Companies Committed to ESG Recover Faster from Crises

Indonesia is facing a polycrisis situation, where several global crises are interconnected and exacerbate one another. According to Jalal, Chairperson of the Advisory Board of Social Investment Indonesia, companies that maintain a high commitment to social responsibility and sustainability will be better protected. Indeed, companies with ESG (Environmental, Social, and Governance) commitments will be stronger in facing crises compared to their competitors. Amid the crisis, the financial performance of companies that decide to continue ESG, CSR, and sustainability programmes does experience a decline. At the same time, he said, the decline in financial performance for such companies will be smaller than for those that do not have a high commitment to ESG, CSR, and sustainability. “They decline together, but the decline is not as deep as for those with low CSR, ESG, and sustainability performance. When the bounce-back period occurs, meaning the crisis tends to end or pass, what will happen is that those with high CSR, ESG, and sustainability performance will return to their original position more quickly,” Jalal stated. Jalal mentioned that there is already research stating that companies can have antifragile strength. Thus, it is not just returning to the original position, but producing even better performance. One reference is the book Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb. ESG should be treated by companies as an investment, not a cost. If a company views ESG as a cost, all its expenditures will be cut during a crisis. Whereas if a company views ESG as an investment, it will think about how to continue pursuing its goals to achieve them. Companies with high sustainability commitments see crises as a test. Therefore, companies need to face crises with various strategies and tactics, rather than reducing their performance. “But they may need to rethink efficiency, rethink what and other ways to achieve the targets that have been set. So there is no reduction in targets at all, no decline in performance at all,” Jalal said.