Paraphrasing Ernest Hemingway, unfolding developments move slower until they happen suddenly. Today, the coronavirus outbreak may lead to a tipping point at which gross domestic product and its supporting metrics are supplemented by alternatives more conducive towards a sustainability transition.
Disruptions related to COVID-19 are predicted to become more severe in coming weeks. They could also come with an unexpected side effect: an impact on carbon emissions. The spreading virus has caused a dip in global greenhouse gas emissions. Reasons include a temporary setback to industrial activities in China, falling demand for oil and a decline in air travel. In China, the world’s largest carbon emitter, experts estimate that emissions over the past month have been about 25% lower than usual. These effects aren’t wholly unexpected. History suggests that global disasters, particularly those with major impacts on the economy, tend to drive a temporary decline in carbon emissions. The 2008 recession, for instance, was accompanied by a temporary dip in global carbon emissions.
Environmental change = Social Impact
The United Nations (UN) launched the 2030 Agenda for Sustainable Development to address an ongoing crisis: human pressure leading to unprecedented environmental degradation, climatic change, social inequality, and other negative planet-wide consequences. This crisis stems from a drastic increase in human consumption of natural resources to keep up with rapid population growth, dietary changes toward higher consumption of animal products, and higher energy demand.
Environmental change also has direct human health outcomes via infectious disease emergence. Infectious diseases, including Ebola, Influenza, SARS, MERS and Coronavirus, cause large-scale mortality and morbidity, disrupt trade and travel networks and stimulate civil unrest. When local emergence leads to regional outbreaks or global pandemics, the economic impacts can be devastating. The SARS outbreak in 2003, the H1N1 pandemic in 2009, and the West African Ebola outbreak in 2013–2016 each caused over US$10 billion in economic damages. The current outbreak of a novel coronavirus, closely related to SARS, is once again keeping the world on its toes. Both the disease and the fear of disease have had considerable economic and social impacts, with restrictions on international travel worldwide, the quarantining and self-isolation of millions of people, dramatic drops in tourism, and disruption of supply chains for food, medicines, and manufactured products. Estimates of the likely economic impact are already higher than US$150 billion.
While the challenge of getting the coronavirus outbreak under control is surely ominous, it merits recognising that from a sustainability standpoint, we may have a rare window of opportunity. The challenge will be to lock in the reductions in energy and material utilisation that are already occurring and will probably intensify in coming weeks and months. COVID-19 could inadvertently contribute to meaningful progress toward meeting the goals of the Paris Climate Agreement and several United Nations Sustainable Development Goals.
The transportation sector is one of the biggest contributors to greenhouse gas emissions. As schools and businesses close their doors, reduced travel could temporarily lower carbon emissions in communities where people are spending more time at home. Even partial closures will motivate businesses and other organisations to deploy flex-time arrangements that allow employees to design their own schedules and work remotely. Less vehicle traffic on its own is great for the climate, but there’s a potential catch. If people are spending more time at home, they could be using more energy. It depends largely on weather conditions, geography and family lifestyles.
There’s also the possibility that people may spend more time watching television or using appliances if they’re cooped in their houses. Pandemics like COVID-19 could also spur less obvious behaviour changes, which may nonetheless affect a household’s carbon footprint.
Reports have suggested a recent spike in online shopping and home deliveries, especially for groceries. This is a likely by-product of the virus as people are increasingly avoiding public spaces. The carbon footprint of online shopping, compared with making in-store purchases, is often tricky to parse out. According to recent studies, it may largely depend on whether the deliveries come from a store in the community or are shipped in from somewhere else. It also depends on what form of transport the shopper would ordinarily use to pick up the goods in person. A trend to sourcing products from local vendors will reduce resource throughput and contribute to more sustainable consumption patterns.
Supply Chain Vulnerability
A Harvard Business Review study found that 60% of the 779 readers they surveyed warned that poor visibility of who they do business with is a significant source of risk. Shocks such as disease outbreaks and natural disasters often expose global companies to vulnerabilities in their supply chains, and the results to business continuity can be punishing.
China’s economy is 16% of the global GDP. Its electronics sector accounts for 28% of the industry globally, while China’s share of the global textiles industry is 40%. Suffice to say that when China catches a cold, the rest of the world sneezes.
This current epidemic is likely to result in companies taking a more proactive approach to managing risks in their supply chains. Identifying areas of vulnerability and ensuring potential disruptions are dealt with promptly and are taken more seriously in boardrooms.
As automotive and industrial air emissions decrease, respiratory conditions will improve. A widely disseminated 2015 study estimated that air pollution contributes to 1.6 million deaths in China (17% of all fatalities). If we assume that air quality in the country is 20% clearer today due to the downturn in travel and manufacturing activity, a substantial number of lives have been spared. Such extrapolations are tricky—and would need to be counterbalanced by the health impacts of reduced physical activity, emotional anxiety, nutritional inadequacy, and so forth—but this is not a reason to ignore them.
Today, investors watch company decision-making through multiple lenses. With impact and ESG investing estimated to be $20-30 trillion of assets under management, according to various estimates (MarketWatch places the number in the USA alone at approximately $12 trillion).
The Conference Board’s 2018 Global Leadership Forecast showed that purpose-driven companies outperform the market by 42%. An Edelman Earned Brand Study reported that nearly two-thirds (64%) of consumers around the world are belief-driven buyers, choosing brands based on their position on social issues.
Purpose-driven companies that offer employees a sense of certainty have an edge over those that don’t. This becomes more real in turbulent times — such as during global market fluctuations and broadscale public-health issues. Today, we find ourselves in one of the most disruptive periods in modern history, with companies (and their leaders) being tested to make decisions and act in ways that remain aligned with their purpose, while also creating greater certainty for employees, despite the external challenges.
This is not the first global crisis or moment of high market volatility that most organisations have faced in recent years. However, the nature of uncertainty is different. It involves health and well-being, rather than climate, technology or other issues — making the challenges feel far more personal and far less predictable.
Whether people continue to apply the more carbon-friendly changes in their behaviours after the pandemic is another question.
Certainly, in the short term, you’ll see big changes in behaviour that are going to have an impact on emissions—either positively or negatively. The more important questions are: Are there going to be long-term changes? Will any of these behaviours stick? Will people learn to telecommute; will they learn that they like online shopping; will they learn to stay at home more, or be less willing to travel?
One can only hope that in these kinds of events—where people are pausing, confined to their homes and have the chance to reflect—we are using these moments to communicate some of these bigger issues that are facing us.
An observation frequently attributed to Winston Churchill is that we should never let a good crisis go to waste. The coronavirus outbreak is a deeply unfortunate situation that is unquestionably causing widespread suffering. While this is regrettable, we should not dismiss that the event provides an opportunity to make some significant headway toward a timely and necessary sustainability transition.