Brazilian businesses are having to adapt as the country faces the pandemic’s second year with a surge in Covid19 infection and deaths.
Professor Heiko Spitzeck, Director of the Sustainability Research Center at Fundação Dom Cabral, led a study with several corporate leaders and shares some of his findings with us, including his perspective for economic recovery in this new scenario.
Professor Spitzeck holds a Ph.D. in Business Ethics from the University of St. Gallen (Switzerland) and a master degree in Business Administration from the University of Bamberg (Germany). He is a member of the Brazilian Global Compact Committee and Board Member of Coca-Cola´s Social Investment Platform Coletivo.
BayBrazil: Brazil’s economy shrank by 4.1% last year due to the coronavirus pandemic, its worst drop in decades What were the main strategic challenges faced by corporate leaders in Brazil during these times according to your research?
Heiko: There were different challenges along the pandemic. At the beginning companies needed to install crisis committees to respond quickly to changing business conditions. In this first stage priorities were given to keep employees safe while maintaining operations, permitting home office especially for corporate functions.
In a second step companies realized that their responsibilities do not end at the factory gate – a fact we describe as “liquification of organizational boundaries”. Companies such as Vale injected money in their value chain in order to keep suppliers alive – which are essential for maintaining operations and even more so once the economy recovers. Also many business leaders started to ask the question: what is the social purpose of my company? Very unusual alliances emerged, such as e.g. a partnership between AmBev, Gerdau, Einstein and the public administration of São Paulo to construct new hospitals for COVID treatment. In this perspective we see a new form of philanthropy emerging, which is no longer limited to financial donations, but in providing business competencies to help resolve issues. AmBev, for example, switched production lines from beer production to alcohol-based disinfectants and oxygen.
From the business point of view, companies focused on cost reductions and restructuring debt. Those, who already invested in digitalization leveraged this advantage. The best example in this regard is Magazine Luiza who opened their e-commerce platform to help small retailers offering their products online, thus securing their survival in times of social distancing. Some consumers show a preference for buying at Magalu instead of Amazon, because they feel that even if the same product at Magalu is more expensive, the company helps Brazilian companies to water the crisis, while all profits at Amazon are going to shareholders.
BayBrazil: At “The Resilience Era” report, you mentioned there is an end of the “Performance Era” and COVID 19 triggered the start of “The Resilience Era”. What was the change? Is it an opportunity for the stakeholder to prevail?
Heiko: The era of performance focused on profits and optimizing relations with workforce, suppliers, clients in this regard. At the center of attention are the interests of the company. The pandemic showed quickly that the well-being of the company is linked to the well-being of its eco-system. As Marcello Guidotti, CFO at Ecorodovias, mentioned in his interview: “You are not a lonesome animal. You are part of an ecosystem and you depend on it for your survival”. With this the company moves out of the center and is part of an ecosystem which needs to survive. In this sense – yes the pandemic gave an additional impulse towards a stakeholder economy. This can particularly been seen in the financial sector, which started to discuss ESG more seriously during the crisis.
Resilience describes the “capacity to recover quickly from difficulties”. The capacity to recover for companies requires duplication of potential suppliers in different regions, holding stock, having financial reserves, etc. In times where you might not get supplies from China, where certain markets are limiting activities such as tourism, shopping centers, you need alternatives. These alternatives and reserves are difficult to construct, if the company´s sole focus is on optimizing existing resources.
BayBrazil: Your research showed that most companies believe in economic recover throughout this year. Since the research conclusion, the pandemic scenario has quickly changed and Brazil now is going through a surge in Covid infection and deaths. What is the recovery perspective this new scenario?
Heiko: As Brazilians are optimistic in nature, the forecast did not materialize. With new and more contagious strains of the virus emerging in the Amazon region, a lack of coordinated governmental interventions, the impact of the pandemic will be prolonged. Despite these issues, Brazil has started quickly to vaccinate its population. While we haven’t polled executives recently on when they think the pandemic might be over, my recent conversations show hope that by the end of 2021 the worst will be over, mainly due to vaccines.
BayBrazil: For startups, what are the new trends after the pandemic? How to incorporate the sustainable lens into a business model?
Heiko: One of our interviewees was Daniel Izzo com Vox Capital – Brazil´s first impact investor. Vox Capital concentrates on issues such as health, finance and education and considers “impact investments” as investments which resolve real problems, in particular for disadvantaged communities. Millions of Brazilians do not have access to financial services, decent education and health care solutions. Due to its focus Vox invested in a health care company which produces lung ventilators, also in a company that brings financial services into communities. During the pandemic the demand for the services of those companies grew exponentially and so did their valuation. So I challenge start-ups here in Brazil with the following question: which problem are you resolving and for whom? Is this something which improves the quality of life of millions of people?
BayBrazil: During difficult times, individuals have the chance to reflect about the purpose of their lives and jobs. What would you recommend for an individual working for a company or starting a new business to consider when trying to identify its own purpose?
Heiko: As I am part of the League of Intrapreneurs my answer is obvious: become an impact intrapreneur! Impact intrapreneurs at Vodafone created M-Pesa which is a mobile banking solution in Kenia. In the first year of operation it attracted more than one million new clients, today they serve more than 50% of the Kenyan population, many of whom did not have access to financial services before. Watch the TED talk by Myriam Sidibe – former social mission director at Unilever and you´ll understand how the simple act of selling soap can save millions of lives. And then start your own project – something which creates social and/or environmental impact and at the same time a decent return of investment.