What lessons were learned from the Covid-19 pandemic, and what do they mean for ESG?


When considering the lessons from Covid, beware of the tyranny of today. So soon, we forget, but at the time, it feels forever. Even now, those moments during lockdowns when it felt like an eternity of solitude seem like distant memories.

Nothing lasts forever, and economies move in cycles. We cling to a particular stage in a cycle and talk about it like it is a new normal, and then the cycle does a half rotation, and the new normal is the opposite.

Did Covid leave permanent marks? Or were the marks like flesh sounds — healed over within a few years, not even leaving scars?

Without a doubt, Covid felt like everything for a while, but how much of that everything is now nothing?

And how does all this Covid clutter affect ESG? What lessons can we learn from Covid that will still have resonance five or ten years from now?

The ESG cycle

Cycles are like the seasons. The oil price shoots, and just at that moment, when people talk about it being permanently high, it crashes. There is an adage in investment circles. ‘Buy when all but the most bullish of investors have turned bearish and sell when all but the most bearish of investors have turned bullish.’

During the peak of Covid chatter, it felt like ESG was the supreme victor. “At last,” we were told, “the penny has dropped; business must deliver more than a mad dash for short-term profits leaving happiness and sustainability on the back-burner.” Instead, people said they wanted more — they wanted more purpose, more meaning, and they wanted more ‘living’. 

Then Covid became yesterday’s news —even though it is still with us, has forced more lockdowns in China and could very well mutate into something more serious — and instead we worried about the cost of living and soaring energy bills and an impending surge in food prices. The lessons of Covid felt so very 2020 and 2021.

During the peak of Covid (peak in terms of media and social media engagement, not actual cases), ESG boomed, and so for that matter, did tech stocks. We were told that companies with good ESG scores saw superior stock market performance —although that old adage about how ‘correlation does not necessarily mean causation’ sometimes gets forgotten. (Maybe booming companies could afford to invest more in ESG.)

But what Covid did is accelerate trends already in place and it may yet also leave a permanent legacy. 

You could argue that attitude changes forged in World War 2 created institutions that are still with us today — in the UK, a legacy of such change is the NHS.

The appetite for change nurtured by Covid and related lockdowns may leave a permanent legacy.

Consider this:

Before and after Covid

  • Remote/hybrid working, supported by smartphones, laptops, wireless internet access and a host of software tools, was becoming more popular. Many thought it was on a one-way course to ever greater popularity, but it was advancing slowly. The lesson we learned from Covid is that remote/hybrid working has both benefits and problems. ESG tries to solve the problems with an emphasis on S. Social policy needs to support the lonely remote working office worker, the team spirit and loyalty, company culture, mental health and find ways to ensure productivity isn’t a casualty of working from home. Governance needs to support a dispersed workforce, working from as many locations as there are people. We might have learned those lessons eventually, but Covid helped ensure we learned them more quickly.
  • Before Covid, they said that the millennial generation wanted more from work —a sense of purpose. Well, the loneliness of lockdowns forced many of us to re-evaluate values. So we returned to work reluctant to do things the old way. That new way of thinking was emerging before Covid; the pandemic made it more relevant.
  • Before Covid, a great demographic shift was occurring — the baby boomers were retiring. The retirement of the most numerous generation in history, which would lead to the highest proportion of retired to working population ever, was always going to be an issue. Post-Covid, (or post-peak Covid-discourse), the retirement of the baby boomers is in full swing. The Great Resignation may be down to Covid, but the great retirement was always going to happen. The great resignation led to a focus on ESG to make an organisation more appealing to choosy would-be employees. The retirement of the baby boomers will set in stone the lessons of the Covid-related great resignation.
  • Covid was the great destroyer of human hubris. Before Covid, humanity was untouchable, smug in its self-belief and victory over nature. The Covid virus reminded us that we are still like children when trying to understand disease and its causes. This attitude shift had implications for our understanding of climate change — creating a greater sense of how the lifestyle we take for granted can be disrupted. The lesson of Covid is that nature can disrupt us out of our complacency. But then we began to forget, and then energy prices soared. Although net-zero represents the quickest and most cost-effective, and most stable route to energy security, the tyranny of today threatened to reverse all that. Some saw soaring energy prices as evidence that ESG had failed, and we needed to burn more coal, oil or gas. But then heat waves swept across the northern hemisphere, and the lesson of Covid about our vulnerability in the face of nature was re-learned. And nothing sticks more than a lesson learned twice (except a lesson learned three times.)
  • The Covid crisis disrupted supply chains, and then the Ukraine crisis disrupted again. There was a lesson from both Covid and the Ukraine crisis that takes us right into the supply chain. Organisations need a better understanding of the supply chain and all the moving parts that make it up. They need to hedge against country risk, geographical risk and component concentration risk. The supply chain needs to be subjected to good governance; sustainability needs to be weaved into the supply chain because sustainability is more robust.

Risk, black swans and predicting things that are unpredictable

No one knows the future, but we do at least know the future is not predictable. Organisations trying to make their way in the world must plan, which by definition means they need to think about the future. But as the future is not predictable we must consider ‘what ifs’, ‘maybes’, and the ‘great perhaps’. This is where risk enters the equation. One particular strategy may create one type of risk. Another strategy is a different type of risk. Covid was possibly the most significant Black Swan event in a lifetime and emphasised the risks implicit in an uncertain future. Preparing for Covid was not possible as no one could have predicted it, but the importance of risk assessment and at least trying to prepare for unknown unknowns became a priority.

ESG is also about risk — a risk strategy must at least consider ESG.

That was another lesson from Covid.