Article by Ashwini Mavinkurve
If there is one thing that binds every individual, organisation or industry today, it’s being impacted by the COVID-19 pandemic. The woes are definitely in varying degrees across the strata of the society with the vulnerable ones being worst hit. Talking about businesses, the worst affected are the ones that relied on short-termism and on merely creating shareholder value. The pandemic has made it clear that for businesses to sustain through the most unprecedented times, their business model needs to be designed incorporating aspects that will matter in the long run.
A robust system needs to be set up to identify and safeguard against potential material risks. Businesses began to take the triple bottom line approach more seriously post the 2008 economic recession that hit companies across sectors. It then dawned upon several organisations that sustainability could no longer be a ‘good to have’ accessory but something that needed to be ingrained within the very ethos of business. 2015 marked an important year in accelerating the Sustainable Development Agenda as a result of the landmark Paris Agreement, UN Sustainable Development Goals, the Task Force on Climate-Related Financial Disclosures. The most defining step in the Sustainability journey of an organisation is Materiality Assessment. It is the process of identifying and assessing the potential environmental, social and governance issues that could affect business and stakeholders. While organisations have been conducting materiality assessments and undertaking goals and initiatives in line with identified material issues, COVID-19 has challenged the existing system. The pandemic reinstates the fact that majority of the organisations around the globe never accounted for an international health emergency as a material aspect that could impact the sustainability of their business and impair normal functioning.
Another fact that reiterates the business sustainability impact of this pandemic is the downgrading of credits of several corporate bonds as COVID-19 comes at the time of mounting corporate debt. Sectors like airlines, oil and gas and travel, shipping, hotels and entertainment and leisure are all heavily impacted due to the business slump, the credit downgrading further pushing them down. The pandemic has forced organisations to look inward and reassess their existing materiality process and matrix. The materiality matrix needs to include development of green, resilient supply chains as the pandemic induced global lockdowns brought to the forefront the vulnerability of disruptions across the supply chain.
With remote working and working from home becoming the new norm, businesses need to look at making these practices more effective. Flexible working hours, social distancing, financial implications of a pandemic, labour management and job security, these aspects will have to start featuring among the top material issues in the post COVID-19 ecosystem. The most important take-away from this situation is that the materiality assessments need to be revisited on a regular basis and it needs to address the dynamic external environment that businesses are exposed to. Today it’s a pandemic that has put business continuity at risk, tomorrow will hold another unprecedented sustainability challenge. Materiality assessment would serve as a tool to foresee and prepare for these challenges.
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