Dear C-suite and VP of Sustainability forget about the mounting pressure between delivering results and investing in “nice-to-have” projects. In the case you were the sponsor, let´s forget about the “intangibility” of those projects you approved and by which you were questioned by board members, shareholders and your own team.
Total Societal Impact, as defined by the Boston Consulting Group, is the total benefit to society from a company’s products, services, operations, core capabilities, and activities. In the past (2017 aka 3 years before COVID-19), they argued that companies that do well integrating TSI efforts into a company’s strategy, organization, and business model, will find they can create value for shareholders and also make a real difference in the world.
Does TSI equals ESG (Environmental, Social and Governance)? Not strictly but let us, for simplification purposes, say yes. ESG is the standard by which investors evaluate companies, and TSI is how the ESG elements plus others not directly measured in the direct business operation as such, are embedded into the company strategy.
No matter how we call them, they were all nice-to-have initiatives for most companies stretching their own growth targets. Also, the data coming in bulk with each ESG related initiative, was considered a by-product with no real impact for the business.
To see one extreme of our new reality and a glance of the collective future, the oil prices war that jump started in parallel with the Pandemic, forced oil prices below to $30 a barrel. This triggered an instant operating and labor cost reduction in the Oil industry. Why was this possible? Perhaps because the Oil industry is the most advance in terms of Digitization and resiliency. Lessons learned from years of facing market volatility in a capex intensive industry.
For oil companies, digitization refers to the collection and analysis of data, whether it is streaming from pumps on oil rigs, or from headsets on field workers. The aggregation of large data sets enables statistical analysis and the use of artificial intelligence or machine learning to enable accurate and safe remote operations while saving millions in facilities inspection and maintenance, especially in offshore rigs. All the above are must-haves’ items for the Oil industry in the form of investment in sensors, cloud computing, advanced analytics tools, data science teams, and a general corporate restructuring.
What about the instant and progressive economic shockwave driven by the Pandemic in other industries with less or no digital capabilities? Are they being able to take instant action to mitigate operational cost? Are they being able to sustain the operability of their critical assets by keeping their people safe at home as much as possible? Can they measure the impact of their minute-by-minute critical decisions? Can they truly turn their products, services, operations, core capabilities, and activities to reduce the risk of negative or even cataclysmic events? Is their longevity currently at stake?
The one in a 100-year event or black swan currently under way, have changed the way many nice-to-haves existed in the past. On a societal level, we might have changed forever. It will be difficult to conceive to buy products or to work for a company that doesn’t operate in a testable no BS way with clear ESG criteria or the criteria that is defined for your own context.
On a managerial level, it will evident that the ability of operating remotely, for example, is just as critical or maybe more critical than investing in growth in order to survive. Also, the well-known resiliency and instant informed decision-making capabilities, will be more important than a disconnected and unmeasurable philanthropy. Data finally will not be a byproduct of pet projects, on the contrary just as for the Oil industry, it will become the main feed to walk-the-walk in our new reality.
Dear C-suite, society and environment, be certain that every initiative that in the past depended on trends, on hugging a tree or on having corporate superpowers, will now count with by the most tangible and ascertainable facts our generation have ever seen to be approved. Forget about the need of achieving target quarterly earnings without guaranteeing your company longevity first. If you are feeling pressured to boost near-term shareholder returns at the expense of long-term existence, the value to society and the environment, rest assured that you’d be in a different reality that happened before the second quarter of 2020.
Geronimo Martinez
CEO & Co-founder
S2G Energy