The chair of the European Confederation of Directors Associations (ECODA) has urged boards to embrace ESG in the fightback against coronavirus and the economic chaos which will likely follow the pandemic.

In an open letter, chair Jan Wesseldijk explained it is the
responsibility of companies to contribute to the survival of the economy, noting
that “every crisis creates a moment of truth for an organization.”

The chair’s letter comes as Covid-19 has killed thousands
across Europe, shutting down many business sectors and causing severe stock
market volatility (the Euro Stoxx 50 index fell 38% between 19 February and 18
March). Several nations are now in lockdown with many businesses facing
considerable financial uncertainty.

In response, the EU Commission and European Central Bank
have introduced several countermeasures to hinder the spread of the virus and
support the economy during this crisis. This has included a 30-day travel ban
on any non-EU nationals from entering the bloc from the Commission and a €750bn
stimulus program from the ECB.

However, Wesseldijk said more can be done by companies in
their response and how they support business continuity, pressing for ESG to be
championed with the “full dedication of board members and management”.

In his letter, he wrote “Board members have to make bold decisions
today and to rely on their collective wisdom to navigate these unprecedented
times

“As the question of survival has replaced the question of
sustainability for now, the concept of ESG goals takes on its full meaning.”

As a result, Wesseldijk says this ‘full meaning’ of ESG means management boards have to review how they are operating in the light of this crisis and how resources and operations can be adjusted to support continuity.

In the letter, boards are recommended to ensure they are
making the necessary decisions regarding employee safety and how supply chain
operations and relations with customers need to be adapted. Exploring new forms
of ‘remote interaction’ is a big part of this, with companies now encouraged to
explore how they can remain operational while satisfying social distancing
measures.

Overall board members are also being urged to adapt their
governance, and the organisation of their physical general assembly, by
counting on the help of national governments to adapt legislative texts.

Even though the chair acknowledged that immediate corporate
survival takes priority over long-term sustainability goals, he also stressed
that transparency should not suffer as a result and that communication must be
sustained with investors and relevant shareholders during this crisis.

In particular, Wesseldijk was keen to stress the fiscal
responsibility boards have not only to their shareholders and employees but
also to the wider economy.

He wrote: “As part of the financial crisis, boards have to
review the 2020 impact on financial information, investment and liquidity,
remuneration policy, specific risks like I.T. continuity.

“Additionally, boards must prevent the current crisis from
creating extra cascading risks like cybersecurity in an exceptional and massive
period of working online from home.”

In recent years, ESG has become more highly prioritised by
management boards due to greater pressure from shareholders and investors
alike. This has been partly driven by a greater focus on the environment and climate
change by investors, leading to ESG-oriented funds (and the companies
championing these ethics) to receive greater attention from investors.

At the same time, this has also resulted in more disclosure
and reporting around ESG, with management boards making greater efforts to
quantify, monitor and report the various ESG impacts their companies have
(which is also being increasingly mirrored by asset allocators in their
reporting).