Seismic Events Put Strategy, Resilience, Social Responsibility to the Test: Corporate purpose, ESG move higher on board agendas.

• Author: Brown, David A.
• Position: ON THE GOVERNANCE AGENDA

The rare confluence of three seismic events--COVID-19, deep-seated social unrest, and a global recession--poses unprecedented challenges for companies and boards in the weeks, months, and perhaps years ahead. Few companies, if any, will come through these challenges thinking or operating the same as before--and every company's strategy, resilience and responsiveness to its stakeholders' expectations will be put to the test.

As many of the directors and business leaders we've spoken to recently have emphasized, the stakes are high: much of corporate America is at an inflection point, there's no playbook for many of the issues companies are now grappling with, and boardroom leadership will be pivotal to the outcome.

While each of these events poses a unique set of challenges for business leaders and boards, they are interrelated in at least one important respect: They all highlight a range of social issues that have long been unaddressed or ignored, and they put an even brighter spotlight on corporate social responsibility. Just what is the company's role and responsibility in society? Are companies doing enough to make real and lasting changes to combat systemic bias and racism? Are workers at every level viewed as essential drivers of long-term corporate value? These questions have gained new urgency alongside the challenges of restarting and operating in a post-pandemic environment.

To better understand the near- and longer-term implications of COVID-19 for board oversight, business operations, strategy and priorities, the KPMG Board Leadership Center recently surveyed more than 300 directors. As our pulse survey (https://bit.ly/32ebCHd) highlights, positioning the company--and the board--for a very different operating environment is bringing a new level of intensity to board oversight. Employee safety and financial performance have been the first order of business. Boards are now extending that focus to near- and longer-term strategy, and the broader implications of COVID-19 on the company's role in society have taken on a new urgency. Seeing first-hand how the performance of the business is inextricably tied to the health of the company's various stakeholders in addition to shareholders--employees, customers, suppliers and communities--boards are sharpening their focus on environmental, social and governance (ESG) issues: blow does the company define its corporate purpose? How does it create long-term, sustainable value for all of its...