Trucost analysis of 13 corporates suggests alignment with UN Sustainable Development Goals is already generating returns and helping identify risks
The business case for driving pursuing globally agreed sustainability goals is often laid out in terms of estimates and projections of future earnings. And on paper, at least, the case is certainly hard to argue with.
According to the Business & Sustainable Development Commission, achieving the UN's 17 Sustainable Development Goals (SDGs) could open up $12tr of market opportunities in food and agriculture, cities, energy and materials, and health and well-being alone, creating 380 million new jobs by 2030 in the process. Meanwhile, the theory goes, we should all find ourselves living on a far cleaner, greener, fairer, more secure, and more prosperous planet once the goals are met.
All that, you would think, goes quite some way towards justifying and incentivising the $5-7tr of investment the UN expects will be needed to meet the SDGs through to 2030.
Yet, projections aside, there have to date been few attempts to actually quantify the impact the SDGs are already having on the global economy, despite the fact 193 countries, 9,000 companies, and investors worth more than $4tr in assets have so far pledged their support for the goals. However, a new tool developed by ESG analyst Trucost looks to do just that.
Released yesterday, the analysis of 13 major corporates makes for pretty positive reading, demonstrating that business strategies aligned with the SDGs delivered hundreds of billions of dollars in revenue last year alone.
The startling findings are the result of a new SDG Evaluation Tool developed by Trucost which provides quantitative analysis of company performance against the SDGs across the value chain, from raw material inputs to product use and disposal, within the context of a firm's geographical location.
Trucost, which is part of S&P Global, began working alongside multiple companies, investors, and academics earlier this year to develop the set of metrics, which are aimed at providing market participants with the data transparency needed to accelerate progress on the UN goals.
Among the 13 companies which agreed to take part in the inaugural application of the Tool were renewables firms Iberdrola and Ørsted, as well as a variety of major corporates such as Rockwool, the Walgreens Boots Alliance, HP and, of course, S&P Global. The advisory panel for the research, meanwhile, included the London School of Economics, the UN Global Compact and the World Business Council for Sustainable Development.
Overall it found the 13 companies generated almost $233bn of 'SDG-aligned' business revenues in 2017, equivalent to as much as 87 per cent of their entire revenues that year. If the SDGs represent the world's biggest to do list, then the work is certainly very well paid.
Libby Bernick, managing director and global head of corporate business at Trucost, welcomed the findings. "Working with a diverse range of companies and market specialists has enabled us to develop a robust framework to assess SDG-aligned business value so that it is comparable across business activities and regions," she added. "We are grateful for the collaboration of our program participants in helping to address growing demand for holistic SDG metrics to meet the decision-making needs of investors, company boards, and other market participants."
Breaking down the findings, most of the companies' revenues - 79 per cent - derived from products and services which contribute to the SDGs. The results also found companies created "positive contributions" across all 17 SDGs, but most significantly in relation to green economy priorities such as Affordable and Clean Energy (SDG 7), Climate Action (SDG 13), and Decent Work and Economic Growth (SDG 8).
But revenues weren't the only business benefits uncovered by the SDG Tool. Trucost said the analysis shows how working towards the SDGs can help catalyse new ways for companies to think about social and environmental issues - and to guard against risk. After all, the Tool is designed to help companies identify SDG-aligned business value, prioritise risks and opportunities, and inform sustainable growth strategies, not just generate raw revenues.
The companies taking part in the Tool were found to be most active in managing SDG risks associated with responsible consumption and production, including waste and resource efficiency, as set out in SDG 12, as well as issues arising from SDG 5 on gender equality and SDG 16 on governance. But while some activity was targeted at addressing supply chain risks, especially with regards to worker conditions, governance, and climate change, the analysis highlighted a need to better manage ESG risks right across the value chain. Moreover, a lack of consistency of action was found across the SDGs, the Tool found, with work on ocean health, hunger and malnutrition largely missing from the 13 companies' sustainability strategies.
As Trucost points out, the analysis shows how such tools and modelling can help screen value chains for SDG risks that companies might otherwise not have been aware of, thereby encouraging better environmental and climate risk disclosure. And given the relative lack of awareness - despite growing take up - of the guidelines set out by the Taskforce on Climate-related Financial Disclosures (TCFD), any work to boost understanding of the financial impact of climate change and wider environmental challenges on business is surely welcome.
"The SDGs can encourage companies to consider SDG-related issues that are not commonly monitored and reported in the corporate community, but are still important to the achievement of the SDGs," the analysis states.
Given so many firms remain off-track with just 12 years to go to meet the SDGs, there understandably remain significant concerns about the world's ability to deliver on the 17 goals it has set itself by 2030. Far more finance is clearly needed to accelerate action, alongside technological innovation and drastic improvements in the policy environment. But with evidence now emerging that the SDGs are already helping to generate hundreds of billions of dollars of revenue and identify risks at little over a dozen firms, the hope remains that more companies will start to recognise that the huge opportunities that come from embracing sustainable business models are not just a future projection, they are also an existing reality.