Russia’s invasion of Ukraine has sent shockwaves through a broad spectrum of industries and could create hurdles for emissions targets as companies cope with disruption. However, GlobalData found that companies that can balance environmental, social, and corporate governance (ESG), COVID-19, and geopolitical priorities instead of episodically focusing on one form of disruption stand to gain the most.
According to a recent GlobalData survey, 67% of respondents said COVID-19 had been a catalyst for an increased focus on ESG. However, the International Energy Agency (IEA) recently reported that 2021 saw the highest absolute increase in CO2 emissions ever recorded. ESG, once again, slipping down the priority list due to the ongoing Ukrainian crisis remains a significant issue.
Despite the narrative of a green recovery, the latest IEA report reveals a bleak picture. In 2021, global energy-related carbon emissions increased by 6%, reaching 36.3 billion tonnes. This is due to many parts of the world pursuing a dirty recovery, using fossil fuels to power a COVID-19 rebound. As the Ukrainian crisis looms large, it is clear a healthier response to perturbation is required.
“While many lessons can be learned from COVID-19, the pandemic revealed our struggle as a society to cope with more than one emergency,” said Francesca Gregory, associate analyst at GlobalData. “Companies are encountering the same problem. In GlobalData’s recent thematic report, ESG Strategy Survey 2021, COVID-19 was singled out as the most disruptive threat, with 69% of respondents saying it would have a high impact on their businesses over the next 12 months.”
However, the current moment also represents an opportunity for companies to demonstrate their ability to respond to change. Companies, such as Apple, Microsoft, Nike, Visa, Mastercard, and McDonald’s, have all looked within their operations and supply chains to assess their contribution and react accordingly.
“Companies that can detach from episodically focusing on one disruptive threat and instead balance ESG, geopolitics, and pandemic priorities will be the most resilient,” Gregory said. “Flexibility is no longer just nice to have; it will be a necessity for withstanding the current uncertainty. A combination of geopolitical tensions, rising ESG scrutiny, and the potential for viral resurgences will demand a rapid reconfiguration of supply chains. Companies that fail to respond to change will face disruption in their operation as well as a potential backlash from consumers.”