Companies and social organisations in times of COVID-19
Simon Kaiser, Analyst, Wider Sense
The current medical and economic crisis in the context of the COVID-19 pandemic confronts companies and social organisations with challenges hitherto unknown both in character and scale. The German case is no exception. After a few days of shock-induced paralysis when crisis hit in mid-March, German companies responded with a host of social measures, ranging from the reactive to the substantial.
This came in various forms: Beverage companies Jägermeister and Beck’s, consumer goods conglomerate Beiersdorf and chemicals producer BASF, for instance, all started to use productive capacities to produce or support the production of sanitizers. Software company SAP started a digital learning initiative that provides interactive educational content and launched its Purpose Network Live, a virtual platform for different actors to co-innovate COVID-19 solutions together. Bertelsmann media companies provide information on the latest public health developments, service topics, measures and tips. Other examples of philanthropic donations which did not originate in companies’ own value chain were the donation of 200,000 respiratory masks by automotive corporation Volkswagen or pharmaceuticals company Bayer’s donation of EUR 1 million to hospitals in Lombardy. To support staff while simultaneously ensure the smooth running of supermarkets, fast food chain McDonalds and discounter Aldi started to swap staff.
One of the major differences in German corporate COVID-19 engagement compared to other countries, such as the US, is that companies have focused less on policies to support workers. This can be traced back to safety nets in the labour market which have long been instituted by the German state. One such arrangement is ‘Kurzarbeitergeld’(short-time work allowance) whereby workers are kept on in times of crisis – but for fewer hours and partly subsidized by the state – which proved highly effective during the Global Financial Crisis. Additionally, the federal government was quick to adopt radical measures to keep the German economy afloat. So far, it has committed to unprecedented EUR 1.17 trillion (GBP 1.05 trillion) in budgetary measures and guarantees for employees, companies and the self-employed.
As elsewhere, in addition to public and private endavours, German civil society has launched a variety of initiatives, bundling resources, or aiming to raise external funds. Some initiatives have aimed to directly benefit the COVID-19 relief efforts, for example by funding mobile medical and testing facilities or providing daily supplies to quarantined individuals and people in systemically relevant jobs.
Others have been targeted at those for whom the sudden stop of economic activity has meant economic hardship, such as affected musicians, individuals engaged in local football clubs, small voluntary organisations, or, more generally, people in economic plight in a given region.
Different commitments from (groups of) funder organisations were made to keep up or increase support of their grantees during times of crises. In late March, a call under the aegis of the Association of German Foundations appealed to its members to continue supporting grantees, become more accommodating towards financial deadlines and impact milestones, increase non-earmarked funds and cooperate closely to find alternative event and project formats. This call was subsequently signed by more than 100 German foundations and other actors, including sector heavyweights Carl-Zeiss-Foundation, Robert Bosch Foundation and Software AG Foundation. On the other hand, the great mobilisation of additional resources that has occurred, for instance, in the UK and North America, has mostly not materialised in Germany, which may – again – partly be due to the state-funded corporatist arrangements that have long characterised its social sector.
Public-third sector cooperation during the crisis has, so far, produced a mixed picture. On the one hand, the federal government tried early on to mobilise civil society towards facing the pandemic. In late March, the federal government and different organisations from the social entrepreneurship space carried out a hackathon under the name #WirVsVirus (We vs virus) which had more than 28,000 individuals working on 1500 solutions, widely touted as a great success. On the other hand, the virus and reactive measures have not only hit the economy but large parts of civil society too have come to a standstill, as exemplified, for instance, by the fact that almost half of the German food banks were out of service at one point.
Many third sector organisations were among those most affected by the crisis, lacking income from events, workshop and services subcontracted from government agencies. While the federal government was quick to assist businesses, it did not create a similar umbrella for civil society, triggering a campaign by the Green party and different initiatives from state governments such as in Berlin and Rhineland-Palatinate. The federal government has not, for instance, instituted a central point of contact as has Switzerland. A part of the problem may be that civil society, with the likely exception of the large corporatist welfare associations, lacks a singular voice campaigning on its behalf.
It remains highly uncertain what the pandemic will mean in the long term. So far, Germany has weathered the crisis relatively well and largely avoided the deeply traumatic experiences of Italian or US populations. However, if this time really is different, as Harvard luminaries Carmen Reinhart and Kenneth Rogoff recently proclaimed, the world is about to enter a period of prolonged economic struggles. The German economy, which drew much of its decade-long economic boom from a strong export sector, will pay a heavy toll. With globalisation and financialization on the retreat, German foundations too may be less able to draw on the generosity of their corporate benefactors and the returns from international financial markets.
The role of government has been on the rise, not only in Germany. The ambition not to increase public debt, a principle so deeply engrained in recent years’ policy making that it was even added to the constitution, was abandoned without further ado in the first days of crisis. In late May, the federal government took a 20 percent stake in Lufthansa, a struggling air carrier – a fate which could loom for various large corporations.
Simultaneously, as in other countries, the crisis has called widespread attention to the notoriously underpaid and underappreciated professions at the figurative frontlines of the pandemic, prompting some soul-searching even among the traditionally uninclined. While austerity has never been as harsh and the withdrawal of the state from the economy never as complete compared to the UK, the crisis could trigger a comeback of the state, including diminished leeway of private actors and stricter legal obligations for companies.
With this, the debate around corporate purpose, which had somewhat timidly started to become more salient across German corporate boardrooms before the crisis, could become more pronounced, as society increasingly expects companies to contribute their share. The backlash that apparel manufacturer Adidas had to face in late March when it announced that it would no longer pay rent on its deserted stores (the company subsequently conceded) may provide an early indication of this trend.
The challenge will be to transform the outburst of corporate engagement in the early days of the crisis into long-term oriented strategies for social commitment, transforming corporate business and culture. Similarly, foundations and the social organisations they fund will be called upon to counter new and reinforced social inequities in a much more uncertain environment – in which major challenges such as climate change have not become less urgent. On the other hand, German federal and state governments have to realise that focusing on stabilising the economy is not enough – that an effective civil society is vital to face old and emerging challenges alike.
Thus, as companies and civil society have to think strategically what their role in COVID-19 recovery and realignment can legitimately be, state institutions must consider how they can facilitate these private efforts, through systematic support and cooperation.