Speakers at a recent panel discussion on sustainability said that, far from derailing efforts, the pandemic has driven home the importance of environmental, social and governance (ESG) factors. The July 23 panel, part of "Addressing Investor Calls for ESG Reporting and Assurance," was organized by the Sustainability Accounting Standards Board (SASB), the AICPA, and the World Business Council for Sustainable Development.

Maura Hodge, who leads KPMG's ESG and Sustainability Assurance Practice, noted that the pandemic era has meant that companies are increasingly concerned with questions of "how do we tell our story," and, as such, it has seen increased, not decreased, interest in sustainability frameworks and standards. While this has not yet translated into policy disclosures with quantitative analysis, she noted that interest is a lagging indicator, and that such interest is usually followed by actions down the road because companies begin actively thinking about how they want to change in the future.

"I think it's very clear today that 'do nothing' is no longer an option, that we need to think about this, and it has to be built into business strategy one way or another," she said.

Another panelist, Alisha Real, senior sustainability manager at grocery wholesaler UNFI, concurred, pointing in particular to how the pandemic has accelerated her company's thinking about human capital issues. COVID-19, she said, "was a bit of a fire drill" on how best to adapt its programs to prioritize the health and safety of both its workers and the community as a whole. More generally, she reported that over the past few months, "our leaders and certainly the investor community are seeing the importance of ESG now more than ever," as evidenced through numerous internal conversations that she said have been happening more frequently than before.

She said the ESG team has been heavily involved in the company's heath and safety plan, and has taken the lead on community outreach, such as by establishing relationships with charities to donate and deliver food. She also said that, prior to the pandemic, the company had a number of initiatives regarding diversity and inclusion, and these efforts "have been accelerated" in response to the killing of George Floyd and the resultant protests.

"I would say, absolutely, the case for ESG broadly and at UNIF has been strengthened," she said.

The third panelist, Ray Cameron, the head of investment stewardship at Blackrock Inc., said that his firm has come to view the pandemic as "a test of long-term thinking." The most successful companies, he said, are concerned not just with how they will weather these trying times, but with what they will look like, and how they will be different in the aftermath. He also noted that his company is looking hard at how the companies it invests in treats their employees at this time: Did they make changes for their health and safety? Did they support furloughed workers? Did they just laid everyone off en masse? Cameron believes the answers can be telling in terms of how the company overall does or does not value its people. 

"These decisions should not be made in a short-term vacuum," he said.

Cameron said he was encouraged by many companies' response to the pandemic, as it has served as a very interesting example of companies recognizing that there is a social contract with their employees and their suppliers beyond the legal one. This is important in light of Blackrock's approach towards ESG issues, which Cameron said emphasizes how the principles have been integrated into actual company thinking rather than just writing a report.

"It should be referenced not only in your sustainability report but should flow into decisions by other metrics as well," he said.

He added that he believes that the performance of ESG-focused companies in the last quarter vindicate the view that companies are better if they focus on being sustainable. These firms outperformed their peers, even when much of the economy has been crumbling around them. While he acknowledged commentary saying that this was largely because they lacked exposure to the energy sector, Cameron believes it came down to how their governance led to better decision-making.

"It was really more of a decision-making model we thought was evidence of the G [in ESG], and companies that embraced ESG in their decision-making tended to fare better in the first quarter," he said.