May 07, 2020

Corporate social responsibility in an era of COVID-19

Roger Martella

For half a century, corporate social responsibility (CSR) has served as the key vehicle for measuring and reporting a company’s broader impacts to the environment and for social accountability to stakeholders, investors, and the public. The year 2019 set the stage for a significant CSR transformation in the environmental realm, to some extent filling the gap resulting from a lack of progress on environmental and climate change law. In turn, 2020 began with momentum to turn 2019’s foundational exercises into action.

With the emerging pandemic, companies are embracing bold decisions to keep their employees safe.

With the emerging pandemic, companies are embracing bold decisions to keep their employees safe.

FG Trade via Getty Images

Then the COVID-19 pandemic arose. By the end of 2020’s first quarter, the world’s economy rapidly shifted from growing to preserving business. Keeping employees safe, rapidly retooling resources toward the global fight against the pandemic, and preserving core operations appropriately captured the full bandwidth of corporate leaders. These priorities will define 2020.

Yet, despite these challenges, CSR will advance in 2020, even if it takes a different course than anticipated. If 2019 was a year of a renewed focus on CSR, 2020 will be a year of redirecting CSR initiatives, with 2021 and beyond resetting the future of CSR. This article takes readers through that transition.

2019: Renewed commitments to CSR

CSR traces its roots to 1950s and 1960s concepts of assessing the broader impacts of companies on societies. CSR has evolved to encompass more specific concepts relating to Environment, Sustainability, and Governance (ESG); human rights; labor; conflict minerals; supply chain; and other topics. Environmental aspects of CSR and ESG measure, inter alia, a company’s environmental footprint from its rooftops through its supply chain and, increasingly, the end use of products it manufacturers. T. Clare, Environmental, Social, Governance (ESG): Why ESG is the next big thing for environmental lawyers, 30 Envtl. L. & Mgmt. 80, 81 (LawText 2018). Environmental CSR and ESG take into account, for example, the company’s impacts on the land—through the production of pollution and waste—as well as on climate and biodiversity. Metrics that track greenhouse gas emissions, recycling, and water use help investors and other stakeholders weigh a company’s environmental performance. Id.

Historically, CSR concepts have been largely voluntary, with the recourse being public shaming for failing to disclose impacts and metrics. CSR traditionally has focused on companies’ impacts on society and less on the opportunities that companies have to ameliorate society’s challenges more generally. However, 2019 was a key year on the transition from CSR being a “nice to do” to a “should do” and, ultimately, a “must do” philosophy. Three developments represented this heightened momentum.

First, 2019 sought to modernize outdated reporting methodologies. Various groups, such as the Global Reporting Initiative, the Task Force on Climate-related Financial Disclosures, and the Sustainability Accounting Standards Board, advanced sometimes complementary, sometimes competing, methodologies to track issues of growing importance, such as greenhouse gas emissions across product life cycles, conflict minerals, and supply chain metrics. While the outcome is unresolved, momentum is moving toward more relevant and uniform disclosures.

Second, investors elevated the role of CSR for decision-making in C-suites and boards. Investment firms made several announcements regarding the types of companies they would and would not invest in, increasingly centered around CSR considerations. Activist investor groups presented more than 75 climate-related shareholder proposals in 2019, up from 17 in 2013. G. Rubin, Show Us Your Climate Risks, Investors Tell Companies, Wall St. J. (Feb. 28, 2019).

Third, companies themselves advanced the long-standing CSR debate about focusing on opportunities to solve bigger challenges. In August 2019, the Business Roundtable proposed to “Redefine[] the Purpose of a Corporation” to include classic CSR concepts such as “[s]upporting the communities in which we work . . . and protect[ing] the environment by embracing sustainable practices across our businesses.” This focus reflected growing momentum among individual companies to improve the communities in which they operate.

2020: Redirecting CSR to protect people

CSR initiatives will continue in 2020 but look different than 2019’s foundation setting in light of the COVID-19 pandemic. In the near term, CSR in 2020 may be even more important in three ways.

First, it’s sometimes easy to take for granted that the true root of CSR—as well as environmental and climate change law—is protecting people and keeping them safe. For companies with global footprints in changing landscapes, this is an all-hands issue. With the emerging pandemic, companies are embracing bold decisions to keep their employees safe, first and foremost, both in the work environment and through policies that promote safe working and leave conditions, bringing this core CSR principle to the front line of focus.

Second, companies are rapidly reinventing to protect their broader communities—another core CSR component. Headlines document heroic efforts to maintain infrastructure in ways that deliver needed healthcare, medical supplies, groceries, and staples around the world, including to vulnerable populations. Some manufacturers are reconfiguring production to make health care equipment for the first time. This effort builds upon 2019’s CSR movement of companies fulfilling a higher purpose in solving global challenges.

Third, in a roundabout way, the 2020 efforts on preserving and returning companies to “business as usual” are themselves a key CSR success. The relatively short experience so far with COVID-19 has reinforced the foundational role of businesses in maintaining the quality of life for diverse populations and communities. In 2020, businesses will need to focus not only on emerging from the pandemic for shareholders, but also on rebuilding the fabric of jobs and infrastructure upon which society relies. To be clear, this does not mean companies will avoid CSR practices. Most companies will endeavor to pursue a “business as usual path” wherever possible in managing regulatory compliance, protecting people and the environment, and operating their businesses conscious of their impact to populations and the environment. Maintaining these commitments will reinforce the importance of CSR even in the economy’s most turbulent times.

2021+: Resetting the CSR path forward

While the COVID-19 pandemic may have temporarily redirected 2019’s CSR foundations, the lessons learned will inspire greater momentum toward realizing new goals with diverse stakeholders perhaps sooner than otherwise would have happened.

First, the pandemic reinforces the most pressing CSR focus: that we operate in a globally connected world—economically and ecologically—with shared challenges. While we will succeed in fighting COVID-19, other global challenges such as climate change, access to water, creating a circular economy, labor conditions, and human rights will continue at the forefront of global issues in need of coordinated action.

Second, the corporate pandemic response will reinforce the growing CSR trend to focus not only on company impacts to communities, but also on the opportunities that companies have to solve broader problems. Early into addressing the COVID-19 pandemic, companies already demonstrated their willingness and ability to tackle global challenges in the toughest of times. We will learn from these lessons in developing pragmatic solutions to other tenacious global challenges.

Third, while 2020 will bring some pause to efforts to elevate voluntary CSR topics toward mandatory requirements, 2019’s momentum will continue after the pandemic is addressed and business as usual returns. At that point, the business sector can build upon its success in protecting employees, creating solutions to solve the pandemic and protect communities, and strengthening performance to apply those lessons to develop collaborative solutions to meet the global challenges ahead.

Editor’s Note: For additional ABA Section of Environment, Energy, and Resources coverage of environmental CSR and ESG, see also S. Orr et al., Why the UN Sustainable Development Goals Matter to Clients, Climate Change, Ecosystems, and Sustainable Development Committee (Aug. 28, 2018); Dr. L. Bergkamp, How the EU’s product stewardship regulations affect global supply chains, Trends (May/June 2019); S. Brown & P. Burton, Trends in Social and Environmental Responsibility, Natural Resources & Environment (Spring 2019); and T. Mohin, From voluntary disclosures to regulatory push: Recent trends in sustainability reporting, Trends (Sept./Oct. 2018); and I. Russell & R. Martella, CSR and Multinational Corporations: Beyond Accountability, a Vehicle for Doing Public Good, Natural Resources & Environment (upcoming Fall 2020).

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Roger Martella

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Roger Martella is a career environmental and climate change attorney who has worked in government, private practice, and in-house. He is co-editor of the upcoming book, Corporate Social Responsibility—Sustainable Business: Environmental, Social and Governance Frameworks for the 21st Century, which will be published in early spring 2020 by Wolters Kluwer. The views expressed herein are strictly the author’s and not any former or current clients and or employers.