By the end of 2019, there was a surge of media surrounding Fridays for Future, and institutional investors were making announcements about using sustainability as a critical criterion for reducing investment risk. So, 2020 began with a lot of momentum for fighting climate change. Then came the coronavirus outbreak. With it has arisen the fear that governments and companies will withdraw their support in the fight against climate change as they did after the 2008 financial crisis.
Yet, there are parallels between COVID-19 (and its economic consequences) and the climate crisis. Both are global and both can only be defeated through international cooperation. They have both forced us to question long-standing certainties. We could have controlled both crises better through long-term thinking, planning and action. And in both cases, it has been about flattening the curve of infections or temperature.
The core difference is the timeframe. While COVID-19 created an immediate fear response, many people find it easier to delay their response to the climate crisis, because even though its impact is already being felt in a big way, its drastic consequences don’t seem as immediate. Delays are happening despite the permanent nature of the climate crisis—we will never develop a “vaccine” against global warming. Once we cross the point of no return with temperature increases, the consequences will be irreversible. Restrictions on movement, physical distancing and controlling borders don’t work against climate change.
So what has COVID-19 taught us about resilience in facing the next big crisis?
Between the lessons from the last few months and engagement with our clients and partners, three key insights came through:
1. Resilience and risk management are essential
Most companies were unprepared for the COVID-19 crisis. Their business continuity plans did not take into account black swan events of this magnitude. As a consequence of this crisis, resilience and business continuity will play a more important role than they did before the crisis.
2. Organizations will have to prepare for the next big crisis—climate change
Unlike COVID-19, the climate crisis is not a black swan event. It is a global crisis that is already very apparent and certain to continue if we fail to act in time. While still responding to the challenges of the COVID-19 pandemic, the conscious people and organizations have not forgotten about the climate crisis. Pressure from capital markets, business partners, consumers and stakeholder groups will likely increase and force companies to take action.
3. Digitization contributes to resilience
IT has played an important role in mitigating the risk exposure during COVID-19, and not only through remote working options that enabled companies to keep in contact with customers and partners and protect their employees. Companies that adopted greater digital transformation seem to have been better able to work through the crisis.
As a contributor to a company’s overall resilience, sustainability is becoming a central element, including for digital strategies, and many large corporations have embedded sustainability into their IT systems landscapes.
While a lot of ongoing initiatives were put on hold, many large multinationals considered it business-critical to continue implementation of their corporate sustainability software.
However, we also see that for many organizations, sustainability and carbon management are still crude manual practices.
On April 27th, under the umbrella of the Foundation 2 Degrees, a group of 68 leading companies that understand the interconnectedness between sustainability and resilience called for a climate stimulus program to make the economy more resilient.
It is now essential to translate the Covid-19 experience into positive lessons for preparing for the next major crisis… the climate crisis. Many governments missed the opportunity to make bailout funding and incentives contingent on an expansion of sustainability. Moving forward, it is critical that measures to help the economy recover include incentives for improved sustainability and greater digitization.
Companies that invest now in greater sustainability and digitalization will be better positioned to handle the environmental crisis. We at Sphera can help you transform and digitalize your corporate sustainability management and reporting towards a more sustainable and resilient future.