Businesses will fundamentally change ‘how they think about work and how work gets done’: Rich Lesser
The coronavirus has shifted the priorities of companies as they shift structurally to weather the pandemic and more long-term, global issues. Rich Lesser, Boston Consulting Group CEO, joins The Final Round to discuss how the pandemic has impacted corporate plans and how the firm is revamping their leadership to help more companies accelerate their transition to more sustainable practices.
SEANA SMITH: Welcome back to "The Final Round." Well, the coronavirus pandemic has shifted consumer behavior and has forced companies to adjust the way they do business as a result. Now, here to discuss a little bit more about this and other factors influencing corporate decisions right now, we have Rich Lesser. He's the CEO of Boston Consulting Group.
And Rich, great to have you on the show. Let's start with the pandemic and really what you're hearing from your clients. Because it's tough to overstate this dramatic impact that it's had really across all industries. Many clients, I know, are Fortune 500 companies. So what are you hearing from these business leaders, and what are their biggest concerns right now?
RICH LESSER: Well, first, it's a pleasure to be with all of you. We're all heading towards the holiday soon, so this is a nice way to wrap up the week. I think, look, what leaders are dealing with right now is first, how to deal with the health situation. What's been very clear in the data is when people don't feel safe, they don't spend.
And so there's been a quite tight correlation where people-- where the infection rates have been high, people ratchet back their activity. So what corporate leaders first worry about is, what are we doing to get the pandemic under control? What can they do to protect their own workers and their own customers and to do that.
I think second, we see a couple massive changes in behavior, consumers shifting to online behavior, employees working remotely in ways we could have never envisioned eight or nine months ago. And so I think part of what companies are figuring out is how do they accelerate the digital journeys they're on, on the one hand, and how do they think differently coming out of the pandemic about the ways that work will be done. How will people connect in-- with each other? How will they be a part of communities, more hybrid work models?
And the final thing is I think we're all aware that the uncertainty going into 2021 is very high. We have pandemic uncertainty. Will we see a resurgence? We have vaccine uncertainty-- how fast, how effective, how well adopted. We have, obviously, geopolitical uncertainty. And of course, there's uncertainty here in the US around the election and what will come afterwards.
So I think from a planning calendar point of view, normally planning starts post-Labor-Day for many companies, and I think we're going to see companies really building more scenario modeling and more of recognition that you've got to plan across a much wider range of the way the environment could evolve than in a typical year.
SEANA SMITH: Yeah, Rich, when you talk about that, it's so interesting because we've been speaking about how this is a structural shift and so many of these companies now are going to look so different in 12 to 18 months than they did just six months ago. And I'm just curious just about some of those long-term economic trends that you think are changing as a result of this pandemic.
RICH LESSER: Well, I think we'll see lasting changes in travel patterns for business. I think we'll see lasting changes in how companies reach their customers, a fundamental shift in the role of online versus offline. I think we'll see businesses fundamentally changing how they think about work and how work gets done, all of those elements.
And of course, the risk management element just took a huge step up. I mean, companies have been doing risk management for a while, but I think the range of shocks that we could see were something most businesses underestimated. And so we'll see more focus on resilience and supply chains, maybe in balance sheets, you know, to be ready for a much more uncertain world.
SEANA SMITH: And Rich, going off that, do you think we'll see more consolidation throughout some of these sectors as businesses do adapt and really reshape their business for this new normal?
RICH LESSER: I think it's really a question of how long the depth of the economic decline lasts. And we still have a lot of people unemployed. That was good to see at least some gain in employment over the last month. You know, normally companies don't want to do acquisitions when equity prices are at this high a level. And so I think as long as the equity markets stays so strong, we may not see it. But if the market stays tough, if it's clear the rebound is going to take longer than we expect, that will probably hit equity prices. And if, at that point, we see that, then I think we would see more consolidation.
AKIKO FUJITA: Rich, you've been talking a lot about consulting with companies who are looking to sort of readjust their models to more sustainability. And when you think back to the beginning of the year, that was such a big topic pre-COVID. You had BlackRock. You had Delta. You had every company out there saying, we've got these grand climate goals. Do you see that being sustained, or are we starting to see some companies back off of maybe some of those promises, especially given the financial situation they're in right now?
RICH LESSER: So I'm not sure they're backing off, but I do think it's-- for many companies, they've put a hold on, you know, where they just focus their energies. I mean, the COVID-19 response requirements, whether it's health and safety or running the business, have been all consuming for many businesses. And you're totally right. I thought in January, February, this was going to be the year where the main focus societally was on climate. And of course, for six months, it's been diverted.
But I was just at the World Economic Forum at a big CEO meeting last week, and a huge percentage of the discussion was back to issues around climate, around societal issues, around how companies live purpose, how we report on a broader set of metrics about what we're doing. And as you know, for us, this was a huge week. An announcement we thought we would do an April around a big climate commitment that BCG's made, we shifted until just Tuesday of this week. And so I think we'll see a lot of companies, particularly with all the focus on climate this month, turning their attention back to the longer-term challenges that have not gone away at all around how we change the carbon footprint of humanity.
SEANA SMITH: Yeah, and Rich, of course, following up on that, your announcement this week was net-zero climate impact by 2030. But how do you exactly plan to do this? I mean, this is such a huge undertaking when we talk about all of these companies now making their announcements. How do we do this in a timely fashion? And then also what do you think are some of the lessons that you've learned and companies have learned from the pandemic that will help your clients and your own company meet those goals?
RICH LESSER: Those are great questions. So just quickly, for us, our pathway has three big components. We want to bring down our own emissions-- our scope one and two, meaning the emissions we directly control-- by 90% by 2025 per FTE and the business travel emissions, which is the bulk of where our emissions come from, by 30% per FTE by 2025. That means real changes in behavior, how we operate, how we leverage renewable energy, and so forth.
Second, we're going to neutralize the rest. So neutralizing is different than avoiding. Think of it as do you keep a forest from being cut down, or do you plant a forest? We're going to shift more in the direction of actually soaking carbon back into the ground, whether it's through engineered solutions or nature-based solutions for the remainder, and actually expect to spend quite a lot to do that-- $35 a ton in '25, going to $80 a ton by 2030, much more than the $3 to $6 when people talk about being carbon neutral per day.
And third, we're going to invest a lot of our own time. We've identified a $400 million commitment over the decade that will make BCG teams and capabilities to help NGOs, to partner with various associations, to be able to contribute our share to moving the world forward, which is, of course, what BCG can uniquely do.
I think what we've learned during the pandemic is we talked about the travel emissions reduction at the beginning of the year, and we've committed internally to do it. But we weren't as confident communicating it externally. Now that we see how work patterns are changing, the different ways to work with clients, the different ways our clients are working within their organizations, we feel more optimistic about the ability to change our own footprint in ways we are aspiring to at the beginning of the year but now we're much more confident we can deliver.
And I think many companies are seeing just different ways to operate. And as they get more urgency on climate, on the one side, and this giant forced experimentation and all the learning that's come from it on the other side, I think we'll see many companies, not all, ready to be bold about trying to make a difference here. And that's the journey we're going to be on for years and years to come.
SEANA SMITH: Rich Lesser, great to have you on. We really appreciate you taking the time to join us, CEO of BCG. We hope to have you back soon. Have a great weekend.
RICH LESSER: You too. Have a good holiday. Thanks.