How the revolving door of crisis limits sustainability pathways
Surviving the Crisis
Eighteen months into the COVID-19 pandemic, businesses around the world are contending with a range of emergent challenges—chief among them being their very fight for survival. Businesses have focused on financial continuity as the economic shocks from the pandemic flow through the economies of the world. The pandemic has also revealed the features of sustainability as they relate to the survivability of businesses. Businesses that have sustainability at their core tend to perform better compared with businesses that do not.
Thomas Singer, a principal researcher at US-based think tank The Conference Board, suggests there are five features of sustainable business that led to higher performance during recent business stress. I would take that one step further to include a sixth, recognising the trend that resilient businesses of all sizes engage in good environmental and social governance.
Six features of sustainable business that helped during the COVID-19 pandemic
- A clear purpose of business,
- High integrity and transparency with stakeholders,
- Materiality mapping of business activities,
- Linking business activity with social challenges,
- A collaborative, engaged work culture linked to purpose,
- Good environmental and social governance process irrespective of business size.
Stakeholder capitalism and Sustainable Development Goals in business
The features of sustainable businesses that have led to higher performance are also underpinned by two macro trends. The first is the shift away from shareholder approaches towards stakeholder approaches to business. Before the COVID-19 pandemic, the US Business Roundtable adopted a new Statement on the Purpose of a Corporation, which highlights the need for companies to look beyond serving their shareholders to consider and uplift their customers, employees, suppliers and local communities. The trend towards a stakeholder capitalist approach to business has continued during the pandemic.
The other macro trend is the alignment of the UN’s Sustainable Development Goals (SDGs) with business strategy in an attempt to align business activity with the grand challenges facing our world. As Business Insider reports, in Australia, top companies increasingly use SDGs in reporting on the environmental and social governance activities of the organisation. There are issues regarding SDG-washing, as Global Goals Australia chief executive Caterina Sullivan correctly identifies.
However, the UN Global Compact explains the process of including the SDGs into business strategy assists organisations with an external social perspective as they undertake their core business activity. When the 169 targets of the Sustainable Development Goals are aligned with the operations of a business, there is an external benchmarking process that forces a business to confront how its operations impact the world. The green ‘build back better’ movement, based on sustainable principles and detailed by the We Mean Business Coalition, has been adopted by many countries and embraced by progressive businesses. Based on these shifts, there appears to be some optimism about how to do business without it costing the earth.
Are we stuck in a business as usual mode?
If there has been an increase in businesses using sustainable business models—and there is a shift in thinking about the value of stakeholder capitalism—why then are there problems with the green recovery in response to the COVID-19 pandemic?
Four features seem to indicate the current global pathway of unsustainability is likely to continue, unless a major shift in business and government responses occurs.
First, there are limited levels of spending by governments across the globe that could be considered as a green recovery. As Oxford University academics Brian O’Callaghan and Em Murdock explain, the top 50 countries only spent 18 per cent of recovery expenditure on inclusive green recovery programs and initiatives. For example, in Australia, the COVID-19 recovery plan features high levels of expenditure on natural gas infrastructure support for industry. According to clean-energy news service Renew Economy, this will lead to high levels of greenhouse gas emissions, which are at odds with the achievement of the Paris Agreement targets.
Second, it is expected that two-thirds of the 169 SDG targets are under threat of not being achieved because of the COVID-19 pandemic, as the University of Vermont’s Brendan Fisher and Robin Naidoo have found. The achievement of the SDGs is underpinned by two assumptions: sustained economic growth and globalisation. The pandemic places strain on these two drivers of the global economy and thus pressure to maintain business as usual grows to achieve development. The mantra of needing economic growth to pay for sustainability occurs at the SDG governance level.
Third, bottlenecks in supply within green industries will not keep pace with the desired goals of a green recovery. The Economist reports that scarce metals and land constraints threaten to slow the chance of a green energy transition despite almost 100 per cent of governments around the world now committing to the Paris Agreement. The problem is systemic and cannot be solved by business alone. Government intervention is needed to facilitate the necessary investments.
Finally, evidence from Croatian researchers Iva Gregurec, Martina Tomičić Furjan and Katarina Tomičić-Pupek indicates that during a time of crisis such as the COVID-19 pandemic, large-scale innovation of business models is less likely, due to higher risk levels. Small-scale changes to operations have occurred, but larger-scale changes such as changing core sustainable business models are highly risky and an uncommon feature at present. As business is predominantly focusing on survival, sustainability has taken a back seat. With governments largely reverting to business as usual, organisations have less systemic incentive to shift also.
Another crisis?
Although the COVID-19 pandemic has been described as an unprecedented crisis, societies across the globe have become accustomed to crises on a daily basis. Human and natural disasters are increasing and, in part, have been exacerbated by climate change—another crisis. Global financial shocks have been a regular occurrence since the 1960s. War, in the form of civil conflicts, has increased since World War II. The media has documented the increase in disasters and crises, and profited from an increasing desire of the public to consume this type of news.
Cross-institutional research from Mo Li, Thomas Wiedmann, Kai Fang and Machalis Hadjikakou suggests the world economy is pressing towards planetary boundaries because of economic and population growth. Disaster capitalism and the shock doctrine controversially described by Naomi Klein provided evidence of the profitability and political advantage of crises. Ulrich Beck’s work on risk society provided a perspective on the rising hazards and insecurities from the process of modernisation itself and how people are intricately involved in the social process of producing and negotiating risk.
The more recent development of the concept of risk society includes the uncontrollable risks from the erosion or fluidity of borders (pandemics and migration) that have resulted from globalisation.
One critical aspect that has been overlooked in the reasons why ‘business and society’ slip back into business as usual is because the revolving door of the crises paradigm cripples any notion of shifting to new ways of thinking and doing. This phenomenon is what I call ‘the crisis society’.
Enter the crisis society
One critical aspect that has been overlooked in the reasons why ‘business and society’ slip back into business as usual is because the revolving door of the crises paradigm cripples any notion of shifting to new ways of thinking and doing. This phenomenon is what I call ‘the crisis society’.
Crisis society is a self-fulfilling pattern in which the protagonists first overemphasise the gravity of an impending crisis and then respond to the threat of the crisis by reinstating business-as-usual policies, claiming the crisis is short-term and the only solution is to revert to business as usual. If there are short-term interventions that run counter to the business-as-usual approach, these are also justified, as short-term measures need to assist the correction to the business-as-usual approach.
Ironically, business as usual is arguably the fundamental cause of the crisis. The boosting of the crisis narrative and militaristic response used to maintain business as usual creates a survivalist way of thinking. Wartime rhetoric is common during a crisis.
Fear is also a rhetorical device used in times of crisis. Under such a paradigm, it’s difficult for alternatives to gain traction in society to counter survivalist narratives. During the COVID-19 pandemic, it has been difficult to convince the people who are well-off to change the system that provided benefits to them in the first place. The increased inequality caused by the crisis leads to the less well-off thinking that a return to business as usual is needed to improve their situation.
Crisis society can be seen as a part of the neoliberal orthodoxy that has the agenda of liberalisation, as international research team Anis Chowdhury (Australia) and Piotr Żuk attest. This results in unprecedented domination of speculative finance capital and multinational corporation-led globalisation. This has seen a falling share of real wages across the globe, increased wealth concentration, and increased household debts. Crisis society is a means to maintain business as usual.
Sustainable business response to crisis society
This article started with the notion that business had predominantly responded to the pandemic with a survivalist approach. A small proportion of businesses had previously adopted robust sustainability practices and have performed relatively better than those that have not. These businesses have shown that during a crisis such as the COVID-19 pandemic that sustainability is the more viable business model for the future.
The pandemic has provided a moment in history to re-evaluate business. The individualistic world of neoliberalism has been challenged by the pandemic through revealing the social impacts of—and value of empathy in—business decisions, the cooperation between competitors and a re-examination of the social licence to operate.
But will this moment in history see business break out of survivalist thinking or continue being part of crisis society? Two questions map the broad response strategies.
- Will unsustainable business have institutional mechanisms for long-term planning to assist the shift to more regenerative, sustainable business approaches to build back better after the COVID-19 crisis passes?
- Do the businesses that purport to be sustainable (and have crisis-proof business models) actually contribute to sustainability targets in ways that ensure they operate within the limits of planetary boundaries?
Crisis society blindsides sustainable pathways in its pursuit of growth and insistence on relying on the past to fix the future. What will it take for business and governments to realise that a crisis is a message to change?
Author
Dr Rob Hales is the Director of the Griffith Centre for Sustainable Enterprise in the Griffith Business School.
His research interests include – sustainable development goals (SDGs) in business and government, climate change policy and management, sustainable tourism and indigenous consent processes. He is also the program director of the Master of Global Development which is a rapidly growing development studies program at Griffith University. He teaches in the Department of Business Strategy and Innovation in such courses as Leadership for Sustainable Business and Research Methods.
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