Changing face of business
COVID: BIGGEST TAKEAWAYS FROM PANDEMIC ‘2020 will go down as the year we started to make progress on racial diversity across corporations.’
The Covid-19 pandemic has been a transformational event. “It has,” said Schroders CEO Peter Harrison, “changed all of our lives.” In many respects, these changes will be long-lasting. Speaking at the 2020 Schroders International Media Conference, Harrison said that there are a number of key areas where this is true.
“We have finally broken our attachment to the office,” he said. “Even the most traditional managers have been forced to accept that businesses coped incredibly well with home working.”
His view is that this will naturally allow people to work in different ways, from different places.
“I am personally still a fan of getting people together in the office from time to time, but I can already envisage fundamental changes to real estate markets, and companies being able to access new pools of labour,” said Harrison. “All of this is a thoroughly good thing.”
He added that one of the biggest pools of labour that many companies have overlooked is that of black professionals. That too, he said, is changing.
“The events of 25 May and George Floyd’s killing were every bit as transformational as the #metoo movement, and made more so by the fact that we were stuck in lockdown, able to see those terrible TV images,” said Harrison.
“I do believe that 2020 will go down in history as the year we started to make real progress on racial diversity across corporations around the world.”
The pandemic, in Harrison’s view, has also forced businesses “to decide who they really want to be”.
“They have been forced to look deep into their souls as to which stakeholders they serve,” he said.
“I believe the crisis has shown us those businesses that genuinely wanted to fulfi l their responsibilities to stakeholders beyond shareholders, and particularly their responsibility towards employees and the wider community.
“I would be so bold as to say that companies who misunderstand the importance of their wider social responsibilities will be forced to recognise that their legitimacy is being consistently undermined.”
In Harrison’s view, the biggest takeaways from the crisis are what he called “the two zeroes”. The first of those is the transition to net zero carbon emissions.
He likened the impact of this to the changes to accounting standards adopted after the Great Depression.
“In 1929, a company’s profits were basically whatever a company decided to report,” said Harrison. “Because of the crash, that all changed in 1933, with the advent of Gaap [Generally Accepted Accounting Principles] accounting. At the time, everyone said it is going to kill capitalism, but of course something very different has happened.
“I would argue that we are now witnessing the start of a new megatrend, and that is that profits are not all created equally.
“Work by Harvard Business School shows that some companies create more than a dollar of environmental damage for every dollar of their sales. That is not reflected in their profits and it needs to be.”
The second zero is the challenge of zero interest rates.
“It’s very clear that zero rates are going to be with us for a considerable time to come,” said Harrison. “And we believe they will have a profound effect on the way that people invest. We are already starting to see market distortions in areas of the credit markets and private markets, but I think there is [much] more to come.”
In his view, these are issues that asset managers, and corporates generally, need to be focused on over the coming decade.