Triple threat or opportunity: the pandemic, climate, Brexit nexus

The phrase ‘we live in strange times’ is often attributed to new situations. Perhaps it is human nature to always feel that the current epoch is the strangest and it’s natural to think about times past with the ease and sentiment of the familiar. However, nothing prepared us for 2020. It feels like the world has slipped off its axis with virtually every nation being affected simultaneously in a way that is frequently described as ‘unprecedented’.

Meanwhile, it is fascinating how many people are finally connecting the dots and understanding that man’s exploitation of the earth’s resources and disrespect for the natural order together with global interconnectivity, is culminating in the corridors of transmission that could lead to the very undoing of capitalism. 

Perhaps most importantly has been the realisation that the unthinkable can happen which means politicians and public alike are no longer able to kick uncomfortable cans down the road. When we all sang in the new year of 2020, no-one foresaw the chaos that would ensue as nation after nation went into lockdown. That’s not to say that a pandemic wasn’t expected … clearly it was, the irony being that in terms of pandemic response preparedness, the UK was deemed the best prepared before the outbreak, yet rapidly claimed one of the top spots for the worst performing countries in actuality. Perhaps the equalising effect of the pandemic has been one of the most surprising. The largest economies have realised that they don’t have the ‘superpowers’ the moniker might suggest. Smaller nations have used decisiveness to outwit their unpreparedness and have proven that GDP is no shield for an unseen foe. 

The reality check that pandemics can happen in advanced western economies as easily as eastern and developing countries, has created a seismic shift in perception of ‘threat’. Whilst there are still some in blissful denial preferring the convenience of conspiracy theories, for most the climate conundrum is finally making awkward sense. The entry point may be seas of plastic waste, wildfires and pestilence … but the concept that nature and the biosphere are infinitely more powerful than mankind, is finally beginning to resonate. 

‘Lessons will be learned’ is another favourite trope. So what lessons are being learned and how do Britain and its main trading partners, begin to navigate the simultaneous triple threat of pandemics, climate chaos and Brexit? Any one of these ‘events’ is enough to put the most enlightened strategist into meltdown. How can we predict what will happen and adapt accordingly? 

In my view ‘prediction’ and planning for business in simple form will now be almost impossible for most sectors. So many aspects of trade, supply-chains, even consumer and industrial trends are changing at speed, that it is certain that the ‘new normal’ will be very different for a raft of reasons. Investors, often the puppet-masters of economic growth, are finally divesting from hydrocarbons, realising that stranded assets are not just a distant probability, but a living reality. Billions of people have ‘seen’ clean air, connected with nature and have faced the fear of human fragility – economically, socially and environmentally. Some talk about ‘getting back to normal’ but many more realise that ‘normal’ was anything but. After decades of being lobsters in a slowly warming pan, submission is giving way to cries of #buildbackbetter. 

The lockdown didn’t just provide shielding; it gave the brain-space employers and employers needed to gain perspective. Countries that were mocked for considering 4-day working weeks are now feted as visionary. Bosses who resisted flexible working are now realising home-working suits some exceptionally well and can be achieved seamlessly. Others are in shared or poor-quality accommodation that is not suitable, especially in cities, or have family set-ups that are not conducive to home-working. Employers can see that one size will never fit all again for workers to achieve the holy grail of work:life balance and the loyalty that engenders. 

Procurement teams that had secured low-cost, long-term supply agreements in far-flung places have rapidly learned the meaning of ‘eggs in baskets’. Diversified businesses with flexible supply options, that had already adopted sustainable principles, have found themselves automatically more resilient … not necessarily bullet-proof, but organisations that take a 360 on all aspects of their sourcing tend to have a more considered approach to all risk and that creates resilience. 

Brexit was always a divisive issue but as we hurtle through the transition period, with very little sign of ‘transitioning’, the no-deal nightmare looms large. Whilst the UK Government is turning its back on its nearest neighbours, accounting for 44% of direct trade in addition to EU trade agreements with 70 more countries accounting for a total of 56% of all UK trade, it is little wonder panic is setting in with those organisations, floored by Covid-19 who are soon expected to find new customers in the most chaotic of circumstances. To the general public, we left the EU on 31st January 2020 and they are told all is well … little do they understand that we are still very much in the status quo but the Brexit shock, coupled with the strongly expected second pandemic wave in Winter 2020, could provide an unassailable double whammy for many sectors. 

Politics apart, common sense in the face of future pandemics and extreme climate events, would suggest that with increasing global unpredictability trading as locally as possible would carry least risk: optimising domestic markets and trading with known partners with similar standards, systems and limiting currency exposure and the costs/risks of importing distant components and finished goods – would all seem like the least risky options.

 Yet at the very moment the UK is facing the most challenging decade of modern times, it has the added self-inflicted blow of managing over half its extant trading relationships on the promise of the 20% of US deals, advantageously metamorphosising into a frictionless golden goose that will double or triple trade in a matter of months.

 The irony is that whilst we share a great deal of history, a common language and some cultural mores with the USA, the similarities pretty-much stop there. US sizing is completely different in clothing, industrial components, paper and more … so products will need to be retooled at great expense and repackaged in both directions. The UK market is so miniscule to the US that you can see how little effort will go into reciprocation, the focus will be very much one-way as American companies will focus on products and services that won’t need adaptation. Whatever the original guiding principle of Brexit, the reality now is that British companies that have spent decades opening up European opportunities simply won’t have the cash or resilience to start from scratch, on the back foot, with reconfigured offerings with the added complication of a staunchly ‘America First’ mentality.

So will more companies look to retrench in home markets? Depending on the sector, and assuming the products and services are required here, that is a very distinct possibility. Looking to the future we must expect that decarbonisation and a cultural shift from rampant consumerism, will mean that many undifferentiated luxury goods and non-essentials, will see rapid erosion of their markets. With so much uncertainty in jobs, there will be caution in house-buying or other major capital commitments. There will be an immediate impact on decorating and furniture sales, that are so closely linked to an active property market. International travel will be heavily impacted due to safety concerns and holding back on discretionary spend, so staycations may benefit where airlines flounder. Hundreds of thousands of jobs are almost certainly already redundant, unbeknownst to the workforce, as companies use the cover of furlough for Covid-19 to radically re-design the business plans and models that they already suspected were not fit for the future.

The promotion of cycling and walking over public transport and discouraging cars in town and city centres will see a rapid shift in multi-modal policy and investment. More homeworking and the instant acceptance of online meetings will massively reduce the need for business flights, company cars, executive hotel stays and conferences. Even that small change will impact on sales of associated products like formal suits/shoes, luggage and briefcases and business-related dining; all those supply-chains will inevitably be heavily if not terminally impacted. From food-service to wine importers, production and sales channels will require a radical shift to ensure viability. 

Management teams will need an overhaul too. Senior executives in mature markets may struggle to envision radical new business models through emerging sales channels that are aligning to the customer need for flexibility in uncertain times. Leaner, lower carbon and circular solutions are rapidly gaining momentum as they appeal to the growth in conscious consumerism, often with lower financial commitments in rental or shared ownership models. The climate is finally right for Zipcar and others to give customers flexible car access without ownership. When this finally takes off outside major cities, there will be a substantial reduction in car ownership that will ricochet through the automotive sector. So many households expect a car per driver, but only 1/3rd drive to work and with an average of 8.5 miles each way, many of those journeys can be easily displaced by cycling, public transport or car sharing. The normalisation of new commuting models, more home and flexible working and the prospect of more and better school buses, could also impact on car ownership and the resultant supply-chain impacts. 

Since lockdown, many people have noted that their stressful lives were leading to a host of issues. More alcohol and fast food to ‘treat’ themselves after a hard week; more spending on fast fashion and beauty products – again ‘rewards’ for working hard. More holidays that are merely decompression from crazy working lives; holidays that are counterintuitively booked to spend more time with partners or children, when it’s the hamster-wheel of work that prevents quality time every day; and the pleasure and healing of nature, rather than self-medicating with ‘stuff’. Those extra costs are often the discretionary spend that ironically tie people into long working weeks, but instead of providing savings and investments into future security, the disposable income is literally frittered away on staying in the game. As a result even many well-paid households are one pay-check from financial stress with little or not safety net. 

Indices which measure health, happiness and well-being constantly prove that shorter working weeks increase productivity and wellness. Better productivity creates more prosperity – and that is reflected more fairly across society, rather than pockets of excess wealth and extreme poverty. Healthier people have less sick leave and significantly fewer chronic illnesses that adversely affect them and their families and put considerable strain on the NHS. Less unnecessary travel may mean fewer cars and that will impact on the car industry for sure; but cleaner air will save 40-60,000 excess deaths a year; a statistic that dwarfs Covid-19 yet slips under the radar as they are silent deaths. It is estimated that by 2035 air pollution in the UK, could cost as much as £5.3bn per annum (Imperial, 2018). The UK automotive sector generates value of around £18bn per annum but car ownership is going to fall as we decarbonise and move around differently, hence there will be a significant benefit to the health and social care sectors that will go some way to ameliorating the impact overall. Not least as that is just cost relating to poor air quality and there are many more detrimental impacts from modern life including pesticides, additives and the toxicity of processed foods. We urgently need to recalibrate the connections between health and a good society that have led to so much obesity/T2 diabetes, heart disease and cancers with the result that medical interventions mean many people live longer but not better as complex multiple conditions are the hallmark of the over 65s. 

There are some signs of optimism though for a new order that is heralding the end of post- industrial capitalism. Cognitive dissonance is slowly being replaced by an awakening. Extinction Rebellion, Sir David Attenborough, Greta Thunberg and many more are breaking through the noise and sewing the seeds for regenerative policies, more balance in the natural world and a vision of more fair and equitable societies. Of course this is at odds with the 1% of the world’s population that controls most of its interests, but there is hope that the incontrovertible reality of the climate emergency, pandemic and Brexit shocks, will begin to shine a light on the self-interest and greed that has caused and exacerbated these issues. 

So how should organisations proceed in the face of such uncertainty? The first step is a very deep reflection on the goals and purpose of the entity. Looking solely through the lens of risk – how exposed is the business to each threat and what are the options for not just mitigation, but to re-engineer the offering to become future-proof? Whether goods or services, every organisation needs a deep and intensive review of every aspect of its proposition and commercial delivery. If it’s a sector that faces terminal decline – then every effort should be made to manage the decline and diversify into new or emerging products/services that closely match the existing skill sets, customers and channels, if they are viable in a refreshed format or to innovate into a new model. In Boston Matrix terms this is about viability of ‘Cash Cows’, managing out ‘Dogs’, developing ‘Stars’ and monitoring ‘Question Marks’. Ansoff’s Matrix provides further simplicity in plotting a business through considered options for market or product development or diversification.  

To end on an unashamed pitch, this work is best carried out with an experienced business/marketing/sustainability strategist who can provide the marketing knowledge and ethical scrutiny to ensure that the transitions to ‘new normal’ will be viable and deliverable, with appropriate frameworks and clear mapping. In so doing we will be thankful for the strange and unprecedented times that finally forced change.

Sarah Daly SD21 – Sustainable Development for the 21st Century www.SD21.org