The health crisis’ impact on business: how can we build a more sustainable recovery?

We meet Alvaro Pereira and Régis Calmels.
Published in the dossier of December 2020

The Covid-19 pandemic and the global economic crisis that it has triggered are a unique occasion to make our economic and social models more resilient. There are opportunities to be grasped, such as the acceleration of digitalization and the local – and sustainable – optimization of companies’ performance. A dialogue.

Alvaro Pereira, Director of the Country Studies Branch at the Economics Department of the OECD

Alvaro Pereira, Directeur des Études nationales du Département des affaires économiques de l'OCDE

Nine months after the beginning of the pandemic, which sectors in your view are the winners, the losers, and those that are in between?

Alvaro Pereira: In many ways, we are all losers, because we are facing the biggest economic shock of our lifetime, with substantial impacts on incomes and businesses. It’s both a supply and demand shock, of unprecedented proportion since the Great Depression. Some sectors are benefiting from the situation: pharmaceuticals and healthcare but also digital services, like streaming and cybersecurity. Major online distributors, like Amazon and others, have seen a substantial increase in online trading and are expected to post record profits.
But others are and will be deeply affected: travel, accommodation, restaurants, and the arts. Independent workers are severely hit, just like many others who are not in a position to benefit from governmental support.
For its part, the utilities sector has been less affected than many. The impact of the crisis was mostly on the demand side, as less income translates to less demand.
Workers in the electricity, waste management and water services maintained infrastructure and allowed us to stay serenely at home during the first wave of the virus. And the public became aware of how critical their work is. As the second wave hits, these services are still as essential as ever.

Régis Calmels: I completely agree: some sectors have clearly expanded through the crisis; companies operating in information and communications technology (ICT) for instance, providing teleconferences and webinar services that have been widely used during the lockdowns, both by businesses and a wider public. In the utilities sector, Veolia has reinforced its position: all our stakeholders have fully understood the importance of providing continuity of essential services for populations and customers in lockdown. That was and remains the crucial mission of our sector.

Régis Calmels, Veolia’s Senior Executive Vice-President of Asia

Régis Calmels - Directeur de la zone Asie de Veolia

What are the primary lessons in terms of the resilience of essential services and their business models?

R.C.: We observed three lessons. Firstly, the robust resilience of our business models. The second point is how Veolia delivered its services by deploying a collective effort based on a decentralized operational organization; a strong local presence supported by highly professional centralized coordination. By coordination, I mean an efficient HQ crisis committee, clear health and safety measures, and extremely efficient communications. Our third lesson points at the need to accelerate our digital systems and solutions development. Their deployment enables virtual visits to our local sites, for example.

A.P.: The utilities sector showed significant resilience during the crisis. In spite of a major shock and lockdown, there was no disruption of service or any major complaints, as the public realized the importance of these essential services. Regarding the economies themselves, resilience additionally came from governments throughout the world very proactively buffering the shock. Our capacity for recovery was also due to the good economic policymaking during the crisis. In the long run, we should prepare ourselves for other shocks. Not necessarily a pandemic, but it is always better to be safe than sorry.

Deep down, are the weaknesses identified leading to a rethink of major (environmental, climate, social and economic) issues and an acceleration of the transition toward equitable, resilient and sustainable societies?

A.P.: The pandemic will lead us to rethink many of our work practices, our organizations, and even the way in which we deal with each other. It will have a long-lasting impact as a factor for change. And the longer we stay under lockdown or the pandemic lasts, the more ingrained the change to our work habits will be.
The silver lining of the pandemic in economic terms, even in societal terms, has been the fantastic acceleration of digital practices: we’ll travel less, work and hold more meetings remotely. Already a critical infrastructure, digital is now vital, as our communications — even face-to-face — rely on it.
As telework is here to stay, we might not need as much office space as we used to: offices will be used for group or business meetings. Some firms already use online solutions extensively. Many companies have understood that if they don’t invest substantially in digital, going forward to interact both with their customers and their suppliers, they will lag behind and lose.

R.C.: Digitalization has indeed appeared as a key resilience factor for most organizations. Furthermore, the pandemic has revealed to many stakeholders the need for a transition to more resilient, equitable and sustainable societies. Through its purpose, Veolia had decided to do so, well before the crisis erupted.
Resilience, fairness, inclusivity, and sustainability are at the heart of the Group’s culture and its strategic “Impact 2023” program.
In Asia, our business is well balanced between our activities for local authorities and our activities for industrial clients. As the risks of these two activities are complementary, the crisis will not fundamentally change our regional “Impact 2023” implementation. On the contrary, we are accelerating the roll-out of our internal tool processes and digital solutions.
We are stepping up the deployment of the 18 priority objectives in Veolia’s Purpose — including reducing GHG emissions, increasing plastics recycling, and improving people’s access to water and sanitation — along with our multi-faceted performance across all our teams and projects, to achieve our ecological transformation ambition.

How do businesses anticipate the changes and find new opportunities?

R.C.: This crisis will generate new standards and practices. Businesses are showing strong innovation capacities. Efficiently structured and digitally operational companies that are fully committed to working with agility and creativity are geared to benefit from new opportunities during and after the crisis. As the world leader in ecological transformation, Veolia is one of them. At the heart of the crisis over the past months, we have been able to make progress and in Asia, for example, negotiate the renewal of important contracts: in Korea with LG Lotte and Kumho, and in Hong Kong with the local authorities concerning the region’s Hazardous Waste Treatment Plant.
Our local teams are well organized and empowered to make decisions in close connection with local authorities — which is crucial for our stakeholders. When a crisis arises, our people know how to react and act locally, while global coordination continues to be ensured at our crisis committee headquarters.
For all these reasons, I’m confident that the crisis is presenting us with strong opportunities to accelerate our development over the short and the long term.

A.P.: There will be tremendous new business opportunities. Everybody started buying online goods during lockdown. We changed the way we purchase our products and interact with companies and even with governments. Changes in business standards and work practices will last, even if it takes a while to complete them. We are at the beginning of an era of major transformation.

“The silver lining of the pandemic in economic terms, even in societal terms, has been the fantastic acceleration of digital practices.”
Alvaro Pereira

Which measures made it possible to avoid economic collapse and what further actions would provide a sustainable solution to the effects of the crisis?

A.P.: Governments’ first reaction was to introduce exceptional measures. Short-time work or job retention schemes would have been unthinkable in major countries, like the UK, a few months ago.
They were a reaction to “stop the bleeding” before the situation got out of control. Without those measures, we would be embroiled in major economic and social crises by now, with millions of unemployed and hundreds of thousands of businesses failing. Substantial packages were brought forward.
Central banks stepped out of the box, reducing rates when they could, injecting money into the economy or providing liquidity.
Policies unheard of in usual economic circumstances were enacted on a large scale, all across the world. The next step involved countries designing economic recovery plans. This is our current stage, despite a second wave of the pandemic.
Once the pandemic is over, with an effective treatment or a vaccine, the priority will shift to recovery plans, to the public investment and reforms required for improving our countries and our societies. Very few countries are in this process today. In a year or so’s time, many more will be discussing reforms. After emergency measures and recovery plans, reforms and economic policy will aim at providing sustainable solutions to avoid massive economic crises ahead.

R.C.: Indeed, many exceptional measures have already been implemented by governments in many countries to support the sectors hit by the crisis. The European Union has shown a dynamic approach to some industries of the future. Similar initiatives have been taken in China, the US and other countries. Agile and innovative companies, willing to improve their operational efficiency while respecting environmental, climate, social, and economic commitments, will provide a key contribution to durably resolve the effects of the crisis.

What is the economic outlook identified for a company facilitating access to essential services like Veolia?

A.P. :A company having provided essential, critical services at the height of the biggest health and economic crisis we have known will be regarded differently in the future. Policymakers are certainly conscious of this shift and are also thinking: “In the third stage of economic policymaking, how can we achieve a more environmentally friendly and sustainable recovery?” The focus on sustainability — on providing water and energy and managing waste in a sustainable way — will be a large part of their agenda.
A company like Veolia can either seize the opportunity... or be surpassed by more innovative competitors.

R.C.: As well as confirming the resilience of our current model, the crisis leads us to further optimize water and energy resource management and encourage waste recovery activities. Saving global resources is a key challenge and at the core of Veolia’s businesses and Purpose. And I can assure you, we will not be found wanting.

“The crisis leads us to further optimize water and energy resource management and encourage waste recovery activities.”
Régis Calmels

What would be the right way to think about 2021 and beyond for an essential services provider like Veolia?

A.P.: If we discover an effective treatment or a vaccine against Covid-19, we are going to see a substantial improvement in expectations. People and businesses will feel a lot more confident; consumption and investment will resume. Let’s hope this happens in 2021; it might not. As a company, you need to be prepared for both scenarios: additional waves of the pandemic or a medical breakthrough making it possible to resume business as usual.
In the latter scenario, it will be a good time for essential service companies and other strategic providers to start thinking: “Okay, how can we learn the lessons from the pandemic in terms of work practices, teleworking, in terms of dealing with our customers and suppliers? How can we take the lessons that we learned over the past months to change our business so that it becomes more profitable, hopefully, but also more sustainable?” This is the key challenge, and should be the main strategic focus going forward into 2021.

R.C.: If the pandemic is brought under control in 2021, we certainly expect business to pick up rapidly. Raising mobility issues and the difficulties of organizing meetings with partners and potential clients, the crisis delayed some of our new projects in 2020. Some developments were postponed, but new opportunities also emerged out of the crisis.
We are continuing to make progress on many items, including our “Impact 2023” objectives. Regardless of when the recovery is complete, we are geared to anticipate our markets’ evolution. I agree that sustainability is now more than ever a central question for public authorities and businesses, and even more so where essential services are concerned.
In this context, the key words that come to mind for 2021 and beyond are, as ever: agility, creativity and efficiency.