Businesses need to take a green path to recovery after COVID-19
To ensure that we have an economic recovery that benefits people and the planet, we should scale up investments in businesses that provide environmental benefits.
The COVID-19 pandemic has caused massive disruptions to economies and people’s livelihoods. By one estimate, up to 242 million full-time jobs could be lost worldwide, with 70% of job losses coming from the Asia and the Pacific. This will disproportionately affect workers in micro-, small- and medium-sized enterprises, which make up 97% of the region's businesses and 69% of the national labor force. Massive investments are needed to protect jobs and support business resilience.
One thing is clear: we cannot return to business as usual. We need to stop environmentally destructive investments that cause disease outbreaks, contribute to crises like biodiversity decline and climate change, and harm communities and economies. To ensure that we have an economic recovery that benefits people and the planet, we need to scale up investments in “green” businesses, or profit-oriented activities that provide environmental benefits.
Developing green livelihoods during a crisis won’t be easy. Many small firms lack business continuity plans and savings, leaving them more vulnerable to shocks. They may also lack resources and capacity to adopt greener production technologies or access new market opportunities. Critical green investment programs are delayed, with government budgets and development assistance prioritizing healthcare and social services and increased risk perceptions limiting private capital flows.
Investments in green sectors, such as sustainable agriculture, nature-based tourism, renewable energy, or green buildings and construction, are good for economies and livelihoods in the long run. A study published in Economic Modelling shows that every $1 million invested in clean energy creates an average of 7.49 full-time jobs in renewable energy infrastructure and 7.72 jobs in energy efficiency, compared to only 2.65 jobs in fossil fuels. The 2008 global financial crisis also showed that green investments can produce more jobs in the middle of a recession, compared to other sectors.
Recent trends suggest that sustainable investments have been resilient during the COVID-19 crisis. Asset management firms Blackrock, Morningstar, and MSCI reported that environmental, social, and governance investments outperformed traditional investments in the early months of 2020. To address the pandemic and the ensuing economic recession, a World Economic Forum study shows that investing in nature-positive models – industry actions that add value to ecosystems and biodiversity – could add up to $10.1 trillion in annual business value and create 395 million jobs by 2030.
Green businesses will be essential to making the post-pandemic transformation a reality.
With the urgent need to restore livelihoods, how can we realize these benefits and better enable green business and job development? Here are a few steps that governments and the private sector can take:
Adopt green measures as part of business continuity plans. Companies can build their resilience to shocks by adopting appropriate and accessible eco-friendly measures that can help save costs and protect health. One example of a potential immediate measure is remote working, which enables business continuity while reducing the corporate energy footprint and emissions from commuting. While initially implemented as a physical distancing measure, many companies are considering more permanent remote working arrangements post-pandemic.
Businesses can also shorten their supply chains by working with local suppliers, which can reduce emissions from transport, stimulate local economies, and reduce disruptions from movement restrictions. For instance, shortages of imported medical-grade face masks led to a cottage industry of reusable masks using locally woven textiles in the Philippines.
Prioritize financial support and capacity building for small and medium sized enterprises. Governments can consider providing subsidies and other incentives for these enterprises to adopt green technologies to minimize pollution, waste, and energy use. For example, as part of its COVID-19 recovery package, the Republic of Korea is allocating around 1.7 trillion won to finance 100 small and medium-sized firms to transition to green business models. Governments and partners in the private sector, civil society organizations, and the academe can also cooperate to train these firms on environmental management standards and practices.
Require companies to disclose and improve environmental performance as a condition for stimulus support. Companies eligible for stimulus support can be required to publicly disclose their environmental performance or invest in activities that have cost savings and resource efficiency benefits. This is already happening globally. For example, Air France must adopt measures to become the “greenest airline in the world”, such as reducing its carbon emissions and requiring 2% of its fuel to be from sustainable sources, in order to receive a €7 billion recovery package.
Adjust risk perceptions and create an enabling environment to mobilize financing for green investments. To attract private capital for green investments, governments can better leverage public funds or have financial instruments in place to mitigate specific risks and boost investor confidence. Economic incentives such as tax breaks and pollution charges can stimulate investments in innovative and cost-effective solutions for reducing a firm’s environmental impact.
National or local green financing facilities or funds, with green investment frameworks and criteria, can also take on projects perceived to have high risk. Malaysia's Green Technology Financing Scheme provides loans to businesses qualifying under specific criteria, where the government provides a credit guarantee and rebate on the interest charged. Low-interest financing can also be linked to alignment with environmental and climate goals.
Strengthen regulatory and non-regulatory frameworks to spur green business development. With some governments relaxing enforcement of key environmental policies and regulations in the wake of the pandemic, maintaining commitments and following through with implementation will be crucial. At the same time, pressures from non-regulatory actors, such as industry associations and civil society organizations, can also motivate businesses to improve their products or processes.
In April, Indonesia launched its multi-stakeholder action plan to reduce marine plastic leakage by 70% by 2025. This program engages with government, the private sector, and civil society on producer responsibility, financing, and innovation to address plastic pollution.
As economies slowly reopen and develop long-term strategies to rebuild livelihoods and industries, we must ensure that the “new normal” is greener and more resilient than before. Green businesses will be essential to making the post-pandemic transformation a reality.