The sustainable pathway out of COVID-19 for Australian businesses

The 17 United Nations Sustainable Development Goals (SDGs) are a call for action to foster economic growth and a fair go for all while safeguarding a healthy ecosystem. By setting negotiated goals for 2030, the SDGs seek to encourage action by governments, companies and the community for the long-term benefit of all.

The goals set priorities that reflect significant challenges facing Australia, such as booming population growth in our major cities, job insecurity, climate change, environmental degradation, inequality and decreasing confidence in business and government. Underpinning the goals is the idea that no one should be left behind, which is consistent with the Australian ‘fair go for all’ value.

Australian policy makers are encouraged to resolve climate change and other environmental concerns with the same active expert approach implemented during the COVID-19 crisis.

The call comes on the back of new research demonstrating that Australia is lagging behind other OECD countries when it comes to addressing the UN Sustainable Development Goals (SDGs), but close to the top with its COVID-19 response.

The 2020 Global Sustainable Development Report, published in New York, ranks Australia third among OECD countries in terms of the efficacy of its response to the COVID-19 pandemic, which was surpassed by South Korea and Latvia.

However, Australia was 37th in the world in its overall progress towards achieving the United Nations Sustainable Development Goals, covering several economic, social, and environmental issues – all of which will be critical as we recover from the pandemic. Australia’s worst outcomes relate to climate action and the atmosphere, where we are far below the average of most other OECD countries.

The middle of a global pandemic may seem like a reasonable time for a business to withdraw from efforts to become more sustainable.

The advantages however of a more strategic approach to sustainability are greater than ever before and, perhaps unexpectedly, COVID-19 could have made the required improvements simpler than they would otherwise.

The most significant topic in the media, of course, is climate change.

Companies are under pressure not only to reduce their exposure to climate change by lowering greenhouse gas emissions, but also to illustrate their business models are strong enough to cope with changes that may result from climate change.

Many workers, particularly those just entering the job market, choose to work for an organisation with a proactive commitment to sustainability, which also affects recruitment and retention.

They agree that businesses should not only be concerned about their financial results, but should also pay attention to the environment and to the social life of their employees. Millennials are willing to sacrifice a portion of their income to work for a sustainable organisation offering tangible social benefits.

Although several businesses acknowledge that their clients – whether it is policymakers, or other companies – want more sustainable goods, sectors viewed as unsustainable find it more difficult to attract financing.

Highly visible incidents such as the 2019/2020 Australian bushfires have only raised public exposure to sustainability issues.

As customers increasingly make choices about the goods and services, they purchase based on how they view the values of a company and that behaviour feeds into decisions as to whether they will attract sustainable investment funds.

Shareholders are also raising their expectations.

Last month, the Climate Initiative 100+ – an international initiative of more than 500 institutional investors that collectively manage over US$47 trillion – sent 161 large emitters of greenhouse gases a set of 30 climate targets against which they will be measured from in 2021.

All these factors equate to sustainability affecting revenue, cost, and risk – the ultimate drivers of a firm’s performance.

Companies that respond well will boost their performance across all three drivers. Many that do not, risk falling behind poorer selling goods, higher prices and/or higher risks.

Sustainability is good business practice and good for business. The ESG criteria helps determine the future financial performance of businesses and are not disappearing because of the emergence of the global COVID-19 pandemic. While sustainability is sometimes seen as overwhelmingly complex, and an unattractive add-on in a crisis, in actual fact a crisis is often the most effective time sustainability can assist strengthen decision-making, reduce risk by enhancing a compliance culture and build trust and reputation.