The global spread of COVID-19 is deeply affecting each of us. It’s taking a devastating toll on lives, businesses and communities. It’s upending how companies operate and is shattering supply chains around the world. Yet, even during this time of upheaval, there are companies mobilizing in unprecedented ways to protect lives and to defeat the disease. We are witnessing inspiring leadership, with so many companies – large and small – stepping up to help their communities and pivoting their businesses to supply essential products and to provide humanitarian relief.

Leading the way are social purpose businesses that have already defined an aspirational societal reason for being and that aim to create value for all stakeholders. They protect their employees, minimizing job loss and providing paid sick leave. And they go beyond simply donating to charity by redeploying their assets to address the most urgent needs. Whether small firms or multinational corporations, purpose-driven businesses are reimagining their role in the time of COVID.

How social purpose-driven companies have responded to COVID-19

Unilever, the global consumer-goods company, launched a sweeping Sustainable Living Plan in 2010 with the aim of improving the health and well-being of more than one billion people by 2020. It’s now leveraging its social purpose “to make sustainable living commonplace” by donating $155 million worth of soap, sanitizer, bleach and food to help protect people’s lives around the globe. It’s also providing $775 million of cash flow relief for early payments to its small suppliers and extending credit to small-scale retail customers to help them manage and protect jobs. According to its CEO, Alan Jope, “Our strong cash flow and balance sheet mean that we can, and we should, give this support.”

Google’s corporate mission “to organize the world’s information and make it universally accessible and useful” drives its global response. It’s providing a total of US$800 million to support small- and medium-sized businesses, the World Health Organization, governments and health workers. Nearly US$600 million of that comes in the form of ad grants and credits. It has established a US$200 million investment fund for non-profits and financial institutions to help provide small businesses with access to capital. It’s also making available US$20 million in Google Cloud credits for researchers to leverage Google’s computing resources to study potential therapies and vaccines to combat the virus. Its employees are bringing engineering, supply chain and healthcare expertise to facilitate increased production of ventilators, working with equipment manufacturers, distributors and government in this effort.

3M – with a mission “to improve lives” – established a unique partnership with Ford Motor Company to build respirators, including a new design that uses existing parts from both companies, such as the Ford F-150 truck’s cooled seating and 3M’s HEPA filters to increase efficiency and scalability. 3M has doubled its global output of N95 masks and is producing 100 million respirators per month.

HP Inc., whose purpose is “to create technology that makes life better for everyone, everywhere,” is mobilizing its 3D printing teams, technology, experience and production capacity to create 3D printing parts to help contain COVID-19. HP’s 3D R&D centers are collaborating with manufacturing partners around the world to increase production of face masks and shields, hands-free door openers, respirator parts and more. “HP and our digital manufacturing partners are working non-stop in the battle against this unprecedented virus. We are collaborating across borders and industries to identify the parts most in need, validate the designs, and begin 3D printing them,” said Enrique Lores, President and CEO, HP Inc.  Through its HP Foundation, the company also donated $1 million to direct COVID relief.

SAP, the European multinational software corporation, is leading through its purpose “to help the world run better and improve people’s lives” in its COVID response. It recently launched the SAP Purpose Network Live, a virtual platform that provides a space that brings together change-making companies, startups, government agencies, non-profits and consumers to co-innovate COVID solutions together. Through pro-bono consulting, SAP employees are also hosting webinars for non-profits on remote work and coaching social enterprises on business continuity. It set up a €3 million Emergency Fund to support the World Health Organization, the Centre for Disease Control and others working on the front lines. Recognizing the massive COVID disruptions impacting global supply chains, the company is offering free access to its SAP Ariba Discovery service so buyers can post immediate sourcing needs and suppliers can respond with their offerings.

With a mission “to raise the good in food,” the Canadian packaged meats and protein company Maple Leaf Foods donated $500,000 in financial and food contributions to food security organizations. It’s using its scale and reach to launch a matching campaign to raise an additional $2 million to support emergency food relief efforts. Maple Leaf has also contributed $2.5 million to the Canadian Frontline Healthcare Professionals Protection Fund, established by hospital foundations to provide support for frontline healthcare workers. As well, it’s contributing its food-safety know-how to others seeking to create pathogen-free environments.

Web Express, a Coquitlam, BC-based printing company, is pivoting its business to offer online publication services within a new Community Hub enabling ethnic media, industry publications, community centres, readers and advertisers to connect with one another. The Hub will be offered free for a time starting with ethnic community newspapers hit hardest by the pandemic, so they can continue their operations virtually – a matter of survival for small publications.

Traction on Demand, a purpose-led software company based in Burnaby, BC, partnered with Thrive Health, Salesforce and the BC government to create a new, life-saving healthcare app that has been deployed in almost 40 hospitals so far. The app, known as Traction Thrive, helps view, track and allocate critical healthcare personnel, personal protective equipment and ventilator availability in real time. Traction on Demand has since made the application available globally, at no cost, as a contribution to the global fight against COVID-19.

Hemlock Printers, a North American purpose-driven printing company also based in Burnaby, is printing Public Health Agency of Canada COVID-19 workplace posters for businesses and non-profits free of charge. Hemlock’s social purpose partner, Novex Delivery Solutions, is donating the “no-contact” carbon-neutral delivery of those posters. Hemlock is also printing floor decals (to indicate proper space apart while physical distancing), plexiglass shields and other signage products that protect employees and customers.

Within days of BC’s COVID shutdown, Community Savings Credit Union, a purpose-based regional financial institution headquartered in Surrey, BC, offered a range of services for people facing financial difficulty. Financial hardship services include an interest-free line of credit, postponement of loan and mortgage payment and service fees, and early redemption of non-redeemable term deposits so customers can gain quick access to needed funds. Its CEO, Mike Schilling, says, “We could do all this so quickly precisely because we are a purpose-driven organization.”

By focusing on their purpose, rather than on their bottom line, these businesses could make clear and quick decisions when they were needed. Purpose-led companies have a beacon they can turn to when steering through turbulence.

However, the bottom line will eventually benefit too, as pointed out by Larry Fink of BlackRock in his recent annual letter to shareholders. As the CEO of the world’s largest asset manager (with an estimated US$6 trillion in assets) says, “Companies with a strong sense of purpose and a long-term approach will be better able to navigate this crisis and its aftermath.”

As we head deeper into the COVID storm, and as our collective instincts rally, more and more companies will become humanitarian businesses. The time is ripe for all business leaders to reboot their companies along social purpose lines – or risk becoming irrelevant in the future marketplace. The rapid purpose pivots of these 10 leader companies shine a light on what’s possible. These and many other pivots are listed in this “COVID-19 Social Response Checklist for Business” we developed to help business leaders identify their unique COVID social response.

Let’s build a new future together. Now is not the time to be on the sidelines. We can envision the economy and society we want to live in in the post-pandemic era and make it happen. These purpose-driven businesses are showing us how.

Coro Strandberg is president of Strandberg Consulting and Mary Ellen Schaafsma is director of the Social Purpose Institute. Strandberg and Schaafsma partnered to create the Social Purpose Institute at the United Way of the Lower Mainland (SPI) in 2018. The SPI is creating a social purpose business movement in Canada and beyond and offers services that help business leaders, company boards, investors, industry associations and chambers of commerce advance social purpose in business.

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What do they have in common? Both believe executives should be rewarded for driving environmental, social and governance (ESG) performance that protects and creates long-term shareholder value.

The good news is that more companies are listening and acting. Unfortunately, outcomes have been mixed.

Globally, investment research firm Sustainalytics found that 16 per cent of large publicly traded companies considered ESG performance in setting executive compensation in 2012, up from 13 per cent two years earlier. In Canada, according to my own research on sustainable pay, that number is much higher, with nearly 60 per cent of companies listed on the TSX 60 providing incentives to executives who hit non-financial performance targets in 2012.

According to Corporate Knights’ Best 50 ranking, that number rocketed to 80 per cent this year (up from 56 per cent in 2010). This points to the obvious conclusion that sustainable pay incentives are becoming increasingly important in corporate Canada.

But underlying these metrics is a less compelling story.

In “Sustainable Pay,” a study I published in March 2013, it was found that only 13 per cent of the TSX 60 companies formally set annual sustainability targets for executive performance. And none of the TSX companies (and few global companies) include ESG performance in their long-term incentive plans.

Boards and their compensation committees are not setting pre-determined performance hurdles for executives to achieve, and they are overlooking the value that sustainability risk and opportunity management can bring to the corporate bottom line over time.

Also, they are failing to grasp the significance of sustainability impacts on their company or resulting from their company, as well as how sustainability will be critical to creating or protecting value over the medium term. Instead, it appears companies are largely treating sustainability performance as an after-the-fact bonus for chief executives – just another way to pay executive teams.

Another observation, particularly in Canada, is that sustainability performance metrics tied to executive pay are primarily directed at compliance, risk mitigation and value protection – not value creation. Top metrics were focused on safety and spill prevention. Few considered the opportunity side of the sustainability equation related to innovation, new products and markets, cost savings or customer acquisition. On the other hand, some global best practices see companies rewarding executives for achieving green product growth targets.

Arguably, the Canadian TSX 60 results reflect an overweighting to the extractives sector, which is necessarily concerned with compliance and risk mitigation. But how are boards rewarding proactive investments in social licence to operate and in stakeholder relations? Forward-thinking measures such as these might realize greater long-term benefits for companies and shareholders alike.

Finally, where metrics exist at all, they are nearly always backward looking. I came across few examples of forward-looking (leading) measures that assure boards their managers are placing careful investments to generate future performance results.

What explains this? We know there is a lack of agreed upon guidance for executive sustainability compensation. We also know that “pay for performance” – whether financial or non-financial performance – is a recent governance trend. The most popular performance indicators continue to be profit and executive performance goals for short-term incentives and total shareholder return for long-term incentives.

Finally, it’s clear that peer normalization plays a very strong role in determining executive compensation. The practice of engaging compensation advisors to benchmark comparable companies results in copycat pay packages.

In my experience advising companies on sustainable compensation practices, I tend to come across the following limitations or constraints:

• The human resource managers who advise board compensation committees lack experience in setting sustainable pay metrics and are not familiar with the qualities of a good sustainable pay metric;

• Companies have not identified the ESG risks or opportunities material to their performance and thus lack an understanding of how sustainability practices can enhance shareholder value protection and creation;

• As the typical corporate strategy does not include relevant sustainability performance targets, ESG is not properly positioned in the corporate balanced scorecard and thus is usually sidelined by the compensation committee.

• Boards lack an understanding of stakeholder expectations and how sustainability mega-forces will affect their company, sector, value chain and region. They are ill equipped to determine top sustainability metrics that will enhance corporate prospects going forward.

So what does the future hold?

Sustainability think tanks like Corporate Knights will continue to rank companies on their sustainable pay practices, putting pressure on company boards to enhance their ESG compensation programs. With capital markets increasingly looking for rigorous ESG value protection and creation goals, expect more compensation packages to have clear, quantified and stretching ESG targets.

At the same time, global standards and guidelines on ESG pay will emerge and compel continuous improvement. ESG pay will then join excessive pay, referred to as quantum by investors, and equitable pay (vertical pay ratios) to create a triumvirate of non-financial pay issues for boards and their advisors to address.

In other words, expect sustainable pay to be on board agendas for many years to come.

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