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06 May 2020

COVID-19 poses new challenges for corporate social responsibility efforts

Dr Gabriela Gutierrez-Huerter O, Lecturer in International Management

Rapid response required but quick solutions may pose new risks

Picture features a bottle of hand sanitiser and a medical mask
Corporates have re-engineered their processes to manufacture goods that are most in-demand during the pandemic, but these, and other CSR efforts have not always been risk-free.

In the aftermath of the 2008-2009 global recession corporations faced the very real question of whether they had to withdraw, maintain or even expand their socially responsible activities. Research showed that firms reduced their Corporate Social Responsibility (CSR) efforts during the global recession because resources allocated to ‘non-core business activities’ were difficult to justify. Indeed, one of the most accepted definitions of CSR assumes that businesses must behave in an economically responsible way as a baseline requirement in order to be able to support society’s other expectations. So, while mantras such as ‘people, planet, profit’ and ‘purpose ahead of profit’ made sense when times were good, CSR managers faced the difficult position of how to stick to those principles when the economy was felt to be on the verge of collapse.

Today, the global downturn due to COVID-19 pandemics is expected to be ‘way worse' than the global financial crisis a decade ago according to the International Monetary Fund. So aside from staying afloat, what are the things that those involved in CSR in large corporates need to consider?

Consider the risks in sweeping changes to business models

The scale of the pandemic has demanded pragmatic and quick responses from companies. Some used their production lines to manufacture products and equipment pivotal to the fight against COVID-19: from hand sanitiser to ventilatorsprotective face masks and hospital gowns. As companies venture into non-core areas to assist with the response to the virus outbreak, there are risks that they will lack the know-how to be fully effective. In a frantic effort to be socially responsible, some may complicate health authorities’ procurement efforts. In the UK, some of the new design proposals put forward in the ‘ventilator drive’ initiated early in the crisis to increase the stock of ventilators to the NHS turned out to be unworkable in the timescale required.  Likewise, the plan to roll out a full antibody testing programme was hampered by the low accuracy of the testing kits developed by nine companies.

Inequalities in supply chains

So far, we have seen stories about executives deferring their own compensation packages and CEOs cutting their own salaries so that the workforce can get partially paid. These gestures may be remembered by employees and repaid in loyalty and productivity once the crisis is over. However, some businesses have failed to consider their obligations to the small companies in their supply chain including those in developing countries, where furlough schemes supported by governments are non-existent and access to health care is precarious. Recent reports suggest that big brands in the retail industry are cutting back orders and refusing to cover costs of work already done. These issues may not  initially be so visible to consumers, but they will surface at a time when people might be willing and able to spend again.

Prioritizing the vulnerable

Beyond the health crisis, COVID-19 will bring a host of social issues with it, including food insecurity, unemployment, and challenges related to education, mental health and domestic violence. The needs of the vulnerable become an even more urgent priority. Large corporations have longstanding experience in philanthropy and should use their foundations to aid shelters, foodbanks, clinics and other non-profits in addressing the needs of the communities where they have operations. While an outpouring of charitable giving has already been reported, much of it is in-kind giving instead of cash which takes extensive resources to marshal effectively and will not address the difficulties that many non-profits face now that much of their regular fundraising activity is on hold. Companies that can afford cash donations should continue supporting these organisations. After this immediate crisis is done, CSR managers can refocus their efforts.

The global pandemic of COVID-19 has posed new challenges to the CSR agenda. Yet not every company is rising to the challenge. The decisions businesses and CSR managers make now are likely to be remembered by employees, clients and the general public for years to come. Questions will be asked by investors and businesses will be punished if they did not respond responsibly. 

Clearly, this is not a time to continue with ‘CSR as usual’, but in the rush to contribute, businesses should carefully assess whether their resources and capabilities make them suitable to respond to the emergency. Taking a step back and devising more thoughtful and innovative business models that help to contain and deal with the virus outbreak may yield better outcomes. It is vital that well positioned brands and businesses support small suppliers through the crisis; this will ensure their ability to resume production and address jointly potential bottlenecks. CSR managers also need to prioritise and redirect resources in the short and medium term to support vulnerable communities. All these actions will contribute to the speed of the eventual economic recovery. Once the public health emergency of COVID-19 starts to subside, CSR managers will need the support from these same stakeholders in order to jointly  tackle priorities such as the climate and biodiversity emergencies that have been temporarily put aside

In this story

Gabriela  Gutierrez-Huerter O

Lecturer in International Management