Corporations generally performed well across most corporate social responsibility (CSR) dimensions in the “new normal” of the global pandemic. Significant increases in cash by major organizations suggest, however, that supplier responsibility may have suffered. Changes in supply-network structure, business operating models and consumer behavior offer the opportunity for firms to significantly improve environmental sustainability.
Corporations fall across a wide spectrum with respect to CSR adherence. Early adopters have fully institutionalized the concept, while laggards continue to view responsible and sustainable business practices as a matter of legal compliance, or at best a public relations and social media gambit.
While a range of influential CSR frameworks are available, most companies are tending to converge on six critical dimensions: customers, employees, communities, suppliers, shareholders, and the environment.
In the new normal of the global pandemic, most corporations have acted responsibly toward their customers, employees and, by extension, their communities. With respect to suppliers, the social responsibility scorecard is more opaque. While corporations pursued resilient supply networks, larger entities also stockpiled cash during the pandemic. Nine of the 10 largest firms listed on the Dow, for example, increased cash by an average of 35% during the 12 months ending Q3 2020. These cash surpluses may have been driven by greater demand or the need for reduced operating costs. More aggressive payment terms might also have been used to increase cash. Shareholders, for their part, fared well during the pandemic; the four leading stock exchanges rose by an average of 10.9% over the 12 months ending Q3 2020.
The new normal creates a greater opportunity for rapidly closing the gap between current corporate operations and the future state required for sustainable environmental performance. Remote work reduces carbon emissions from commuting. The shift from in-store shopping to direct home delivery also reduces the carbon footprint through last-mile optimization, and accelerates investments in fulfillment technology such as robotics and green-powered logistics. Remote working and employee safety also boost investment in new and more efficient technology.
Unfortunately, the positive environmental impacts of remote work can’t be sustained if corporations return to pre-pandemic preferences for office space. Investments in optimization and technology provide only incremental improvements in environmental sustainability. To more rapidly close the environmental sustainability gap, corporations need to fully exploit the opportunities created by changes in business models.
The significant shift to e-commerce creates significant potential to improve environmental sustainability. Online shopping separates shopping decisions from the physical product. Unlike the in-store experience, customers buy items that they can neither see nor touch; they see images instead of physical products. As a result, consumer packaged goods suppliers and their retail partners can improve environmental sustainability by replacing glossy packaging with recyclable materials, shifting to product configurations that have more volume for less surface area, reducing empty space, and creating automation-ready and ready-to-ship packaging. In response to shortages and hoarding, consumers have demonstrated less brand loyalty and higher rates of demand transfer and purchase substitution. Manufacturers should take advantage of these changes in customer behavior to introduce more environmentally sustainable offerings.
Shrewd firms focused on CSR will capitalize on changes in supply networks and business operating models to accelerate environmental sustainability. Retail and CPG sectors will respond to changes in consumer behavior by improving the environmental sustainability of product offerings. The new normal won’t be without environmental risk; monitoring and reporting could suffer due to remote working, reduced staffing and pandemic imperatives. Disruptions in supply might also cause environmental monitoring and reporting to become misaligned with supply-network operations.
Tony Gray is a Director with Tata Consultancy Services.
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