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11/05/2020

Corona crisis as an opportunity: changing the future positively together

Patrick Bungard
Prof. René Schmidpeter

Original source: https://www.greatplacetowork.at/blog/coronakrise-als-chance/

 

The current corona crisis is changing many things, the economy is strongly affected by it, and is now at a crossroads, asking: rethink or perish? How does the crisis become an opportunity? How do companies promote social responsibility and how do they act more sustainably?

Prof. Dr. René Schmidpeter, internationally renowned management strategist, speaker and founder of M3TRIX GmbH, as well as Patrick Bungard, co-founder and managing director of M3TRIX GmbH and lecturer in economics, will examine these questions in this guest article.

The authors show why companies with sustainability strategies are more resilient and successful, why the classic oppositional thinking between economic success and sustainable development (SDGs) must finally be overcome and provide company examples.

Rethinking or going under?
Globalisation as we know it is coming to a standstill and with it the way we do business. The current crisis shows that the old oppositional thinking is no longer up to date, because the current economic system, which is geared towards efficiency and the short-term pursuit of profit, is reaching its limits.

The global value chains that focus purely on cost reduction are extremely fragile and make it difficult, especially in times of crisis, to secure the supply of vital products. Companies are at a crossroads: rethinking or going under?

Structural adjustments not (yet) implemented
The vulnerability of this economic system has been exacerbated by the failure to make the necessary structural adjustments called for since the financial crisis. An unprecedented policy of low interest rates has prevented necessary economic changes and created significant disincentives to the allocation of resources and investment by enterprises.

As a result, non-viable companies and business models were kept artificially alive for too long. This has massively increased the fragility and interdependence of the overall system. As a result, the resilience of our economy is extremely low and the potential collateral damage in crises is extremely high.

Economic transformation required
Many thought leaders therefore see the transformation of our economy as being extremely accelerated by current events, but absolutely necessary for a positive future. Even before the crisis, the declaration by 181 American CEOs (including leading companies such as Apple, Amazon, General Motors and Walmart) fundamentally changed the way we view our companies and economic system.

Instead of the profit maximisation pursued for decades, the comprehensive creation of value for all those involved and a positive impact on society were demanded as the primary corporate goal. As early as autumn 2019, the leading managers of the world’s largest companies thus fundamentally questioned the previous business paradigm of “enterprise value/shareholder value”.

Sustainable companies are more resilient and successful
Current empirical studies show that companies that integrate key sustainability issues into their business model have significantly higher risk-adjusted returns. And the investors themselves also put a focus on sustainable investment.

For example, Larry Fink, CEO of one of BlackRock’s largest investment houses, announced that according to his current assessment, “within the next 5 years all investors will use the impact of a company on society to determine the value of the company.

And the issue of sustainability is also becoming increasingly important strategically for other stakeholders. Business management potential such as improving the employer brand, increasing the attractiveness of a company on the financial market or simply the enormous market potential of sustainable products has made its way into the executive floors and strategy departments of large companies and SMEs.

Political framework conditions are changing
And politics is also proactively driving and shaping a new economic framework, which will have a massive impact on all sectors and many markets.

Regulations such as the electric car quota in China, the introduction of car-free zones in city centres worldwide, the recently adopted EU resolutions on stricter emission limits for cars or developments in the European Union’s “Green Deal” will drive more and more companies towards more sustainability in their core business.

The European Union estimates the annual investment needed to achieve its political climate and energy goals at around 180 billion euros.

Current sustainability management falls short
The crisis in particular has shown that the environmental and sustainability management that has been standard practice in many companies to date is not enough to ensure economic success.

In view of the current global social but also economic challenges, it is time to consistently think about the present from the future: i.e. companies must realign their business models in the crisis. In such a way that the negative effects are minimised and at the same time the positive effects for society are maximised.

It is about the comprehensive integration of sustainability in all corporate decisions - turning crisis into opportunity: to reshape the economy through a new management paradigm.

New mindset: sustainable management
For this to succeed, a new mindset and a new understanding of economic sustainability are needed.

The crisis shows impressively that the often propagated oppositional thinking between profit and social interests (in this case - protection of health and life) as well as the unconditional promotion of old structures have led us into this difficult situation.

Therefore, more than ever, it is necessary to finally overcome the classic trade-off between economic success and sustainable development (SDGs).

Successful entrepreneurs are already demonstrating this and are currently developing integrated management approaches that measure and control the effects of the company with the aim of creating equal value for all stakeholders along the entire value chain.

Case study 1: The Porsche Sustainability Index (PNI)

With the development of the Porsche Sustainability Index (PNI), the automotive group is positioning itself to base its business activities in future on a clear and individual understanding of sustainability and to resolve existing contradictions between sustainable business models and the creation of economic added value and growth.

The aim is not only to avoid negative effects on society, but also to place a clear focus on creating positive effects.

The PNI pursues the basic idea of measuring and managing sustainability holistically, creating an own understanding of sustainability, integrating external sustainability standards and decoupling value creation from negative environmental impacts.

Practical example 2: Breeze Technology - Artificial Intelligence Against Air Pollution

In addition, there are more and more sustainable start-ups. This new generation of “founders” is characterised primarily by the fact that the entire company is thought of in terms of its social impact. In other words, the purpose or the sense and purpose for society.

One example of this generation of new companies is the start-up Breeze Technologies, which has built a business model around the topic of air pollution.

Using their own low-cost air quality sensors, they collect pollution data, create a hyperlocal map of air quality and compare it with a catalogue of more than 3,500 air pollution control actions. The potential effects on humans are calculated automatically.

Artificial intelligence then recommends the most efficient interventions for local challenges, which can increase the effectiveness of air quality plans tenfold.

CONCLUSION: This is not a new start to the old, but a departure into a new era

The time has come to change the future positively together. For, in addition to the Corona crisis, climate change and the loss of biodiversity are epochal challenges for humanity, which we can solve with a new economic thinking.

It is essential to join forces to build sustainable economic structures and thus use the current crisis for the forthcoming economic transformation. After all, many positive innovations are already emerging from the crisis, and the management paradigm of “sustainable management” will also emerge from it. 

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