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Communications during Covid-19 and the effect on reputation and ESG credentials

As Britain digests daily press conferences from the Prime Minister about Covid-19, the words and actions of business leaders are starting to come under increased scrutiny.

As small businesses across the country seek banking loans to stay afloat and employees face being furloughed or even made redundant – what leaders do today and how they communicate will have a long-term impact on reputations and wider ESG credentials.

What does best practice communications look like in times such as this? Companies should:

(I) Communicate early and often with key stakeholders (employees, suppliers, investors and regulators) – even if accurate forecasts are difficult to make. Several listed companies have already suspended earnings guidance in the short-term;

(ii) Be fully transparent to maintain credibility; and

(iii) Communicate with empathy – by putting themselves in stakeholders’ shoes and understanding what issues are important to them. Companies will not always get it right, but transparency is much better than silence.

In recent weeks we’ve seen some companies get it right and some get it very wrong. In each case, companies and individuals face the prospect of stakeholders with long memories. There will be consequences – positive and negative – for reputation.

Two founders in particular have struck the wrong tone. Tim Martin, Chairman of JD Wetherspoon told staff they would not be paid until government rescue money materialised. Martin later reneged on that. Mike Ashley of Sports Direct issued a public apology after his initial attempt to keep stores open, despite the government mandated lockdown. Subsequently, he said this was “ill judged and poorly timed.”

Words only go some of the way though. The spirit of a company’s communications has to be borne out by its actions. Holding companies more firmly to account has contributed to the rise of ESG – i.e. hard metrics to measure a company’s actions rather than its more philosophically-led precedent – CSR.

Refreshingly though, Covid-19 has brought out some of the best in UK business.

FTSE250 company, Unite Students – the UK’s largest owner of student accommodation – relieved students who opted to go home for the rest of the academic year, of their rent. Unite has also allowed international students unable to travel home to stay in their rooms over the summer, at no extra charge. This will cost Unite up to £125m in lost cashflow – money the business will recover by cancelling its dividend to shareholders (a move adopted by many public companies) and other reduced costs. Chairman, Phil White, correctly said, “it’s about doing the right thing”. In doing this, Unite CEO Richard Smith, has demonstrated a commitment to look beyond Covid-19, and maintain positive relations with universities.

One non-listed UK company, The Delivery Group (‘TDG’) is using its spare transport capacity to position specialist beds for NHS and is assisting Morrisons to transport essential food to supermarkets. TDG have also started bulk movements of Personal Protective Equipment from suppliers through courier company Diamond Logistics’ facilities around the country, who will provide final mile delivery into GP Surgeries and healthcare locations. Diamond have also been working 24/7 on transporting testing kits from healthcare facilities to laboratories on a same-day courier basis and are setting up operations to roll out the reverse logistics for home testing kits. Chairman of TDG and Diamond Logistics, Paul Carvell said “In these difficult and unprecedented times we have to collaborate to create supply chains that are fit for purpose and can be delivered cost effectively.”

The ‘E’ and ‘G’ have dominated ESG discussions to date. Investors identify most readily with the ‘G’ and most people can easily identify with the ‘E’. However, best practice on the ‘S’ (Social) has been more opaque, but current circumstances will elevate its importance.

In a recent report Morgan Stanley noted:

“With the disruption caused by the Covid-19 crisis, ‘social’ considerations are back at the forefront of ESG,” adding that “Corporate decisions affecting workers and communities for investors have become increasingly important as a wider array of investors have begun looking at companies through an ESG lens.”

Similarly, a recent research report from Barclays opined that Covid-19 will only accelerate Sustainability concerns. It said:

“ESG implementation may be delayed, [but] it is unlikely to be abandoned in the long run — and it may even accelerate in a post-Covid-19 world. Societal and demographic shifts mean asset owners are demanding ESG integration.”

As we all come to terms with the new normal during Covid-19, companies looking to maintain stakeholder relations and improve ESG metrics cannot afford to sit on their hands.

Levels of scrutiny are higher than ever, and companies who don’t communicate or act appropriately, may suffer a reputational wound that might not heal quickly.