The COVID-19 pandemic has irreversibly shifted various aspects of individual lifestyles and organizational structures. With over 215 million cases, nearly 4.5 million deaths, and significant time devoted to large-scale lockdowns across the globe, the pandemic has required businesses to re-envision their operations and practices to appropriately respond to the ESG risks that COVID-19 presents. Now, as over 50% of the US population has been vaccinated against COVID-19, businesses are beginning to implement their return-to-the-office plans, while other companies that were never able to go completely remote are assessing how the pandemic will shift their operations in the long run. The effects of the pandemic on ESG risks and risk management will continue to manifest as the labor market and business landscape adjust to the new normal.
Worker Health and Safety
COVID-19 brought worker health and safety to the forefront for businesses that are not themselves labor-intensive, and it added an additional layer of complication for businesses that are. Guidelines from the Occupational Safety and Health Administration (OSHA) at the onset of the pandemic set foundational expectations for businesses to protect their employees, including frequent cleanings and hygiene requirements, enabling social distancing or remote work, ensuring access to protective equipment, and documenting COVID-19 cases. As employees move back into in-person workspaces on a full-time basis, some companies are developing policies that mandate COVID-19 vaccinations and proof of vaccination for employees. For businesses that were deemed essential at the onset of the pandemic and that have kept their in-person operations open throughout, enhanced pathogenic contamination controls and more permanent changes to workflow procedures have helped adapt worker health and safety programs to the realities of COVID-19. While the health and safety risks posed by COVID-19 may seem to be diminishing over time with the advent of vaccines and formalized procedures, both labor-intensive and non-labor-intensive businesses must continue to stay abreast of changes in the pandemic landscape, such as the delta variant, which could necessitate returning to prior stringent measures to mitigate risk.
Supply Chain Management
COVID-19 destabilized global supply chains; for many companies, procurement and sourcing of necessary inputs has yet to reach pre-pandemic norms. The companies that succeeded in navigating COVID-19 disruptions relied on extensive knowledge and data extending upward throughout their value chains. Investing in supply chain management by centrally and attentively tracking upstream supply chains, from origination to end-product, has proven to be a strong practice to mitigate disruption risk while also maintaining measurable social and environmental performance. Indeed, stronger supply chain oversight provides the means for businesses to better incorporate ESG considerations into their upstream sourcing. For example, companies like Nike, HP, and Kellogg’s tapped into their risk management strategizing to survive the stress tests posed by the pandemic and emerge stronger for them. Just as companies with labor-intensive operations have had to incorporate COVID-19 considerations into their everyday programs, companies with extensive reliance on sourcing inputs should continue to stress upstream COVID-19 mitigation efforts. Doing so can both act as a preventative measure against future disruption and enhance the ESG profile of the value chain.
Social and Labor Conditions
The COVID-19 pandemic put a spotlight on labor conditions in the US; employees were segmented into “essential” and “non-essential” groups. Those classifications affected who could and could not work remotely, leading to downstream effects. Layoffs and furloughs hit workers in blue-collar industries particularly hard. COVID-19 has exacerbated US-specific challenges in the labor market surrounding benefits, like a lack of paid sick leave and hazard pay for essential workers who have had to weigh the effects of a new risk to well-being on their own employment. The uncertainty brought about by the pandemic has made many employees more susceptible to work-related stress and burnout through continued focus on performance during the struggles of the pandemic. With reduced in-person interaction to gauge sentiments and increased stress inside and outside of work, COVID-19 has highlighted the importance of consistently and intentionally measuring employee engagement, as well as the importance of providing employees with opportunities to provide feedback that can inform a company’s return-to-work planning. New staples of everyday work, like regular pulse surveys, manager-employee check-in sessions, online engagement programming, and an emphasis on preserving mental health and wellness will contribute to improved conditions for workers. In fact, some companies with business models that can be sustained by remote labor have already decided to transition significant portions of their operational activities toward full-time remote work. Providing flexibility to workers to determine their working conditions without sacrificing productivity or engagement should be a key organizational priority.
Diversity, Equity, and Inclusion
The effects of the COVID-19 pandemic on diversity, equity, and inclusion (DEI) have been less apparent than its effects on working conditions but are nonetheless important to consider for all businesses. In particular, the challenges posed by the pandemic have exacerbated preexisting disparities for different employee groups. Employees belonging to diverse groups have struggled to grapple with COVID-19; members of minority communities are more at-risk of contracting COVID-19 and of experiencing its tangential negative consequences for health and well-being. Similarly, many women during the pandemic have had to undertake caregiver roles in addition to their responsibilities as employees. More broadly, genuine and authentic intentionality from businesses explicitly outlining commitments to DEI, whether through targeted recruiting efforts or through initiatives to expand diversity and equity of consumer access to products and services, can help to interweave diversity and inclusivity with the workplace. Employers can also help their minority and female employees who are working through unexpected pandemic challenges by offering work arrangements and benefits that align with employee needs, like flexible work-from-home schedules and allowed leave for the caretaking for others.
The COVID-19 pandemic has manifested in pronounced ways over the past 18 months in ESG risk mitigation and value creation. Businesses that have accurately and quickly identified their level of risk exposure and then worked to furnish their practices to make the pandemic a manageable challenge have in turn exhibited the greatest success in showing how strong approaches to ESG can facilitate adaptation to the realities of COVID-19. The pandemic has irreversibly shifted the nature of professional work and business operations; COVID-19 management will be an ongoing business consideration. Subsuming COVID-19 management within robust ESG practices will help companies to identify material issues, manage risk, and continue creating value as we move forward.
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