, the Bangladesh Garment Manufacturers Association has reported that over $2.4 billion of ready-made garment orders have been cancelled or suspended by global buyers, describing it as a "catastrophic" move which will directly affect almost 2 million workers, mostly women. This drastic slowdown in commerce, combined with the preexisting financial inclusion gender gap, makes female workers even more vulnerable and less likely to have access to remittances, savings, or insurance that could help them in emergencies.

Not going back to work is not an option. Workers are more concerned about getting paid—regardless of the health risks. "We have not been paid for two months. We are starving," a female garment worker, Brishti, recently told AFP during a protest in Dhaka. "If we don't have food in our stomach, what's the use of observing this lockdown?"

But how can workers reintegrate into factory work in a safe and sustainable way? Workplaces need to implement preventative measures, upholding social distancing and improving hygiene practices. Workplaces, which gather people from different and densely populated communities into a confined space and have them handling the same objects, are an obvious vector for communicable disease transmission. Garment factories, which are staffed by approximately 60-80 percent women workers globally, are exceptionally at risk because the production process requires workers to operate in close proximity while passing products from one to another. It’s been documented that the coronavirus can be transmitted through handling cardboard boxes passed between workers. As the material of choice for packhouses, this puts packhouse workers at higher risk of picking up traces from carton to hand.

So how should businesses consider the needs of female workers when reopening their doors?

Reproductive Health to Ensure the Sustainable Return of Women at Work

Health resources normally dedicated to reproductive health go towards emergency response in times of crisis. At the same time, past pandemics have showcased a rise in domestic violence which lead to additional unwanted pregnancies. Ensuring continued access to family planning resources and preferred contraceptive methods during COVID-19 will be key to ensure that low-income women who are already facing financial hardship from this pandemic are not faced with the added economic hardship of having a child. Furthermore, it ensures that they are able to return to work and not forced to drop out to care for a newborn. Access to contraceptives may be hampered, however, by potential supply shortages during lockdown which reduce the stockpile of available commodities. Furthermore, low-income women suddenly out of work may find it difficult to make out-of-pocket payments while navigating insurance practices that often limit reimbursement to just one month of prescription drugs at a time. COVID-19 is an exemplary reason why employers should ensure their workforce’s modern family planning needs are provided for at the workplace clinic or through referral mechanisms.

Physical Health and Safety in the Community and at Work

HERhealth baseline data in 2019 showcased that personal hygiene practices are weak and conducive to spreading germs like the coronavirus both at work and at home. For example, across eight factories in Bangladesh, 55 percent of 363 women workers could name only one benefit of hand washing. And yet, 13 years after we first launched a personal hygiene model, some donors ask us whether it is still relevant. Of course, the topic is now back on the map as a central public health concern, crossing both personal and professional spaces in order to survive the pandemic. Imparting a culture of handwashing, however, relies both on behavior and access to clean water and soap. HERhealth is reaching workers—both at work and in their communities—via digital means to improve hygiene best practices.

Production Pressure and Stress

It is commonly reported that poverty-related stress and economic insecurity can lead to an increase in intimate partner violence. When unemployment rates skyrocket and economies slow to a halt, intimate partner violence is likely to increase at home as a result of related stress. Similarly, following the reopening of factories, orders that were on hold will lead to increased production pressures. We know from experience that in times of stress, managers sometimes resort to abusive behaviors, such as shouting, insulting, and cursing, in an effort to motivate increased production. Such practices are unacceptable, and they give rise to conflicts, confrontations, and grievances that require negotiation and mediation. Support for managers and workers, especially female workers, while navigating the pressure of making up for lost profit and time while the factory was closed and its implications on management stress repercussions on women workers will be key to reopening factory doors.

Building Financial Health and Resilience

Although the protocol for wage payments during factory closures is determined by government, brands, and factories, we know that wage digitization is a more convenient, efficient way for factories to pay workers remotely, which also supports social distancing. For example, the Government of Bangladesh's $590m bailout package stipulates that workers must have financial accounts to receive wages. This enables workers to be paid, even if it’s through family members' financial accounts. More support will be required to ensure that workers, especially women, are able to control and benefit from their digital wages. Participants in the HERfinance Digital Wages program have been able to manage their finances better and increase their savings, helping to make them more resilient. The program found a 21-percent increase in both male and female workers reporting that they save regularly, and women were 17 percent likelier to report feeling confident that they can meet such unexpected costs as an emergency or family problem in the next two years.

Collaboration and good communications across brands and their suppliers, garment associations, governments, and development organizations will be key to helping garment workers recover from the COVID-19 shutdowns and build their resilience for future health and economic crises. Looking ahead, it will be crucial to consider how additional partnership efforts can support and prioritize workers’ health and financial resilience as businesses reopen. Early, bold, and effective action will reduce short-term risks to employees and long-term costs to businesses and the economy.

Blog | Wednesday May 20, 2020

The BSR Conference Reimagined

Blog | Tuesday May 19, 2020

A Post-COVID-19 Agenda for Sustainability Reporting

Blog | Friday May 15, 2020

Mitigation and Resilience Building: A Response to the COVID-19 Effects

Blog | Tuesday May 12, 2020

A Human Rights Impact Assessment of Facebook In Cambodia

Blog | Tuesday May 12, 2020

COVID-19: External Resources for Business

Blog | Tuesday May 5, 2020

COVID-19 and the Climate Crisis: Building Resilience with People at the Core

Blog | Monday May 4, 2020

Sustainability Reporting and Early Lessons from COVID-19

Blog | Wednesday April 29, 2020

Understanding Connections Between Climate and Public Health

Blog | Wednesday April 22, 2020

ESG Isn’t Going Anywhere: Investor Expectations in the Age of COVID-19

Blog | Monday April 20, 2020

Women in Supply Chains: On the Frontlines of COVID-19’s Impact

Search Again?

Sustainability Insights

Advisory Services

Collaboration

Membership

Events

Focus Areas

About Us