Using COVID-19 Adversity as a Business Opportunity
The above image comes from Lama El-Hatow, an environmental and social consultant at the International Finance Corporation (IFC), who recently gave an online talk hosted by Alternative Policy Solutions. The talk explained that once COVID-19 comes to an end, economic recession, climate change, and biodiversity collapse will follow. The illustration depicts these risks as tsunamis overshadowing business.
Do we have your attention?
“We all ask when this disaster will end and how, but we need to keep in mind that there are a lot of other bigger crises that will follow” — Lama El-Hatow
Yet, what if we viewed COVID-19 and our response to it as a business opportunity, a means to prepare for and mitigate prevailing risks, i.e. a recession and our environmental crisis (climate change and biodiversity loss)?
In this article, we’ll explore how businesses can learn from COVID-19, and use the crisis as an opportunity.
Using the COVID-19 turbulence as an opportunity
The saturation of crisis news can leave one feeling paralyzed with inaction. The issues are complex, interconnected, have many feedback loops — meaning improvements in one area can degrade another area — and require cross-sector collaboration.
However, solutions are born from problems. If we consider COVID-19 and our response to it, our solutions can be used to mitigate economic, climate and biodiversity issues that prevail, as I’ll explain.
Opportunity #1: Business efficiency improvements
Consumer spending during COVID-19 retracted by 10.1% in the U.S. — comparing quarter 1 with quarter 2 — which was the sharpest quarterly contraction of record. In the UK, consumer spending declined by over ⅓ during the lockdown period.
It’s this reduction in consumer spending, and the slowdown of the economy during lockdowns that’s causing a second wave of business risk, tagged recession, to brew.
The World Bank reports that COVID-19 may spark the worst recession since world war II, shrinking the economy by 5.2%. The word opportunity doesn’t spring to mind when hearing this, but an opportunity is exactly what our economy has, as I’ll explain.
A recent study published by the Harvard Business Review tracked 4,700 companies during the last three recessions. From these 4,700 companies, 9% emerged stronger. But how?
The thriver-survivors were able to delicately balance cuts to stay afloat today with investments to grow tomorrow. Money wasn’t saved by aggressively slashing headcount, but rather by improving operational efficiency.
COVD-19 has shocked businesses as a wake-up call. When our businesses aren’t functioning as well as they should, back to the drawing board we go. Here the cost of inefficiency slaps us in the face. According to research by IDC, inefficiency costs 20–30% of a business’s revenue.
To improve business efficiency, organizations need to automate operations where possible, co-collaborate between different business groups, document business processes for full transparency, and adopt a mindset for continuous business improvement.
Inefficiency can also exacerbate the environmental impacts of a business, e.g. overuse of environmentally damaging inputs.
For instance, a 2019 study looked at the environmental costs of energy inefficiencies in China’s construction industry. They concluded that removing technical inefficiencies would maintain value-added output but reduce carbon dioxide emissions.
By forcing businesses to re-evaluate their operations, COVID-19 addresses inefficiency issues to build better businesses in the long haul. Businesses that are able to survive an economic downturn, and better meet environmental needs (mitigate climate change, and biodiversity loss risks).
And so we can conclude that:
- COVID-19 has jolted businesses to action, to examine their operations and improve efficiencies, protecting themselves from market fluctuations.
- Bettering efficiency in business gives environmental benefits by reducing the use of environmentally damaging resources.
- As such, efficiency improvements build better businesses in the long-run, ones that’ll mitigate the impacts of an upcoming recession, climate change, and biodiversity loss risks.
Opportunity #2: Remote work
How did society respond to the COVID-19 pandemic?
The impact of COVID-19 on the way we work arguably represents the most drastic and rapid shift to the global workforce since WWII. In essence, COVID -19 has forced us into a remote work experiment.
And what are the results of this experiment so far?
A 2020 Airtasker survey assessed the daily habits of 1,004 workers. The report tracked the mouse movement/screen time of office-based workers vs remote workers concluding that those working remotely sought fewer distractions compared to those in the office. Remote employees took more breaks and devoted more time to work on tasks, meaning they were more productive.
In addition, working remotely saves costs associated with onsite business operations, including office space, equipment, and travel reimbursements. A Global Workplace Analytics report detailed savings of £8,077.24 per remote worker who telecommutes 50% of the time.
Lowering business expenses and improving productivity means organizations are better-placed to handle a recession. Further analysis by Chief Economist, Adam Ozimek, concluded that businesses plan to increase the extent of remote work into the future, accelerating the already upward trend.
Greenhouse gas emissions (GHG) were down by 17% at the beginning of lockdowns in early April 2020. And Europe is expected to emit 388.8 million tons less carbon dioxide than it did before COVID-19. The continuation of remote work will help maintain these reduced GHG emissions, by targeting work-related travel, which accounts for over one-third (37%) of total CO2 emissions from passenger transport in the UK.
To address climate change and extreme weather risk, global emissions need to be cut by 7.6% every year for the next decade. Remote work will help us achieve these targets.
And so we conclude that:
- COVID-19 has forced us into a global remote-work experiment, from which we have seen unexpected positive outcomes, both for business and for the environment.
- Improved employee productivity and lower business expenses mitigate recession risk.
- Remote work can help curb GHGs emissions, reducing the business impact on the environment.
Opportunity #3: Business redesign
When life returns to normal, higher consumption rates, pollution and deforestation are in danger of coming back with vengeance. For example, when China re-opened shops after the initial lockdown, Hermes stores recorded ~£2 million in sales for one Saturday.
Our new normal cannot reflect our previous business values, as that’s what got us in this mess in the first place.
Our businesses have a fundamental design problem. They’re driven by the dictum more-is-more, chasing economic growth without considering the true cost of operations. For instance, when we buy a product, we’re paying for the materials, labor plus a profit margin, but there is no acknowledgment of the social and environmental costs of the purchase.
As such, the metabolism of our economy is out of sync with what our planet can support.
Think about how we value businesses in the stock market. The Fortune 500 are deemed top because of their economic success — a purely human aspect to Business. But what if we altered how businesses were valued to include societal and environmental aspects?
For instance, the World Economic Forum’s global 100 rates businesses against revenue and key metrics of sustainability, such as carbon footprint and genre diversity. Top-rated organizations include Tesla and Swedish bank Skandinaviska Enskilda Banken AB. These businesses are redesigning their model to account for economic, social, and environmental facets of business, otherwise termed as the sustainable business model.
By disrupting the status quo, and decelerating economic gain, COVID-19 has granted us a window of opportunity, to rebuild our businesses with sustainability in mind. And why wouldn’t we?
COVID-19 has surely highlighted that we and our businesses are dependent on healthy and functioning natural systems. A sustainable business design works to maintain the health of these natural systems.
The realization of this fact is creating a shift in consumer perspective, with 61% of millennials willing to pay a higher price to support sustainable alternatives, and 2/3‘s of consumers across all generations prefer sustainable brands. In 2018, Unilever announced that its most sustainable brands grew 46% faster and delivered 70% of its turnover growth.
And so we conclude that:
- COVID-19 has highlighted the need for healthy and functioning natural systems.
- This disruption has given room to rebuild our businesses and adopt a sustainable model for our future.
Learning from COVID-19 to build better businesses for our future
Our business response to COVID-19 has driven business efficiency improvements, remote-work, and business redesign adopting a sustainable model. As such, we can take a brighter look at the COVID-19 pandemic, and grasp at the opportunities presented to help us mitigate the impacts of more severe future issues.