Our first series of virtual roundtables, marking what would have been the World Bank’s spring meetings, are focused on addressing sustainability and corporate purpose commitments in the face of the COVID-19 epidemic and the global recession. So we wanted to share our thoughts on the role of the private sector and our shared pathway forward through this crisis and beyond.
The private sector is facing unprecedented uncertainty, risk, and disruption. No business model will escape 2020 unscathed. Yet, in the midst of chaos, there is opportunity.
Once we get the virus under control and the economy begins to improve, society will enter an unprecedented period of re-balancing. Every norm, every assumption, every company, every leader will be looked at through a new perspective. Investors will need to adjust their portfolios, consumers will change their buying preferences, voters will reassess elected officials, and employees will seek out the companies most able to provide long-term career opportunities.
Any person or any organization that fails to demonstrate how they make the world a little better will be passed over for those who will.
Leaders will be elevated, and laggards shunned – and the judgment passed will be swift and absolute.
The Public Sector is Doing What it Can
Along with medical professionals, the health experts in the public sector have been on the front lines of tracking the spread of the pandemic, responding to it, and working to limit its consequences. Many public sector health experts have emerged as credible experts on COVID-19, and their leadership has been commendable.
The wheels of government policy now are turning, albeit slowly. While it is true that the recent rash of so-called “stimulus” policies to support individuals and businesses will have important benefits, many of them will take weeks – if not months – to be fully operational.
In the meantime, central banks – most notably the U.S. Federal Reserve – have aggressively stepped into the void by injecting much needed liquidity into markets. Central bankers are keenly aware that a liquidity crunch could take a dangerously weak global economy and put it on life support. They have acted with speed, clarity, and decisiveness.
The Villain of 2008 Can be the Hero of 2020
The last global crisis was the “Great Recession” of 2008 – 2009. In large part driven by the anger over the massive taxpayer bailouts of financial institutions, much of the public blamed the private sector for the economic downturn. In some countries – such as Ireland, the United States, and Japan – public trust in companies dropped by over 75 percent from 2007 to 2009.
2020 is a different story. Today, the public is looking to the private sector both for leadership and for solutions to stem the spread of COVID-19 and the resulting economic meltdown.
For the most part, the private sector is rising to the challenge.
Companies are doing the best they can to hold the line on making layoffs. Auto manufacturers like GM and Ford are setting aside over a century of fierce competition to collaborate in developing ventilators. A number of apparel companies are completely reimagining their production lines to meet the urgent demand for facemasks, aprons and clothing needed by front-line medical workers. And of course, the health care industry – led by the brave medical staff in every country of the world – has turned itself into a massive urgent care clinic to treat patients with COVID-19.
CEOs like Richard Branson, Satya Nadella, and Larry Fink are providing honest, accurate information to help people understand the gravity of the situation and what can be done to address the challenges we face.
More fundamental, there are increasing calls for the private sector to use this moment of trial and uncertainty to assert a commitment to creating long-term value for society. As Klaus Schwab, Founder and Chief Executive of the World Economic Forum, and Brian Moynihan, CEO of Bank of America, recently wrote to executives, “Finally, we also maintain the principle that we must continue our sustainability efforts unabated, to bring our world closer to achieving shared goals, including the Paris climate agreement and the United Nations Sustainable Development Agenda. We will continue to focus on those long-term goals.”
The efforts of the private sector are appreciated and understood by the public.
According to recent research by Edelman, most people believe that, after health authorities, their employers are best equipped to effectively respond to the pandemic. Furthermore, Edelman’s research showed that the public believes that governments’ response to the pandemic will be far more effective when done in partnership with the private sector. In other words, people want the private sector to be leading along with the public sector in responding to the crisis.
The Moment of Opportunity Awaits
Perhaps the most consequential challenge for both the public and private sector awaits in the coming months. The cost of human life and social capital due to COVID-19 will be staggering. But we will survive. The question then becomes – “How will we learn and improve from this crisis so that society is healthier and more prosperous?” And not just next year, but many generations from now.
The public sector will have ample opportunity to re-instill a relationship of trust with its citizenry. The cost and consequences – societal and financial – will last for years. The stimulus packages rushed into law in recent weeks are meant to stop the worst from happening, not foster lasting change. In many countries a badly frayed social safety net is being stretched to the point of breaking, and sensible policies will be needed to prepare for the next crisis.
The private sector must build on its momentum by sustaining its commitment to thinking beyond short-term profits and instead, creating lasting value for society. The fastest way to lose every ounce of public trust gained in recent weeks is for companies to revert to business strategies driven by profit maximization, shareholder buybacks, and making products known more for being cheap rather than valuable.
The opportunity awaits. Time will tell if it is seized.