How Did Business’s Role in Society Change in 2020?

The year 2020 was incredibly rough, but with one big bright spot at the end.

A once-in-a-century global pandemic — an unfathomable tragedy — devastated lives and economies. But in a miraculous display of scientific prowess, Pfizer, Moderna, and other pharmaceutical companies produced what appeared to be highly effective Covid-19 vaccines by December. After a year of loss, there was a fresh glimmer of hope.

But while Covid has been the story of the year, it is far from the only story — our other mega-challenges continued and, unfortunately, grew larger. Economic inequality became even more stark. After decades of the top income earners getting all the wealth gains — about $50 trillion in the U.S. alone — it got worse. During the pandemic, U.S. billionaires gained one trillion in wealth. Climate change hit harder than ever with bigger storms, heat waves, and fires of record-breaking scale in Australia and California. 2020 is on track to be the hottest year on record.

In response to the economic crises of the pandemic, governments opened the taps. Countries injected about $20 trillion of stimulus into the economy — about a quarter of the global GDP — to keep people and businesses afloat. With that much capital, and our other crises looming, many people called for the world to “build back better” — that is, cleaner, more just, more sustainable — a slogan then-U.S. presidential candidate Joe Biden adopted as well.

Finally, U.S. protests over police brutality sparked a global conversation about racial injustice.

So, a lot more than usual happened this year. Which means business has changed forever. No list could cover all that transpired, but here are 10 stories and themes that caught my attention.

1. Covid slowed down progress on sustainable development.

Countries and companies had been making steady progress on most of the world’s ills, even if not fast enough for what science demands. But a July UN report on the Sustainable Development Goals (SDGs) showed a painful reversal in almost every indicator. For the first time in 20 years, the number of people in extreme poverty rose. Hundreds of millions of jobs were lost or reduced. Women in particular took a hard hit on decades of progress toward equality in the workplace.

Ironically, the only improvement was in greenhouse gas emissions. The economic shutdown reduced emissions by about 7%, but that highlighted the challenge we face: we need to do that every year to avoid the worst outcomes of a changing climate. Business and governments pursuing sustainability will have to work harder than ever now.

2. Business innovated to help the world cope with Covid.

As the pandemic ramped up, global supply chains were stressed like never before. Items we needed most, medical equipment like masks and gloves, were often produced in locations — such as Wuhan, China — that were, ironically, shut down by the virus. And we ran out of things. Companies of all sizes had to adjust quickly and went into overdrive to shift production and provide medical equipment and support.

Consider these representative examples out of the countless stories of quick operational changes and unusual collaborations.

Companies such as P&G radically increased production of hand sanitizer and others, such as LVMH, converted perfume factories to help meet surging demand for the gel. Apple’s partner, Foxconn, made ventilators and face shields. Ford collaborated with 3M to build respirators and with GE and the United Auto Workers on ventilators. Medical device leader Medtronic made production easier for all by publicly sharing its designs specs for one of its ventilators. Many apparel companies made gowns and masks, including a fun example where Fanatics, a company that makes professional baseball uniforms, made gowns that looked like team jerseys. Finally, tech giants, led by IBM and the U.S. Department of Energy, created the High Performance Computing Consortium to offer world-class computing resources to serve the science community working on the pandemic.

3. Companies handled people issues well…and badly.

Entire sectors, like hospitality and tourism, disappeared overnight. Many food and consumer product brands lost all sales in commercial channels, but gained in retail and direct-to-home. The historic changes meant shifting jobs and lots of furloughs and layoffs. Many companies handled it well, putting people first. CEOs took immediate pay cuts to help save money for employee salaries and benefits — Comcast’s top executives even donated their whole salaries. The CEO of Airbnb, Brian Chesky, was widely lauded for sending an open, honest letter to employees about necessary layoffs. And when IKEA’s business bounced back quicker than expected, it repaid nine governments for funds it received for furloughed workers.

But other companies were not so responsible. A number of large UK brands reverted executive compensation to full pay within a few weeks, and some companies filing for bankruptcy — like JCPenny, Hertz, and Chesapeake Energy — used loopholes to ensure executives got bonuses of many millions of dollars…while laying off thousands and shutting stores and offices. It wasn’t a good look.

4. Despite it all, ambitions on climate and sustainability grew.

In January, Microsoft set the most aggressive climate goal in the world, committing to be carbon neutral by 2030 and, by 2050, offsetting all of its emissions since the company’s founding in 1975 — a first in retroactive carbon neutrality. Google quickly raised the ante, buying offsets to cancel its historic emissions immediately and pledging to run is operations with on-site renewable energy by 2030. Apple targeted carbon neutrality across its entire supply chain by 2030, as did Starbucks, with a detailed list of actions to shift consumer and supply chain behaviors. Amazon said it would be neutral by 2040 and renamed Seattle’s KeyArena the “Climate Pledge Arena.”

Land use and biodiversity goals scaled up this year as well. Unilever allotted €1 billion for land restoration and carbon sequestration, Walmart said it would protect 50 million acres of land and 1 million square miles of ocean to help it become “a regenerative company,” and apparel giant Kering committed to being net positive on biodiversity, regenerating six times as much land as its supply chain uses. On the social side, Mastercard said it will connect 1 billion people, 50 million small businesses, and 25 million women to the digital economy.

5. Fossil fuels continued on the path to irrelevance.

About 90% of the new electricity generation added to the grid globally in 2020 was renewable energy, with the price for building solar hitting 1.5 cents per kilowatt hour. Clean energy will displace coal as the largest source by 2025.

“Oil companies are collapsing,” The New York Times reported in April. The value of oil and gas giants plummeted — Exxon, Shell, BP, and others are worth one-third of their peak value based off my calculations. Orsted, a Danish company that has pivoted from gas and coal to offshore wind, is, as of this writing, worth more than BP — with one quarter the revenues.

Other notable stories along this theme: A 116-year-old Volkswagen factory produced its last combustion engine car, switching to electric vehicles. Unilever announced it would spend €1 billion Euros researching alternatives and replacing fossil-fuel based chemicals in its cleaning products. Google said it would no longer build algorithms to help the oil and gas industry find and extract more fuels. And insurance company Suncorp will stop financing or insuring oil and gas by 2025.

6. Investors continued to move toward “getting it” on ESG.

Every year, the talk of ESG rises, but this year seemed like a tipping point. Like Suncorp, a growing number of banks are getting out of fossil fuels and investing in environmental, social, and governance (ESG).

The year began with what is now an annual ritual — a letter from the world’s largest asset owner, Blackrock, to investors and companies about ESG. This year, CEO Larry Fink made the case that climate change and its systemic risk will reshape finance. T. Rowe Price said that ESG disclosure was now the number one topic for its engagements with company management. And a Morgan Stanley survey showed that 80% of asset owners are integrating ESG into investment process, up from 70% in 2017.

Morgan Stanley, along with some big investors like the New York Pension Fund and Macquarie Asset Management, committed to having portfolios with net zero emissions by 2040 or 2050 (way too late since investments lead to long-lasting power plant infrastructure, but it’s a start). The world’s largest sovereign fund in Norway said it would push companies for more ESG disclosure, including policies on climate change and goals to reduce emissions. And the Rockefeller Brothers Fund announced that cutting exposure to fossil fuels helped it outperform the market.

7. The business world said “Black Lives Matter.”

Awareness of racial injustice took a leap forward in 2020. In many ways, Covid played a role: Black, Latino, and Native American people in the U.S. experienced two to four times as many cases, hospitalizations, and death compared to white Americans. But the cold, undeniable video of American George Floyd’s murder was a tipping point.

In addition to spontaneous marches around the world, nearly every organization felt a need to say or do something to support Black Lives Matter and show commitment to justice. Many companies committed to raise the level of Black representation in management and buy more from Black-owned suppliers. For example, Microsoft pledged to buy 500 megawatts of solar energy from and for minority communities and retailer Sephora will dedicate 15% of its shelf space to Black-owned brands (a more comprehensive list of actions here).

The symbolic moves were also important. PepsiCo retired antiquated brand images like Aunt Jemima and Uncle Ben and NASCAR banned the Confederate flag (a symbol of the Confederacy during the U.S. civil war and slavery) from its races. Many companies found profound ways to honor the loss of life. ViacomCBS’ channels went dark for 8 minutes and 46 seconds (the amount of time Floyd was choked to death). The most powerful statement I saw came from an unexpected source, the site BabyNames.com. Normally a happy place to explore names for your new family member, the site posted a simple black box with white letters listing dozens of black men and women killed by police or white supremacists, with the simple statement: “Each one of these names was somebody’s baby.”

8. The definition of corporate responsibility expanded.

In May, mining giant Rio Tinto expanded an iron ore mine, destroying two ancient Aboriginal archeological sites in Western Australia. The ensuing scandal ran the CEO, Jean-Sebastien Jacques, out of the business. His departure was, the Financial Times editorial board declared, “testament to the growing power of socially responsible investing.” The paper blamed the board of directors, too.

The lesson is that how a company treats stakeholders, such as communities and employees, is now core to how the C-suite is judged. In another important example this year, Disney took heat after it released its live action film Mulan. Part of the movie was made in areas of China that has forcibly detained at least 1 million Muslim Uighurs, one of the world’s great human rights disasters. Increasingly, companies are responsible for a much broader definition of their “impact” on society than just physical impacts like pollution or land use. Anything that contributes to an unjust society is on the table.

9. Companies defended pillars of society.

This year saw increasing threats to democracy around the world, particularly in the U.S. and Brazil. But in many ways, companies stepped up.

First, there’s access to voting. In the U.S., almost 2,000 companies signed on to “Time to Vote,” giving employees paid time off to do their civic duty. Target, Warby Parker, Compass Coffee, and Gap Inc.’s Old Navy even gave employees paid time off work at the polls.

There’s also the societal threat of vast misinformation, often spread on social media. To try to help combat this, some of the world’s largest brands — an alphabet of companies from Adidas, Best Buy, and Coca-Cola to Unilever, Vans, and White Castle pulled tens of millions of ad dollars off of Facebook.*

This misinformation problem is also closely tied to attacks on, and reduced trust in, science — which may be the most dangerous development in recent years. Both the 208-year-old New England Journal of Medicine and the 175-year-old magazine Scientific American endorsed a presidential candidate for the first time. They both backed president-elect Joe Biden because, as Scientific American said, “Donald Trump has badly damaged the U.S. and its people because he rejects evidence and science.”

10. Calls to reset capitalism rose.

As part of the push to build back better, many of us — notably Harvard’s Rebecca Henderson and hedge fund billionaire Ray Dalio — called for some serious fixes to the inherent problems with capitalism as we operate it. A system with unpriced externalities that funnels all wealth to the very, very top is not sustainable or just.

As the global response to Covid demonstrated, $20 trillion of stimulus shows that governments will run away from their neoliberal, free market ideology when things are bad enough. So perhaps we should invest more in social and physical infrastructure to build resilience before tragedy strikes. As the editorial board of The Financial Times (again) put it succinctly, the “virus lays bare the frailty of the social contract.” They made the case that “policies until recently considered eccentric, such as basic income and wealth taxes” would be on the table.

Companies have a role in helping create an equitable redistribution happen, too, through positive advocacy for change and their own policies. A number of apparel brands like Adidas, Patagonia, Matter, and Everlane embrace living wages in the supply chain. And in December, influential billionaire investor Paul Tudor Jones, co-founder of Just Capital — an organization dedicated to build an economy that works for all, rejected the “false god of low pay” and called on companies to embrace living wages.

. . .

A final thought on two things we learned this year that may inspire. First, business can pivot very fast when it needs to, with many having completely reorganized production or supply chains in days. Think of the pharma industry that produced those Covid vaccines in less than a year. We are capable of so much.

Second, as the world paused this spring, millions of city dwellers in Los Angeles, Beijing, and elsewhere looked up and saw blue sky. A pandemic was no way to get there, but it gave us a beautiful picture of what living in a cleaner world would look like.

As the vaccine makes its way around the world, we can all look forward with hope that the suffering will end in 2021 and we can continue building a thriving world for all. All in all, even in the midst of a human health crisis of unimaginable proportions, the sustainability agenda continues — because it has to.

*Editor’s note: Harvard Business Publishing paused paid advertising to Facebook and Instagram for the month of July.