2020 was supposed to be a “defining year of climate action” according to British Prime Minister, Boris Johnson, when he launched the UN Climate summit in February. And it needed to be. At the time of launch, fossil fuel usage and greenhouse gas emissions continued to rise exponentially and 2020 was set to be the warmest year on record. The climate crisis was at the forefront of all government agendas, until – barely one month later – one crisis gave way to another.
COVID-19 provided a stark reminder of the scale of systemic risks that can build up – and the exponential impact these can have – when we allow negative externalities to accumulate over time. It is clear that deforestation, biodiversity loss, climate change and inequality all contributed either to increasing the risk of a crisis like the one we’re in or making our societies and economies more vulnerable in the face of it.
For businesses, this crisis can and must trigger a reset that embraces not just responsibility, but also resilience, regeneration. Responsibility is clearly a critical imperative for businesses dealing with the immediate fallout from COVID-19. As we move into the post-crisis world though, resilience and regeneration will both become increasingly important and will be where the focus needs to turn.
The value of building resilience at all levels – from individual businesses to supply chains to the global economy – should be self-evident in the wake of COVID-19, given what the pandemic has exposed about our vulnerability to systemic shocks. Regeneration matters because, in an interconnected, interdependent world, it is only by regenerating economies, communities and the biosphere that we will be able to achieve true resilience.
To ensure they are better prepared for the next shock when it comes, companies will need to establish a better balance between efficiency and resilience in everything from supply chain configuration to financial management. Complex supply chains may give way to simpler ones. “Just-in-time” may be superseded by “just-in-case” as the mantra of procurement and production teams.
And since we are only as resilient as the systems we rely on, businesses will need to contribute to efforts to build systemic resilience. This means working with a wide range of partners to ensure systemic risks are properly understood and mitigated. Where mitigation is not possible, business will also need to play its part in developing and implementing local, national and international adaptation strategies.
Much of the corporate world has been fine-tuned to maximize efficiency. An excessive focus on short-term shareholder value maximization has also left many companies ill-prepared to deal with an economic shock and with little regard for the impact they are having on the natural world.
Until we see a successful roll out of the vaccination, governments and businesses around the world remain in rescue and survival mode. But as attention turns to recovery, regenerative thinking and practice must come to the fore.
The challenge of decarbonising entire economies and retooling businesses for a circular, zero-carbon and, ultimately, regenerative future can be the source of demand needed to kickstart economic recovery. Critically, too, we must seize this opportunity to confront the broken norms and incentives at the heart of business and make substantive reforms – to ownership and governance models, to laws and regulations, to business models, and to pay and incentive structures. For example. Business models that incentivize companies to use and purchase products that fulfil community and biodiversity needs, not just its own corporate needs. This is the focus of Volans’ ongoing Tomorrow’s Capitalism Inquiry.
The inquiry has derived that business, as usual, even “sustainability as usual” – looks increasingly unfit for purpose. It is time for businesses all to either “step up – or get out of the way”. The inquiry involved speaking to businesses that are starting the map the blueprint for regenerative and resilient businesses such a Covestro Systems, leading supplier of premium polymers, who aims to embed circular economy principles into the plastics industry and find ways of putting the world’s limited resources to good use. Or, as it were, re-use.
If we don’t seize this opportunity, systemic risks and vulnerabilities will continue to accumulate, making future shocks both more likely and more dangerous. If we do, however, the COVID-19 pandemic could yet be the catalyst for a profoundly positive transformation of the global economy, taking us several steps closer to the goal of a future in which humans and the natural ecosystems we rely on can both thrive.
For more on this topic, see The consequences of COVID-19 for the decade ahead, a briefing developed by Volans, in partnership with the World Business Council for Sustainable Development.