8 April 2020 / COVID-19
The COVID-19 pandemic has brought into sharp relief the interconnectedness of business, economies and societies, and the vulnerabilities created by prevailing policies and practices that have left individuals and companies ill-prepared to manage the adverse effects of global emergencies.
In the wake of the unprecedented global economic shut down, companies are weighing whether to honour or cancel contracts, cut off or maintain suppliers, or furlough or retain workers. All of these decisions must be made quickly, yet these decisions will profoundly impact the lives and health of millions of people across the world.
Legally and commercially expedient approaches that focus on narrow economic gains or loss avoidance are insufficient. Not only do these approaches risk exacerbating the harms of the pandemic—whose trajectory will affect everyone—they will also impact these companies’ future sustainability. The world is watching; investors, customers and employees are taking note of the social implications of the decisions made, and there may well be a reckoning on the other side of this crisis.
Newspapers globally are reporting daily on how companies are behaving during the crisis. Investors have also made it known they are watching. One major investment group published a joint statement expressing their expectation that companies focus on the “welfare of their stakeholders, including their employees, suppliers, customers and the communities in which they operate.”
Companies that disregard the impacts on their stakeholders are likely to feel the backlash. Labour movements around the world are urging workers to speak out and take action. As this article is being published, Amazon and Instacart workers are striking across the US. And when Adidas announced it would skip rental payments for retail outlets that are closed because of the lockdown, the group was strongly criticised by politicians, celebrities and columnists and there were appeals to boycott the company’s products. While Adidas’ move may have been legal, it was not consistent with the spirit of the rescue package that the German government hurriedly enacted to help individuals and businesses fighting for financial survival. Social media, meanwhile, has been furiously circulating reports of companies that have behaved admirably—and those that have not.
Companies that have embraced a stakeholder approach are better placed during the crisis, according to the founder of the World Economic Forum – as they have more robust business models and tend to have stronger alliances with stakeholders including governments and the public. These companies also appear to be faring better in the markets now.
The ramifications of the business decisions made now will be significant, and there is guidance that companies can rely on to help ensure their response to COVID-19 is responsible. The UN Guiding Principles on Business and Human Rights (UNGPs)—the only authoritative global standard on the corporate responsibility to respect human rights—can be used to help companies design their COVID-19 response. The following four steps, derived from the UNGPs, can be useful.
Four steps for companies to responsibly navigate the COVID-19 pandemic:
1. Focus efforts on ensuring that business decisions do not exacerbate the health or economic harms from the pandemic. Perhaps never before have the cumulative impacts on people from individual company actions been so clear and immediate. Strategies for limiting losses cannot be divorced from their impacts on individuals and society. The focus now should be on ensuring that COVID-19 responses avoid exacerbating the damage from the economic slowdown on workers, suppliers, customers and others. In addition, and where possible, companies should seek to ameliorate the expected harms. Legal and commercial expediency should not supersede these core concerns. The skills and experience of human rights teams will be key to building a company’s COVID-19 response.
2. Take swift steps to identify the impacts on people of various decisions. Every decision will have acute human rights impacts because we are dealing with a global pandemic. Given the widespread nature of this crisis, the ability of people to weather those impacts will be severely restricted. For example, where companies lay people off, rapid re-employment may be impossible now. Companies will also undoubtedly contribute to wider cumulative impacts as all companies worldwide will be similarly looking to manage the crisis. If companies cancel orders from suppliers, they will likely be among many who do the same, putting cumulative strain on suppliers. While a full-fledged human rights impact assessment for every decision will not be possible now, companies should make every possible effort to understand the direct and indirect impacts of their decisions. Even continuing to work has its risks. If companies continue their orders, they should ensure they are not incentivising work in unsafe conditions—or more egregious abuses such as forced labour. Companies should take measures to identify their most exposed suppliers as well as other vulnerabilities in their workforce and supply chains. For example, confinement measures combined with an obligation to work from home might increase the risk of domestic violence and mental health risks for workers.
3. Design a mitigation plan for decisions made or changes to activities. Mitigating the impacts of decisions made due to the crisis is therefore fundamentally important now. Some companies have already taken useful steps to mitigate the impacts of their business slowdowns, such as making accelerated payments on outstanding invoices, advanced payments to suppliers or offering financial support to suppliers where work or orders have been halted. Some companies who have continued production, for example in the food and grocery store industries, are also rewarding workers with bonuses or providing support for childcare for workers whose children are out of school. Mitigation efforts should be scaled to the size of the company and scope of its activities. For example, some large companies are supporting small and medium-size suppliers or distributors to mitigate impacts across the value chain.
4. Work collaboratively. Collaboration pools expertise, mobilises resources and economises costs. When companies move to craft mitigation efforts, they can look to industry, sectoral, multi-stakeholder and other ad hoc collaborations. Some companies, for example, are working collaboratively to help place displaced workers. Others are collaborating with suppliers to ensure safety equipment and training are available. Perhaps never before has collaboration, empathy, mutual support and assistance—even for those far down the supply chain—been more important to ensuring lives are saved and the impacts on all are ultimately mitigated. Where companies have human rights teams, they will be well equipped to help forge collaborations with peers, customers, suppliers, governments and civil society.
The extent of the harm that will come from the health and economic crisis that the COVID-19 pandemic brings is still malleable and will be determined by our actions. Companies’ role in this will be critical. At this early moment in time, when companies are reeling from the initial shocks, it is imperative that they step back and view the crisis—and their actions—through the lens of shared impacts and responsibilities. For this, the UNGPs offers a useful framework for navigating decisions now.