Amid a bombardment of non-financial reporting and strategic sustainability initiatives over the last few years, the Sustainable Development Goals (SDGs) are starting to emerge as a powerful tool for enabling businesses to achieve real long-term growth. The SDGs are the United Nation’s strategy for raising global social, environmental and economic standards up to 2030. Comprising 169 specific targets across 17 high-level goals, the SDGs follow on from the Millennium Development Goals set in 2000; but this time the focus is on sustainable development across the globe, not just developing nations.
Corporate ambitions to engage in SDGs are high, but we often hear this question: how do SDGs actually relate to business and what are the benefits of adopting them into an organization’s strategy?
Sustainable Development Isn’t Just for Big Business
According to the Sustainable Development Goals Commitment Report 2016, of the world’s largest 400 companies, 300 already report on the inclusion of SDGs in their annual reports. Clearly, there is a benefit to aligning business strategy with the SDGs, but not just for larger corporates.
The Business and Sustainable Development Commission (BSDC) reported that the annual market opportunity created by achieving the SDGs may reach USD $12 trillion by 2030 – a sizeable prospect. This is based on new market demand in a range of sectors, including food and agriculture, cities, energy and materials, health and well-being. Product, process and technological innovation aligned with SDGs are also anticipated to offer significant market opportunity; in particular, renewable energy technologies, circular models (automotive and appliances) and healthcare innovations such as remote patient monitoring. With both the range and size of opportunity, SDGs present a strong business case for both large and smaller organizations.
These market opportunities are also driven by an increasingly informed and discerning customer base – particularly among millennials. While governments have a part to play in helping realize some of the SDGs, the role, and expectation, of businesses in this regard is also significant. Therefore, organizations looking to embed long-term and sustainable growth will need to take notice and act on the goals or risk losing market share. Evidence of this demand can already be seen through the unanticipated growth of ethical financial products on the market aimed at investors looking for SDG-aligned funds, such as the Sustainable Development Goals Fund.
Aside from the additional market opportunities, aligning with the SDGs makes business sense internally. For example, the SDG Climate Action (no. 13) is one of the most adopted goals across industries and regions – simply because reducing CO2 emissions yields tangible environmental and financial benefit.
SDGs Are Much More than Green Wash
Given the array of ethical and environmental reporting frameworks and initiatives open to businesses, it is easy to see how consumers might become skeptical; is it just another marketing ploy? Similar to Science Based Targets, the SDGs can actually provide an additional level of quantifiable and robust evidence that a company is having a tangible and positive impact on the triple bottom line – but only if implemented correctly.
In an ideal world, businesses would be able to positively impact on all the SDGs, but in reality this may not be possible and should not be ignored when reporting publically. When a business first assesses its own performance against the 17 SDGs – normally through some form of materiality assessment – it is highly likely to be supporting certain goals at the expense of others. Rather than ignoring areas of poor performance, acknowledging them alongside successes and identifying areas of corrective action may improve consumer confidence.
Using existing external metrics for measuring performance and setting credible and scientifically robust targets is essential for evidencing how an organization is contributing to realizing SDGs. For example, The Gold Standard is an internationally recognized and respected certification scheme for companies looking to offset emissions by investing in projects, with quantifiable and testable impacts. If an organization chooses offsetting as a means of aligning business strategy with one or more SDGs, reporting on the impact – rather than financial input – adds credibility and avoids external stakeholder disillusionment.
Where to Start?
SDGs offer significant business opportunities with tangible environmental, social and economic benefits – but with 17 interrelated goals to consider, how do businesses practicably go about aligning with them at a strategic level?
The Gold Standard has recently published a best-practice guide to implementing SDGs into business practice, setting out 3 recommended steps organizations can follow.
1. Consideration of all impacts – the SDGs set the bar high so organizations need to be realistic about their impacts and report on areas of improvement as well as successes. To assess how a business might be performing against the goals, consideration should be given to;
- Use of best practice tools to assess performance, such as the GRI materiality principle
- Identifying and communicating both negatives and positives
- Evaluating the organization’s entire value chain – from suppliers to end market
- Involvement of impacted stakeholders during the review
2. Third-party verification and certification – careful selection of external certification programs and assurance is essential for ensuring self-reported data has credibility with external stakeholders, and that an organization is effectively meeting the goals. While there is a general increase in businesses seeking external verification, only a small percentage of schemes are deemed reasonable by the World Business Council for Sustainable Development (WBCSD).
Choosing an internationally adopted and respected external verification program is therefore just as important as the process itself. If done correctly, however, this helps;
- Create credibility around an organization’s commitments and performance
- Make data comparable – and therefore meaningful – to external stakeholders
- Breakdown any potential preconceptions of green washing
- Open up new opportunities for results-based finance models
3. Integrating SDG reporting into internal strategic planning – considering the range of impacts a business strategy might have on the SDGs reveals how an organization is performing, opens opportunities for new markets and can lead to improved efficiency and innovation. Integrating SDG into internal strategy is no small task, so organizations should consider;
- Using existing tools available online, including the SDG Compass and PWC’s Global Business Navigator
- New market opportunities which contribute to the SDGs, such as investing in more water-efficient plant machinery in facilities where water stress is an issue, and may also improve production yield
- Linking the SDGs to human resource programs, incentivizing employees to consider them within their own objectives and roles
Contributed by: Tom Bardwell, Sustainability Consultant, Schneider Electric Energy & Sustainability Services