Beyond Recovery: Building Back Better

Employability

The pandemic has highlighted, and deepened, systemic inequalities and fault-lines in society. It has also revealed flaws in many organisations’ strategies and supply chains. There is a window of opportunity to make fundamental improvements – in companies and in society at large. Building a better company than what was there before.

 

The Intergovernmental Panel on Climate Change (IPCC) report “is a code red for humanity,” said the United Nations Secretary-General António Guterres on 9 August, shortly after its release. A few weeks later, addressing the UN, he warned that current wars, climate change and the pandemic represent “the greatest cascade of crises in our lifetimes.” 

In the Covid-19 repercussions of slashed revenues, losses, and a prolonged recession, businesses worldwide have received their own, earlier code red. Whilst the Organisation for Economic Cooperation and Development (OECD) is upbeat about the world’s overall in-progress recovery, updating its interim forecast to 5.7% global GDP growth for 2021 and 4.5% for 2022, it notes that the recovery is proving uneven. Gloomily, South Africa’s forecasts are lower, and job losses of 3m directly attributable to the pandemic put our current unemployment number at 7.8 million, according to the most recent Quarterly Labour Force Survey. Adding in the nearly four million ‘discouraged’ job seekers, a more realistic unemployment figure is nearly 12 million, or 44.4%, according to the expanded definition. As a leading political observer noted, South Africa’s socio-economic reality is dire.

For South Africa – and the world, as Guterres points out so powerfully – returning to where we were will not work.

What was once a catchy slogan is now a cry of necessity: “Build back better”.
US President Bill Clinton first uttered the phrase in 2011 in relation to plans to assist Haiti after the impoverished island nation had been hit by a series of natural disasters. The UN officially adopted the mantra at its 2015 Sendai Conference on Disaster Risk Reduction as a strategic driver of improved and holistic resilience. But what does it mean in today’s context?

Building back better’s basic premise is that the way things were at the cusp of the Covid outbreak did not represent inclusive wellbeing for a significant proportion of the world’s population. Too many people had been left behind in the waves of progress over the last century. 

Building from this premise, it seeks to address this situation – and other threats, not least the climate crisis – by actively creating a new, “next normal”. 

In a business context, it is also the realisation that economic activities have contributed to these fault-lines and fissures, or that corporations have not done enough to alleviate them. In particular, during the decades after the fall of the Berlin Wall in 1989 the concept of shareholder capitalism reigned supreme, aligned to the apparent triumph of Western liberal democracy and “the end of history,” as political scientist and economist Francis Fukuyama proclaimed. But, as we’ve subsequently come to see, humanity has far from reached a pinnacle in our development.  

The way forward will vary by nation, and across sectors and company-specific conditions. But build back better objectives are broadly outlined according to three agendas: re-igniting growth, restructuring activities towards greater equity and inclusivity, and remodelling business in a more sustainable manner – environmentally, socially, and economically. 

If this is the mission for building back better, what, in this window of opportunity, can realistically be done by business leaders – even of smaller enterprises?

It starts within your organisation.
Companies do need to shore up their positions, strengthen their supply networks, and create better – and more productive – workplaces. Resilience requires doing deep-dive thinking about the business model and business planning, securing the company’s access to capital, and updating market knowledge. 

This could be viewed as diversification planning: consider, for example, different product offerings; B2B and B2C channels; internal innovation and collaborative external partnerships. Essentially, the new reality requires a continuous form of business planning as a form of strategic resilience.   

Technology strategies, too, are vital: accelerating the organisation’s progress towards digital maturity is an important aspect of all-round resilience. The necessity of remote work pushed many organisations to rapidly adopt cloud platforms and communications applications. But familiarisation with Zoom doesn’t make the workforce digitally enabled. True upskilling means a transformation towards a digital culture, implying digital thinking and innovation, diffusing digital skills and resources throughout the enterprise, and breaking down organisational silos to capitalise upon the connection and collaboration benefits of digital.

People are paramount.
Ultimately, building back better starts and ends with people. C-Suite leaders should consider multiple talent-related issues within the companies they manage. Some may already have been actioned in Covid’s immediate aftermath, but they warrant reassessment. Inasmuch as they demonstrate a people-first philosophy towards recovery and improvement, these are suggested priorities:

Rehumanising work should be very close to the top of the agenda. A supportive culture, one that encourages co-creation and nurtures trust and transparency, will pay dividends. It may also reduce, or make irrelevant, the dilemmas surrounding remote, co-located or hybrid workforce arrangements.

Revisit and update employee wellness initiatives and policies. The world of work remains pressurised, with business conditions volatile and uncertain. So, rather than scaling back or reducing their emphasis, expand these programs. For the business to thrive, it is a prerequisite that your workforce is able to cope – and thrive, themselves.  

Foster diversity and inclusion. This is a proven competitive advantage – but there are caveats. Diversity should be implemented with critical mass, such as a minimum 30% composition of women on the board. There should be a holistic approach to embed representation and participation, from recruitment through to mentoring and career planning, across all levels of the company. Don’t underestimate underlying issues: consider an audit to probe for systemic barriers to inclusivity and unconscious biases blocking diversity.

Business has a broader role – and responsibility.
Beyond internal strategies, policies, and their link to operations, companies need to step up their wider societal contributions. The shift from shareholder to stakeholder capitalism is under way, but is this happening fast enough? Profit, as reported in accounting periods, is still seen as the key, if not the only, measure of success. This is unhelpful, because it does not capture the range of crucial, ongoing and consistent markers of value, such as contented customers, a motivated talent pool, secure raw material sources, progress towards net-zero carbon emissions in the production process and supply chain. 

The triple bottom line (TBL) concept, as a formal accounting framework, was first mooted a quarter-century ago by business journalist Jon Elkington. Proposing a social equity (people) line, an environmental (planet) measure, and an economic (profit) deliverable, the principle calls for fuller cost accounting and stakeholder impact reporting. 

The critiques, refinements and nuances of TBL are complex. ‘People’, for instance, covers employee welfare internally within the company, fair trade principles across the supply chain, and contributions to community development projects. Environmental measures embrace the circular economy – land ownership and usage, resource inputs, waste management – and climate mitigation initiatives.

At stake is sustainability. In the next normal, this should permeate every major corporate decision.
Sustainability actions can be categorised into direct and indirect impacts. Direct impacts include the organisation’s contribution to measured GDP and employment; the health and wellbeing of its workforce in aspects such as personal and career development, and employee benefits; how it enacts principles of diversity and inclusion, encompassing board and executive leadership representation, pay parity, and empowerment; and corporate social development spending and initiatives. 

Indirect impacts are harder to measure, and may even be difficult to pinpoint, because they reside throughout the company’s value chain and ripple beyond it. Contracting minority-owned small- or micro-enterprises for supply components, for example, may contribute to local community upliftment and spin-off expansion of complementary services. And here’s a statistic as to the real benefits flowing from, and attributable to, social spending: the World Health Organization calculates that every $1 invested in water and sanitation projects generates $4.30 in economic returns. Better access to resources equates to more economic participation, translating to upliftment, spending power, and productivity. It’s a simple yet compelling business case for companies to contribute to the betterment of communities.  

More obliquely, the endorsement of human rights and social justice initiatives may have a barely notable immediate impact – but a profound longer-term one.

Sometimes these are moral imperatives. Don’t hesitate: they also deliver material gains.
There is a growing body of evidence that a long-term view – implicit in TBL principals and stakeholder capitalism – delivers better results. A study by the McKinsey Global Institute, assessing the 15-year performance of 615 large- and mid-cap US listed companies between 2001–15, concluded that “those with a long-term view outperformed the rest in earnings, revenue, investment, and job growth”.

There’s comfort in a gradual return to what we perceive as normal.
Experience from previous recessions shows that most organisations do not fundamentally change, nor do the structures and core economic models adopted by national and international authorities. In other words, very recent economic history shows that pre-Covid looked very much like 2007, despite a near two-year long Great Recession spanning 2008-2009.

However, this time around, it’s fair to say that businesses worldwide, large and small, have been shocked. Will there be an enduring response this time? Shall we simply rebuild? Or shall we make our foundations stronger? In answering these questions we could heed the words of Christopher Alexander, architect, design theorist and emeritus professor at the University of California, Berkeley: “When you build a thing you cannot merely build that thing in isolation, but must repair the world around it, so that the larger world at that place becomes more coherent and more whole.”  

We should also consider our descendants. In a letter to future generations, sustainability activist Rebecca Freitag poses the question, “How I will explain this historic, Covid-induced opportunity for a new beginning to my children and grandchildren – and how it finally turned out?” 

How it turns out is up to us. We can all contribute to building back better. 

 

Interested in taking a more active role in building back better? At DigitalCampus we offer a Governance and Ethics short course, designed to assist companies generate and manage sustainable value creation. The questions below may also help to kickstart initiatives in building back better in your organisation:  

The King 4 corporate governance committee, via the Institute of Directors in South Africa, has provided a Guidance Paper as a lens through which business could respond to Covid-related challenges. Have you read its ‘Strategy and Recovery’ section, which may be an invaluable framework for the rebuild ahead?


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‘What matters most? Five priorities for CEOs in the next normal’, p86, McKinsey & Company, September 2021

Personal perspectives count. You don’t need to be an impact investment fund manager to think like one. Consider the future next normal you would like to see. From that perspective, how could you influence or direct your organisation’s activities and resources more appropriately?

Are you familiar with the United Nations’ Sustainable Development Goals (SDGs)? The document comprehensively addresses 17 key global challenges, and represents a roadmap towards a better future, for all. (Even before the pandemic, we were not on track to achieve them by 2030.) 

 

 

Written By:

Gavin Olivier

Senior Partner and Managing Executive

DigitalCampus

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