The way we do business has changed overnight as a result of the Covid-19 virus and parts of the system are breaking because of it. Suppliers are most vulnerable to this sudden change. Guesthouses, travel agents and conference venues that rely on corporate patronage have had the rug pulled out from under them. Others, such as lawyers, consultants, catering and courier companies are also hurting as the corporate machine hunkers down.
We are in a no-win situation. Everyone is compromised, but not everyone has the same ability and reserves to survive the crisis. In many instances, this survival is dependent on big business that has, until now provided, the life blood for smaller ones. The intuitive response by companies in times of uncertainty is to put the brakes on all non-essential activities; work done today to ensure a more sustainable tomorrow is suddenly less vital. On the other hand, actions to improve cash reserves are top priority. The corrective action will naturally focus inward – on the wellbeing of the business, but without regard of the knock-on effects of decisions taken to others in the value chain.
When partners pay the price
Consider an action by Booking.com to offer refunds to customers who had opted for discounted but non-refundable guesthouse bookings. "We expect partners to refund any prepayment and waive any cancellation costs (fees, expenses and/or other amounts) in situations where the guests/travellers requested cancellations as a result of Force Majeure," the company explained in a notice to its affiliated guesthouses, which was updated on 27 March 2020. This includes "all reservations made for properties in South Africa with a check-in date between 26 March 2020 and 16 April 2020 (including). Domestic travel is included in the Force Majeure conditions."
What are the consequences of this for guesthouses already critically threatened by cancelled bookings due to the virus outbreak? Booking.com refers to these guesthouses as partners, but where is the partnership if unilateral decisions are taken under the guise of Force Majeure, without any compromise or consultation? Why was there not an opportunity given to postpone the booking – or meet the cancellation costs half-way?
There are other examples where co-operation and agreement are being adopted as the way forward, such as pre-booked conference venues that are not enforcing rights but instead negotiating alternative dates, or consulting assignments where e-conferencing engagement is replacing physical workshops and meetings. Alternative solutions may not be as good as original plans, but can still get the job done.
Opportunities for growth; not demise
There have been other technology-based companies that responded to their partners with creativity. Before lockdown, Uber Eats started a marketing campaign to provide people working from home with lunch and dinner. Launched on 17 March, this initiative aimed to protect their drivers and partner restaurants, both financially and health-wise.
"We expect that meal delivery could also help support restaurants who may be seeing reduced sit-down guests where social interactions and gatherings have been discouraged," they explained in an email. They also detailed ways in which their delivery staff would be protected when making deliveries and stated they would provide financial assistance to any Uber employee impacted by Covid-19.
During the lockdown, the above initiative was put on hold, but there are other initiatives trying to help the restaurant industry from collapsing. This week, restaurant payment provider Zapper launched a donation feature on its app for customers to financially assist their favorite restaurants. "Together we can make a difference," the told customers in an email.
The power to protect your suppliers
Those with influence over their suppliers would do well to exercise the power they have to honour existing agreements to the extent possible, for instance by:
- Agreeing to alternative work methods, delayed delivery and rescheduling of work
- Continuing to pay contractors for monthly services – partially if need be if the scope of work has to be adjusted
- Not delay payments – suppliers are likely more sensitive to cash flow constraints than large business.
It isn’t necessary in times like these to be a corporate bully by unilaterally and unequivocally pursuing your legal Force Majeure right. Consult with those exposed, be reasonable, perhaps agree to share some of the pain, see if you can work something out. This crisis will end. It is not in anyone’s interest to come back to an obliterated supply chain when it does.
* Nick Rockey and Matthew le Cordeur are from Trialogue, a consultancy that focuses on corporate responsibility issues, as well as sustainability and integrated reporting. Views expressed are their own.