Business leaders across the world are grappling with the economic fallout from the Covid-19 pandemic. As governments issue lockdown orders to stop the spread of the virus, businesses are adapting to the new normal as workers work from home, factories automate and digitalization becomes a key driver of growth.

But even as companies focus on the Covid-19 pandemic, they should not and cannot lose sight of the longer-term survival and growth of their business by becoming sustainable not just in terms of continuity but also in terms of doing business the right way without negatively impacting the environment, community or society as a whole.

In fact, the very actions companies are taking to deal with the pandemic will bring them closer to the multi-stakeholder, long-term principles that lie at the heart of ESG (environmental, social, governance) principles.

“It is increasingly recognised that unsustainable businesses aren’t sustainable,” said Glenn Hoetker, professor of Business Strategy at the Melbourne Business School and MBS Foundation Chair of Sustainability & Business. “Businesses that do not attend to the well-being of people and planet will find it increasingly difficult to maintain profitability in the long run.”

In survey after survey, it has been found that a growing number of organizations are integrating sustainability into their business strategy. The issue has moved from the fringe as a CSR activity to becoming a core business issue that is top of mind in corporate boardrooms.

A 2020 survey by PwC on expectations for ESG found that, even though 83% of consumers think companies should actively shape ESG best practices, 91% of business leaders report their company has a responsibility to act on ESG issues, and over $51 billion went into ESG-impact funds in 2020, many consumers and executives are not convinced that businesses are making sufficient investments towards better ESG practices.

Having a strong sustainability core is not only good for the planet, it is now critical to business growth and profitability. Investors are increasingly looking at factors such as the company’s carbon footprint, water usage, community development efforts and board diversity critical to their decision-making process.

Today, more than 40 percent of global investment flows are ESG driven. The old paradigm of focusing purely on shareholder value and profitability is shrinking as investors only invest in companies that have strong sustainable practices.

“As such sustainability has become central to all business operations. This is also true for Indonesia as banks have also shifted their lending requirements to incorporate ESG guidelines and principles,” Professor Hoetker noted.

This is true for just about every industry, including mining companies that are now becoming more green by reducing their carbon footprint. By doing so, they not only improve efficiency but also drive up their share price.

Under President Joko Widodo, the government has placed the economy onto a green and sustainable development pathway as envisaged in the National Long Term Development Plan. But this will require significant investments estimated between US$300 billion to US$530 billion with a large portion of the investment needed in critical infrastructure as well as environmentally sensitive areas such as agriculture, forestry, energy, mining and waste. In addition, financing SMEs and industry is critical for creating jobs and boosting productivity.

According to the OJK (Financial Services Authority), today the majority of banks and non-financial institutions do not consider environmental, social and governance factors in their lending and investment process as the main consideration. But that is changing. Indonesia’s financial markets have seen a number of important designs and innovations over the past few years to encourage green lending and investments such as the development of sustainability ratings in its rapidly growing stock market.

The Indonesian government has also begun to take steps to green some aspects of the financial system with OJK launching the Roadmap for Sustainable Finance in 2014. As part of the roadmap, OJK will develop a binding regulatory framework for green finance which could include the establishment of compulsory and social management systems and associated reporting in both the banking and capital markets.

The momentum is building and ESG has moved beyond verbal commitments to do good. On the Indonesian Stock Exchange (IDX) for example, the Sustainable and Responsible Investment (SRI) –KEHATI Stock Index outperformed the main index. Between December 30, 2009, to December 30, 2019, the SRI KEHATI Index generated a return of 173.66 percent as compared to the JCI, which had a return of 148.57 percent.

The SRI-KEHATI index tracks the shares of 25 publicly listed companies, among them are agribusiness company PT Astra Agro Lestari, PT Bank Central Asia, food manufacturing giant PT Indofood Sukses Makmur.

“Sustainability is a big macro trend which is parallel with the Covid-19 pandemic,” noted Professor Hoetker. “It happened to all of us but the difference is how do each of us responds to these trends as individuals, corporations, governments and nations.”