Business with purpose in the era of COVID-19

The coronavirus pandemic has delivered a profound shock to the world economy. IIED's Laura Kelly argues that businesses must commit to more responsible and inclusive practices as part of their efforts to build recovery.

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Insight by 
Laura Kelly
Laura Kelly is director of IIED's Shaping Sustainable Markets research group
18 May 2020
Two women sewing face masks

Women sewing facemasks in an Algerian factory. Millions of garment workers in developing countries are losing their jobs as fashion brands cancel orders (Photo: International Labour Organisation via FlickrCC BY-NC-ND 2.0)

Globally the measures introduced to tackle COVID-19 have focused on reducing fatalities and relieving pressure on health services, with significant economic costs. But it is increasingly clear the pandemic might well cost more in terms of loss of livelihoods, especially in developing countries.

The International Labour Organization estimates relative poverty will increase by more than 50% (PDF) in lower-middle-income economies due to job losses and cuts to incomes.

The poorest workers, particularly women, are among those most at risk. Especially those employed at the end of global value chains producing food and clothing in countries such as Bangladesh and Kenya. They are being hit in the short term as demand plummets and companies cancel orders.

Companies are responding in different ways, even within the same sector. Clothing retailer H&M, for example, has switched its orders for garments to facemasks, while its competitor Arcadia, the owner of Topshop, has cancelled future orders with garment factories across Asia.

Whether companies follow the H&M or Arcadia approach goes to the heart of the evolving ‘business with purpose’ agenda. Over the past 18 months the debate about how the private sector can deliver social and environmental benefits such as cutting carbon emissions and contributing to the Sustainable Development Goals (SDGs), while achieving economic returns, has increased.

There has been scepticism about the sincerity of companies’ commitments to achieve net zero carbon emissions or support women’s economic empowerment, with accusations that these promises are ‘green’ or ‘purpose’ wash. The case has also been made that recovering from the crisis will require business to focus entirely on rebuilding profits and that the goals of responsible and inclusive business are a costly distraction.

They are anything but a distraction. They are at the heart of action businesses need to take. The sheer scale and global impact of the COVID crisis could be the tipping point in moving responsible and inclusive business practices fully into the mainstream.

Building back better

Companies of all sizes, across all countries and most sectors are facing a huge recovery effort. The UN’s ‘build back better’ approach has been widely used in recovery and rehabilitation after natural and humanitarian disasters to strengthen countries’ and communities’ resilience to future disasters. Applying it to business in COVID recovery has huge potential to help them achieve the SDGs and the net zero commitments needed to keep the world below a 1.5°C temperature rise.

Stimulus packages across the developed and developing world are an opportunity to kickstart this move and work with the private sector to support decent work and reduce destructive emissions.

Many leading companies, including IKEA and Danone, are making the case for this. Recently, more than 180 business leaders, politicians, trade unions and civil society organisations signed an open letter urging a transition to a climate-neutral economy, protecting biodiversity and transforming agri-food systems to rapidly deliver jobs, growth and contribute to building more resilient societies.

Without business leadership and collaboration... the SDGs stand little chance of being met, and the development gains of the past 20 years in the poorest countries will be wiped out

Companies need to take this opportunity to reimagine their operations to improve social impacts, including by paying living wages, respecting workers’ rights, and creating jobs and products that will benefit the poorest women and men.

There is also potential for innovation. Digital technology can play a huge role, from expanding the use of mobile money such as M-PESA to digital platforms that enable poorer consumers to purchase essential health supplies online. 

International donors need to ensure their development programmes help countries cope with the pandemic and provide longer-term support that will benefit communities and the environment. The UK Department for International Development’s new COVID Vulnerable Supply Chains Fund, for example, will support businesses and civil society partners to address challenges that threaten the resilience of supply chains by helping to diversify them and rapidly and ethically introduce new workers and suppliers.

Without business leadership and collaboration across sectors on this agenda as part of response and recovery, the SDGs stand little chance of being met, and the development gains of the past 20 years in the poorest countries will be wiped out. A sobering thought even in the era of COVD-19.

This blog was originally posted on the Thomson Reuters Foundation News website.