The UN's Sustainable Development Goals will change the world for the better, but only if businesses play a full role
The death of former UN Secretary General Kofi Annan last month sparked an avalanche of praise for one of the world's greatest modern statesmen. There were tributes to his role as a diplomat, his Nobel Prize, and his revitalisation of the UN as a peacekeeping body. But the warm and respectful obituaries made surprisingly little of what Annan regarded as his greatest achievement.
It was in 2000 that Annan convened the Millennium Summit and wrapped up a two-year consultation process with the release of the Millennium Declaration and its bold assertion everyone has a right to freedom, equality, and a standard of living that leaves them free from hunger and violence. The Declaration would be followed by the Millennium Development Goals (MDGs), which set out eight goals and various sub-targets that aimed to direct the world's development efforts for the first 15 years of the new century.
Having gained a Masters degree in management from MIT in the early 1970s, Annan applied the basic business principles of setting clear and ambitious targets, alongside the chief exec's mantra of "you can't manage what you can't measure", to bring some much needed clarity to international development agendas. This new approach, and the celebrity-fuelled campaigns and concerts that became the public face of the goals, inevitably attracted criticism from some quarters. It could also be reasonably argued the various targets to end extreme poverty, improve maternal and child health, promote gender equality, combat diseases, and achieve universal primary education simply built on existing trends. But by the time 2015 came around the UN was able to confidently state the MDGs represented "the most successful anti-poverty movement in history".
The primary target to halve the proportion of people living in extreme poverty on less than $1.25 a day was met, overseas development assistance increased 66 per cent between 2000 and 2014, 6.2 million malaria deaths were averted and 37 million lives were saved through action on tuberculosis. Infant and maternal mortality rates plummeted, and gender parity in primary schools became the norm in the vast majority of countries. But the MDGs also delivered another less tangible but no less important legacy for Annan. They demonstrated, in the words of the UN, that "goals and targets work". They laid firm foundations for a new approach to development that promised to deliver on the MDGs' rallying cry to "Make Poverty History". As then UN Secretary-General Ban Ki-moon observed in 2015, "we now know that extreme poverty can be eradicated within one more generation". The only question was how?
The UN's answer was the MDGs' successor, the even more ambitious and wide-ranging Sustainable Development Goals (SDGs). Hailed variously as the international community's "roadmap" or "flightpath", the "closest thing the world has to a strategy", and the planet's "most important to do list", the SDGs have secured plenty of monikers in the three years since their unveiling, all of which emphasise their unprecedented reach and scale, as well as their primary purpose as critical signposts for political and business leaders alike.
"What is so potentially transformative is this was a crowd-sourced agenda, bringing together government, business, and civil society," reflects Rachel Kyte, chief executive of the UN-backed Sustainable Energy for All (SEforALL) initiative. "It really is the best blueprint for how we want to be moving the economy forward." As a celebrity-dominated video released to mark the launch of the SDGs put it, here was an agenda developed and delivered by "we the people".
But what is it that makes the SDG blueprint so important? How have they come to secure endorsements from the world's largest businesses, the financial community's most powerful investors, and even Kanye West? This investigation - which marks the launch of the new BusinessGreen SDG Hub, supported by BNP Paribas - spoke to a raft of UN and business figures who are involved in the development and delivery of the SDGs to explore how this global roadmap emerged and how it is poised to quietly direct the global economy over the next decade, shaking up established business models and driving an epoch-shaping industrial revolution in the process.
Because that is the most important and yet least well understood aspect of the SDGs. It is easy to see them as a simple replacement for the MDGs, another set of government development targets that may have some modest implications for businesses. But if you look at the goals in detail it quickly becomes clear they are much more than that. The promises to tackle climate change, deliver sustainable production and consumption, build liveable cities, ensure real equality, and achieve true environmental sustainability imply a multi-trillion dollar investment programme and fundamental re-engineering of the global economy. They point to the creation of exciting new markets, as well as a minefield of stranded assets for companies that fail to respond to the new policies and technologies that will be essential to meeting the SDGs. They also suggest that if the SDGs are met by 2030 the world will have solved virtually every one of the economic, social, and environmental challenges it currently faces. They are that big.
For many observers the key to the SDGs importance is found in three areas: their complexity, their universality, and the complete absence of viable alternatives.
'For the UN the SDGs are it'
If the MDGs were a checklist, the SDGs are a multi-faceted management matrix, imposing both goals and boundaries while extending far beyond the traditional development axis of governments and NGOs into the world of business and investment. They are integrated and interconnected, or, to deploy the business school cliché, truly holistic.
Steven Stone, head of the Resources and Markets Branch at UN Environment, recalls this sophisticated full-spectrum approach was driven by governments. "For the UN the SDGs are it, it is our roadmap for the next 15 years," he tells BusinessGreen. "And it wasn't set by the UN, it was set by the countries… It was heads of government coming together and saying 'we need to develop, but we need to do so in a way that does not destroy our environment and does not destroy our base of wealth'. That was a big breakthrough."
James Gomme, director of SDGs at the World Business Council for Sustainable Development (WBCSD), agrees the "breadth and ambition" of the SDGs marked a departure from the MDGs' narrower focus on specific target areas. "It brings everything together and has a vision," he says. "It used to be development was in one bucket and the environment was in another bucket and economics in another bucket, but this makes the interlinkages clear."
The net result is a framework of 17 goals - as opposed to just eight for the MDGs - covering everything from traditional development ambitions, such as 'No Poverty', 'Zero Hunger', and 'Good Health and Well-Being', through to social and economic goals, such as 'Reduced Inequalities', 'Decent Work and Economic Growth', and 'Sustainable Cities and Communities', via demanding environmental targets, such as 'Affordable and Clean Energy', 'Climate Action', and renewed efforts to protect 'Life Below Water' and 'Life Below Land'.
Moreover, the goals are underpinned by 169 targets and even more official indicators designed to ensure progress is maintained against a raft of metrics. These indicators cover everything from halving the number of deaths and injuries from road traffic accidents and ending malnutrition to doubling the global rate of improvement in energy efficiency and ending the physical punishment of children. Taken as a whole, the ambition is so bold and all-encompassing the goals point to a borderline utopian world.
The SDGs have turned every country into a developing country - James Gomme, WBCSD
This unprecedented scope can be overwhelming, but for many stakeholders the complex nature of the SDGs is one of their biggest strengths. The MDGs may have had a goal to "Ensure Environmental Sustainability", but it wasn't core to the endeavour and the targets were too easily ignored. In contrast, the SDGs do not allow for the kind of short-termist trade-offs that have to date undermined efforts to tackle escalating environmental risks.
"The beauty of the SDGs is it is the first time all the global issues are in one place and you can't prioritise one over the other," argues Anjuli Pandit, UK head of corporate sustainability at BNP Paribas. "We've all heard the arguments about how some countries may need new coal power to drive development. But the SDGs mean you have to find a way to deliver energy access and drive development that is harmonious with all the SDGs. You can't discount any of them, as they are all equally important."
Kevin Moss, former head of the Net Good programme at telco giant BT and now director of the Business Sustainability Center at the World Resources Institute, has a useful way of unpicking the complexity contained in 17 different goals, each with their own competing pressures and demands. "For me the goals coalesce into three groups," he explains. "What we want to achieve for society, that's areas like health and nutrition and ending poverty; goals that define the boundaries within which we have to achieve those aims, that's the environment goals and the planetary resource goals; and then there are signposts to how we achieve it, that's areas like peace and justice, equality, partnerships, and sustainable consumption."
The distinction between goals, boundaries, and signposts maps pretty effectively on to how businesses often see the world, Moss argues. "The resource boundaries we can't cross define our safe operating space, while the other goals set out what we want to achieve," he continues. "That basically adds up to a set of defined design criteria, and companies are very good at competing in an operating space once it is clearly defined."
'The SDGs are universal'
The other big difference between the MDGs and the SDGs is provided by their universality. "The MDGs were largely about the global North's commitment to seeing countries in the South develop - it was a one-way flow," reflects Stone. "But the SDGs are universal. These are goals that have been accepted as pertinent and relevant to all countries... The US and Europe have the same goals to Burkina Faso or Ghana. That is a really important mind-set shift to say 'we have a common set of goals'."
It is a point echoed by WBSCD's Gomme. "The MDGs were a development agenda with a rich country lens looking at poor countries," he argues. "The first thing about the SDGs that strikes is that it is a really universal agenda. The line we have here is 'they have turned every country into a developing country'. Everyone has a real contribution to make."
Even the traditional development-focused goals contain targets that cover industrialised and developing nations. SDG1's stated aim is to "end poverty in all its forms everywhere". As such target SDG1.2 refers to halving poverty rates according to national definitions, while target SDG1.3 pledges to ensure all people "have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services". It is an agenda for the homeless and impoverished in the world's richest nations, as much as it is a goal for those still living on less than a dollar a day in the world's poorest countries. Similarly, SDG2 may focus on ending hunger, but it also contains targets to improve nutrition, tackle obesity, and promote sustainable agriculture that all countries have to engage with.
Coming four months before the Paris Agreement was delivered in December 2015, the SDGs helped establish the 'we're all in it together' ethos that was to underpin the historic climate accord. For industrialised nations it was no longer enough to fund poverty reduction initiatives in developing economies - the SDGs meant they also had to tackle relative poverty and poor health outcomes in their own countries, while slashing carbon emissions and embracing more sustainable production and consumption patterns.
Consequently, it was an agenda every country on the planet was comfortable signing up too, even if their commitment to each and every goal and target could sometimes be questioned. And it was also a programme many leading businesses felt they could engage with.
The SDGs were finalised following the largest consultation exercise the UN ever carried out, bringing multiple perspectives to bear and ensuring the private sector and civil society felt a degree of ownership over the resulting goals. "Businesses were involved from the outset with other stakeholders," recalls Gomme. "A number of our member companies were engaged with it during the consultation phase. As a result, the SDGs have had more of a business impact than the MDGs."
Libby Bernick, global head of corporate business at environmental data and risk analysis firm Trucost, admits to being pleasantly surprised at the level of corporate engagement with the SDGs in the years since their launch. "For the past two years I've been travelling and meeting with [Trucost parent company] S&P Global's customers in all our markets to talk with businesses and investors about the SDGs," she says. "We were quite surprised by the level of market readiness. I thought it would be mostly a European initiative, but there were surprisingly high levels of interest from Asia Pacific and North America as well… They want to connect their existing sustainability programmes to the wider SDG cause, because in doing so there is much better chance of solving some of the big challenges of our time." This approach can also strengthen the influence of the sustainability department across the business, she argues. "A lot of sustainability programmes can be a bit intangible to many businesspeople," she adds. "It can be hard for them to understand the business value or even the environmental and social value. The SDGs make that realisation a lot easier."
Unsustainable development is unsustainable
This realisation is driven in large part by the final defining characteristic of the SDGs: the fact there is no viable alternative. By definition unsustainable development is unsustainable. It is no coincidence the SDGs and the Paris Agreement were brokered at a point when escalating environmental impacts and social tensions were not only impinging on the public consciousness, but were also being felt by corporate and political elites. In the run up to the SDGs being agreed inequality and climate change regularly topped the agenda at the Davos Summit. Global businesses started to echo environmental campaigners' warnings that "there are no jobs on a dead planet".
There is no such thing as business as usual - Aris Vrettos, Cambridge Institute for Sustainability Leadership
The first two annual progress reports published by the UN following the adoption of the SDGs hammered home this stark reality. While the patchwork of progress that characterised the delivery of the MDGs continued with encouraging moves forward in areas such as education and combatting disease, alarm bells were sounded over the first increase in levels of global hunger since the turn of the century - a worrying trend the UN confirmed this month has now stretched to a third year, sparking fresh warnings the long-feared impact of climate change is starting to be felt on food supplies. Metrics covering areas such as air pollution, desertification, the gap between rich and poor, and levels of violence, are similarly fuelling concerns that environmental and social pressures could quickly undo some of the wider development progress made since the turn of the century.
These trends have worrying implications for businesses that fewer and fewer corporate leaders are able to ignore. "One of the big components of the SDGs is the way they highlight that businesses can't succeed in societies that are failing," reflects WBSCD's Gomme. "Just looking at some of the environmental threats that are going to have big impacts in the next 15 years you can see how businesses need to engage. There will be big opportunities from new markets, but there is also the other side - the risk side, which is harder to quantify but hugely important. If we carry on the same path businesses will find it harder to operate no matter what they do… There are risks of inaction - if you don't start thinking about these issues you will find it harder to operate, whether that is through regulatory risk, license to operate risk, operational risk, or competitive risk."
It is a point echoed by Aris Vrettos, director of open programmes and international markets at the Cambridge Institute for Sustainability Leadership (CISL). "Among the companies we work with there is a clear business case for delivering the SDGs and taking a lead in doing so, and clearly no business case for inaction for there is no such thing as business as usual," he says. "The fact is no one knows for sure what happens if ecosystems can no longer provide critical services, but no one wants to find out."
Every sector is facing these risks, he continues. "If you are packaging company, contributing to deforestation is, by definition, not sustainable either for society, or for the company, in the long term," he says. "If you are an automaker still working on the premise it is OK to build a fossil fuel engine factory, then you risk facing big stranded assets. If you are a retailer in a city with massive inequality that creates challenges opening up new markets. If people's basic needs are not met they will prioritise food over medicine, and if you are healthcare company it becomes very hard to sustain growth. If you are a building company and you don't adapt then buildings will become uninhabitable, as we saw this summer. The flip side to this is that the SDGs represent a great opportunity for companies that adapt their business models to align with the SDGs; reversing deforestation; supporting the development of stable and prosperous communities and finding market opportunity doing so."
Governments of all stripes are reaching the same conclusion, as they recognise that they can't meet the public's expectations and address escalating risks without a comprehensive approach that covers the food, water, energy, climate, resource security, health nexus. Inaction on climate change triggers a vicious circle where air pollution, food, water, and security risks all escalate. In contrast, effective action to tackle greenhouse gas emissions and prioritise greener infrastructure should create a virtuous circle of better health outcomes, improved economic efficiency, and enhanced security. Jake Reynolds, executive director for sustainable economy at CISL, puts it succinctly: "There is a realisation you don't have a business when inequalities trigger revolutions or people are too poor to buy products, or climate risks make insurance premiums so high you can't get cover."
'An economy of abundance'
As such, the SDGs - taken in conjunction with the Paris Agreement - provide a crystal clear market signal for businesses and investors. They flag how meeting the targets on climate action, sustainable consumption, and air pollution, to name just three examples, will create huge stranded asset risk for businesses that fail to respond. But at the same time they point to the multi-trillion dollar markets that will be created as economies move on to a sustainable development path and actively pursue a transition towards greener infrastructure and business models.
In the wake of the SDGs being finalised, the 2016 Davos Summit saw the Business and Sustainable Development Commission begin work on a study to explore the scale of the economic opportunities that would be unlocked by the goals. A host of high profile CEOs and investors, including Unilever's Paul Polman, Alibaba's Jack Ma, and Aviva's Mark Wilson, as well as Sharan Burrow of the International Trade Union Confederation and Lise Kingo of the UN Global Compact, were appointed as commissioners and tasked with exploring the full gamut of business implications arising from the SDGs.
The result was the Better Business, Better World report, a great starting point for corporate discussion of the SDGs. "It's a really good piece of work," says Reynolds. "They looked at the scale of investment necessary to deliver solutions to the SDGs and the kinds of industries we can expect to lead them - existing and emerging ones like micro-insurance, telemedicine and new forms of mobility. They asked 'if we were to meet the SDGs what industries would we need and what investment would be required'."
The headline conclusions are startling. The report estimates meeting the SDGs would create $12tr of economic opportunities through to 2030 in just four sectors: food and agriculture, cities, energy and materials, and health and well-being. "Achieving the Global Goals would create a world that is comprehensively sustainable: socially fair; environmentally secure; economically prosperous; inclusive; and more predictable," the report states. "They provide a viable model for long-term growth, as long as businesses move towards them together. The goals are designed to interact, so progress on them all will have much more impact than achieving only some. Of course, the results will not be heaven on earth; there will be many practical challenges. But the world would undoubtedly be on a better, more resilient path. We could be building an economy of abundance."
It sounds hugely optimistic and the enormity of the projected economic boost will inevitably invite scepticism in some quarters. But when you consider that SDG7 alone involves bringing clean energy to over a billion people, it is easy to see how investment opportunities quickly scale. The Better Business, Better World report points to 60 "hotspots" across the four sectors it analyses where enormous market opportunities are on offer. For example, in cities energy efficiency, fuel efficiency, electric and autonomous vehicles, office sharing, smart meters, and modular buildings - to name but a few - all represent multi-billion dollar markets that will expand rapidly as a result of the pursuit of the SDGs. In energy and materials it highlights the myriad opportunities presented by renewables, resource recovery, circular business models, carbon capture and storage, green chemicals, and a host of other nascent clean tech industries. The comprehensive nature of the SDGs means these rapidly evolving markets should be replicated in every corner of the global economy.
"The total economic prize from implementing the Global Goals could be two to three times bigger, assuming that the benefits are captured across the whole economy and accompanied by much higher labour and resource productivity," the report says of its $12tr headline estimate. "That's a fair assumption. Consider that achieving the single goal of gender equality could contribute up to $28tr to global GDP by 2025, according to one estimate. The overall prize is enormous."
It is a framing that should resonate with business leaders, argues Reynolds. "The smart question is 'do you want to be part of a $12tr investment opportunity'?" he says. "Many businesses would say 'yes', in fact they would say 'I would do anything to be part of that'. Meeting the SDGs needs to be seen not as a cost, but as an investment opportunity. A future-proofed business strategy."
'This is the only growth paradigm'
Ian de Cruz is global director at P4G, a government and business backed initiative to catalyse "real world solutions" for the SDGs. It is providing funding for a range of cutting-edge projects designed to stimulate new green markets in emerging economies, ranging from food waste reduction initiatives in Indonesia to plastic recycling processes in Kenya. He is confident that currently small markets have the potential to scale rapidly as governments target resources and policy levers at delivering the SDGs.
"One practical example is a project we are working on to pilot electric buses," he says. "What if this becomes an area where we can aggregate demand and show that the market is there? If you can demonstrate that scalability what does that mean for bus companies and financiers? Electric buses help meet SDGs on cities, climate change, air pollution, access to mobility, and jobs. And when you look at the lifecyle costs they are much lower than current technologies. There are new business models to be unlocked that are very complementary to the SDGs and the Paris Agreement."
These emerging technologies are starting to gain traction with both business and political leaders, he argues. "You see in China now, this acceptance that green growth and green business is a source of economic and competitive advantage," he says. "It is under-reported, but the real opportunity is when you recognise there are businesses to be grown, markets to be opened up, profits to be made in these areas. That is the momentum, as people realise this is not an alternative growth paradigm, this is the only growth paradigm into the future."
'Detached and rootless'
It may be the combination of reduced risk profiles and emerging market opportunities that drives most businesses engagement with the SDGs, but there are other less tangible benefits on offer as well. Virtually everyone we spoke to for this article pointed to the growing pressure on businesses from consumers, civil society groups, and employees to demonstrate a sense of purpose beyond simple profit maximisation, and the way in which the SDGs can help promote a firm's wider social and environmental agenda.
Writing in the foreword to the Better Business, Better World report, Unilever's Paul Polman and former UN deputy secretary general Lord Mark Malloch-Brown argue businesses have little choice but to embrace the renewed sense of responsibility that is embodied in the SDGs. "One casualty of the general meltdown in support for elites is trust in business," they write. "Big business and major financial institutions are increasingly perceived as detached and rootless, more willing to justify themselves to each other at meetings like the World Economic Forum than to national legislatures, let alone at town halls in the communities where they operate. So at the core of our argument is also the need for business to regain the licence to operate... Business will need to demonstrate that it pays taxes where revenue is earned; abides by environmental and labour standards; respects the national politics and customs where it operates; integrates social and environmental factors in its investment decisions; and, above all, engages as a partner with others to build an economy that is more just."
It is a compelling argument, even before you consider the immense commercial gains on offer, and yet for a combination of reasons there is a widely held perception that corporate engagement with the SDGs has struggled to cut through beyond the 'usual suspects'.
A report earlier this year from PwC argued that while a growing number of businesses were talking about SDG strategies, many were only paying "lip service" to the goals. The survey analysed the reporting of 470 businesses in 17 countries and found relatively widespread engagement with the UN's goals, alongside a general failure to draw up comprehensive strategies in support of them. "We found 37 per cent had selected priority SDGs for their business and another 25 per cent had mentioned them in their reporting - taken together that is 62 per cent that are engaging at some level," explains Louise Scott, director of global sustainability and SDG lead at PwC. "But you can look at it the other way and say 38 per cent aren't engaged at all, and when you add that to those who are just mentioning the SDGs you could say 63 per cent have no meaningful level of engagement."
Why have the SDGs struggled to achieve the level of cut-through with business leaders that will be required if they are to be met?
For some observers the complexity that provides one of the SDGs' biggest strengths is also a key part of their weakness. In a blistering critique of the proposed goals published during the consultation phase, Michael Liebreich, founder of Bloomberg New Energy Finance, warned the process could prove a "sleepwalk to disaster". "What is being proposed is a smorgasbord of good intentions, with 17 goals and 169 sub-goals, which will serve almost no useful purpose," he wrote. "At the purely numerical level, 17 goals and 169 sub-goals are about as useful as no goals at all. But of even greater concern is the sheer lack of logic and structure in the proposed list. Intellectually, this has to be the weakest document to have come out of the UN system for decades."
The SDGs could have been a sizzling steak, but they are a sausage - Michael Liebreich
His analysis is wide ranging, but boils down to three mains concerns. Firstly, there are too many goals - Liebreich notes that then UK Prime Minister David Cameron had called for no more than 12 goals warning that at 17 "there are too many to communicate effectively". Secondly, the SDGs are afflicted by clumsy wording and logical contortions - the repetition of "sustainably" and "sustainable development in SDG14's pledge to "conserve and sustainably use the oceans, seas and marine resources for sustainable development" comes in for particular (and not wholly unreasonable) opprobrium. And thirdly, the goals fail to adequately recognise the critical role of business and investment in their delivery. "The proposed SDGs include 41 mentions of the word 'access', 17 of 'inclusive', nine of 'equitable', but not one mention of 'telecoms', 'mobile phones', 'big data', 'universities', 'business' or 'enterprise'," Liebreich writes. "Science appears just three times, entrepreneurship twice. The word 'enterprises' appears only in the context of promoting SMEs, de facto demonising large corporations. Finance is spoken about only in terms of the universal right of access to it, never in terms of its role in efficiently allocating capital to growth opportunities."
Speaking to BusinessGreen Liebreich's assessment of the SDGs has mellowed a little, but not that much. "I think it is a big missed opportunity to engage business much more broadly in sustainable development," he says, arguing that the success of the MDGs meant every corner of the UN and the wider development community realised the importance of getting their pet agenda included - hence 17 goals and 169 targets. "I saw the sausage being made," he jokes of the consultation process. "The SDGs could have been a sizzling steak, but they are a sausage."
"When you look at the MDGs, I heard from a well-connected official that they were written on a room on a white board," he continues. "They were very simple, they weren't trying to be comprehensive, but they were obviously good. How many people are in school? How many children die in the first five years? But the UN went from a spear fishing approach to net fishing. Instead of trying to do 10 things and do them well, they try to do everything. And when you try to do that you just don't get the focus."
It is this broad reach, coupled with the overlapping nature of many of the targets, and the lack of a clearer call to action for businesses, that explains the difficulty the SDGs face in grabbing CEOs' attention, Liebreich argues. "The absence of a business tone means that outside the big consumer goods companies where you have really clear water and food interests you are not getting that CEO engagement," he says. "You are not getting the Jamie Dimons of the world saying 'this is great, we can really use this to drive positive change'."
Liebreich's assessment of the SDGs may be characteristically blunt, but it is echoed by others. "One of the big challenges companies are facing with the SDGs is their complexity," admits WBCSD's Gomme. "And it is bringing in areas businesses have not really focused on in the past, particularly with those social challenges like inequality and poverty and hunger. Then there is the language and the 169 targets. It is very 'UN language' so there is a translation process some businesses have to do."
The risk is that busy business leaders dismiss the whole project as too unwieldy. "The mantra at business school is your CEO can only remember five things," says Gomme, "whether that is fair or not it's certainly true there is no elevator pitch for the SDGs."
The absence of an "elevator pitch" becomes particularly apparent when the SDGs have to compete for attention with an avalanche of competing short-term pressures. "It feels like a longer term project and a lot of companies are struggling with more immediate issues," reflects PwC's Scott. "What the SDGs have done is elevate the sustainability conversation from being just a CSR issue to a boardroom issue at the biggest companies. But even then, if you were in The City and you stopped business people and said 'have you heard of the SDGs' I would guess a lot haven't. Brexit trumps the SDGs."
However, there is also a widespread acceptance that the SDGs' complexity does not negate their importance. CISL's Vrettos accepts concerns about the SDGs' complexity as "valid", but counters that leading businesses are managing to navigate them. "The SDGs represent our first global strategy for what we want to see society achieve over the next decade or so, they ask the questions 'how can we make people prosper given the environmental constraints we face?" he reflects. "Inevitably that is a very ambitious question and you can't address it with five or six goals. People used to ask M&S 'why have 100 targets in your Plan A?' The answer was 'that is what we need to be a responsible business'."
'Interconnectedness is a facet of the 21st century'
Evidence is emerging that forward-looking organisations are translating the SDGs into business language, selecting the areas that are most material to their operations and those that will impact their future direction, and developing a strategy in response, Vrettos insists. "One of the reasons people find them so difficult is they require changes, changes in the way we source things and the way we consume things - it is sustainability as a whole," he reflects. "It is challenging, but it is not that complicated."
UN Environment's Stone admits to having "mixed feelings" about the complexity of the SDGs, but ultimately argues they can be boiled down to a simple and business-friendly narrative. "We should not get lost in the complexity of reality," he advises. "All the goals are connected and they cannot be addressed in isolation. Interconnectedness is a facet of the 21st century. We need to get comfortable with that and deal with it. For me it is quite simple. We need to work out how to produce value without producing liabilities. That is the green economy approach."
It is a fair point, although the complexity of the SDGs is not the only grounds for criticism. Like the Paris Agreement, there are fears that it is not just businesses that are paying lip service to the SDG agenda - governments are equally guilty of undermining their own targets. In this respect it is the SDGs' admirable ambition that inadvertently damages their credibility.
Take the welcome goals to deliver gender equality and end all violence against children, including physical punishments. These have been endorsed by every country on the planet, and yet those nominally claiming to support the goals include countries where discrimination is enshrined in the statute book, women are denied basic freedoms, and punishments based on violence are both legal and long-standing social norms that legislators have no intention of tackling. At the same time you get the feeling the only reason President Trump is yet to denounce the SDGs' commitment to tackling climate change and other environmental threats is because he is yet to hear about them.
Moreover, there are some gaping holes in what is presented as a comprehensive agenda. Any reference to discrimination based on sexuality is notable by its absence in what looks like a clear sop to those countries that continue to resist calls for equal rights. Similarly, while the goals place massive new requirements on governments there is barely a whisper about tax reform, tax avoidance and evasion, or the role of tax havens.
UNEP's Stone also argues securing reliable data capable of tracking development progress remains a major challenge for businesses and governments alike. "Not all the metric systems are in place," he admits. "Some of the metrics are tracked routinely by statistical offices, but there are others that remain aspirational."
Liebreich has related concerns that some of the metrics are so precise they could result in unintended consequences. "I was speaking to someone from a large consumer goods company and they asked 'how is the target on food waste measured'? 'Is it in tonnes or in value add?'" he recalls. "The KPI is focused on the weight. That means you focus on potatoes as they are heaviest, but what of the small farmers in the developing world growing spices or fruit? You might have a business worried about those issues, but they are not as likely to focus on it because it makes less of a contribution to the SDG target."
And even where governments have the best of intentions and reasonable track records to boast of - as is the case with climate action, clean energy, education, clean water, and several other areas - study after study shows a major investment and policy gap between current levels of progress and what is required to tackle escalating climate risks and meet the basic needs of a growing global population.
Mechanisms for holding governments' progress against the SDGs to account do exist. Governments are invited to report on how they are addressing different SDGs on a regular basis and while it may be on a voluntary basis most are committed to some form of disclosure. "There is still national pride and peer pressure between governments and from citizens," says PwC's Scott. "That is why awareness of the SDGs is so important. If citizens are demanding action, if investors are demanding it, if businesses are calling on governments to do more, then that can make a big difference." The only way to get governments to respond to sluggish progress against many of the targets is to demand that they do better.
'A breakthrough moment'
The general consensus appears to be that while the SDGs contain some flaws, they are ultimately a major step forward for global development efforts and a valuable tool for businesses.
"I was very excited when the SDGs were launched," admits Reynolds. "Many people had been confused over what sustainability was, but this was a breakthrough moment. They are not perfect - there is some duplication, some impossibly ambitious targets, and 17 goals is a lot to take in - but as a canvas for drawing up a sustainability strategy it is not bad at all… With 194 governments behind them, it is clear it is unlikely to take companies in the wrong direction, and it is rich and complex enough that they can fit their own needs to it. It allows companies to relate to sustainability in a meaningful way. It has brought clarity to what sustainability is and what good looks like over the next 15 years."
Liebreich stands by his belief the SDGs represent a missed opportunity, but he would still urge businesses to engage with them. "I think you should engage because there is a brand aura, a purpose aura around them," he advises. "You get kids who are incredibly motivated to do more than work on stupid crap. But there has to be an authenticity. If your SDG report comes out of the CSR group and the CEO is not living it, then where is the sense of purpose? Employees are really smart, they will see that."
He also advises that business leaders should play a more proactive role in working with the UN and governments to shape the next critical phase of global development efforts. "I would say don't just support the SDGs, but get on the committees, get on the working groups," he says. "By engaging you get access to people who could be very material to your business. And if you do that then you can help shape the wave of goals that come after 2030 - and they are vital, 2030 to 2050 is crunch time, that's when we will know if renewables can get to a 60 to 80 per cent share or not, if deep decarbonisation is happening fast enough. You can't waltz in in 2028 and say 'we should have no tariffs on products that help cities'. You are not going to get that done in two years. You are going to do that by building relationships, getting to know the rising stars in the organisation, being helpful and useful."
'A lot of energy'
There is ample evidence that business are responding to the "breakthrough moment" provided by the SDGs and the Paris Agreement that followed. The renewables market is growing faster than the fossil fuel industry, the coal sector is in structural decline in many countries, the auto industry has embarked on a multi-billion dollar transition towards electric vehicles, and a host of industrialised nations are demonstrating that economic growth and rapid emissions cuts are compatible.
As Bernick's global tour for Trucost revealed, a surprisingly large number of firms are re-jigging their sustainability strategies in response to the SDGs. "Companies are doing great work to map their business activities to the SDGs," she says, "even if they are not yet clear how to take that next step and convert that into action. That is being mirrored by investors, who are very excited about all the work being done to map against the SDGs, but what they need is quantitative data so as to discern the differences between companies' actions."
It is an observation echoed by WBSCD's Gomme. "There were meetings this summer at the UN and you could see there was a lot of energy around this agenda," he reveals. "There were 1,000 businesses there, the investment community is getting increasingly involved, there is a growing sense of mobilisation around the SDGs."
Last week's annual survey from the Business for Social Responsibility (BSR) initiative and consultancy Globescan may have focused on BSR members who are by definition more engaged with sustainability issues than most, but it confirmed corporate engagement with the SDGs is rising. Over 70 per cent of respondents said they were using the SDGs to set internal targets or intended to do so, up sharply from around 50 per cent last year.
UNEP's Stone reckons a fundamental shift is underway across the global business community. "There are now three classes of business," he argues. "One is the brown economy business. There was a Trucost report in 2013 which looked at the top 100 externalities from businesses; it found there are $5tr-7tr a year of damages from businesses that are just truly dirty. These are businesses that are drawing down our collective wealth, whether it is the atmosphere, the soil, or the water. Those businesses are very resistant to change and they are not picking up the goals.
"Then you have the good corporate citizens - the Unilevers and Mars and the like - who are making a huge effort to bring sustainability into their reporting and business models.
"And then there is the third class, I am thinking about the AirBnBs, the Teslas, the disruptors. Entrepreneurs who have honed in on the fact tomorrow's markets will be green; that consumers care about what they eat, what they wear. They are the ones to watch."
What is so fascinating about the SDGs is the scale of the economic and technological transformation they dictate implies a rapid integration between Stone's 'good corporate citizens' and 'disruptors'. You can see this nascent trend in the flurry of SDG-related announcements from major corporates made in recent months.
For example, Bacardi revealed this month it is to revamp its sustainability strategy in line with the SDGs, unveiling a raft of new targets including science-based emissions targets, drastic reductions in water use, and a commitment to analyse how single-use plastic can be tackled. Similarly, Carlsberg launched a series of packaging innovations as part of its SDG-informed Towards Zero strategy, which is built around ambitious goals to become a zero carbon, zero water waste, zero irresponsible drinking, zero accidents business. In a recent webinar, TetraPak told BusinessGreen readers about how its sustainability strategy and investment plans are being shaped by a sweeping materiality assessment that sought to understand how the SDGs would impact its business. Executives at Iberdrola similarly point to how the SDGs have been mapped onto the ambitious plans the company has to cement its position as a clean energy powerhouse.
These announcements are just the tip of the iceberg. Many other businesses are either re-thinking their sustainability strategy or tweaking it to match up to the various SDGs. Many more may not be fully aware of it, but their plans to deliver deep decarbonisation or transform how they manage waste are often in keeping with the SDGs. They are also adopting these plans for sound commercial reasons. "One question when facing a major transition is 'do we want to move too far ahead?" concedes Vrettos. "But in a race to the top the first movers find it easier to change direction as required." It is a point echoed by Gomme: "You look at some of the ESG index performance levels now, those companies that get these issues are tending to perform better, to manage risks better, and recognise new opportunities earlier."
PwC's Scott points to MSCI's sustainable impact index as compelling evidence of this trend. "To get into the index you need 50 per cent of your revenue from products or services that contribute to the achievement of the SDGs," she explains. "The performance of that index through 2017 was nearly 3.5 per cent better than their all share index."
Jeff Seabright, chief sustainability officer at Unilever, is convinced there is a compelling commercial rationale for pursuing the SDGs. "Companies have a once-in-a-lifetime opportunity to embrace the SDGs as a driver of business growth," he says. "There are still many challenges to overcome, including the short-term focus of financial markets, the difficulty in giving social or environmental capital a true value, and political systems too focused on the next election cycle instead of on the next generation. If they fail to get behind systems change and the kind of inclusive capitalism laid out by the SDGs, the costs and uncertainty of doing business will swell. On the other hand, if a critical mass of companies joins the movement for system change, it will create an unstoppable force."
For its part, Unilever says it is already seeing returns from its investments in support of the SDGs. "Brands that help solve problems are relevant and accepted," continues Seabright. "Not surprisingly, the stronger this purpose the better the brands do. Our sustainable living brands are delivering more than 60 percent of Unilever's growth, and growing over 50 percent faster than the rest of the business. We are orienting our brands to serve the underserved, and when we do it well, we are rewarded with stronger business results."
'Money that cares'
And for those laggard businesses that are less keen to embrace the SDG agenda, there is a critical constituency that could soon change their minds: investors.
"You are starting to see the SDGs being embraced in the impact investment and high net worth world, you are starting to see investment vehicles that are tied to the SDGs, you are starting to see 'money that cares' and 'money that has values'," observes SE4All's Rachel Kyte. "Investors are trying to show how they are aligned to the SDGs or helping the SDGs. And that means in many boardrooms people are aware of the SDGs and they see the need to explain how they fit in with them."
But it is not just well-meaning millionaires that are tying the SDGs into their investment strategies. There are plenty of signs the goals are being embraced by institutional investors. If 17 goals and 169 targets are overwhelming for some businesses, they are catnip for investors who like nothing more than a framework with which to measure their portfolios and inform decisions. In the last few weeks alone the World Bank, the European Investment Bank, Banque SYZ, and Hermes have either launched SDG-based financial products or released information on how the SDGs are shaping their investment and engagement strategy.
Hermes, for example, published a case study detailing how it had undertaken an SDG-driven engagement with Swedish manufacturer Trelleborg to encourage the company to develop a sustainable natural-rubber sourcing policy. "In June, we spoke with Trelleborg's corporate responsibility team," the company revealed. "We discussed the company's due-diligence checks on its natural-rubber suppliers. Encouragingly, the team explained that it was monitoring this issue: last year, it had coordinated dialogue - focusing on the risk of child-labour use and deforestation - with more than 1,000 representatives of its direct and indirect suppliers in Southeast Asia and Africa. We also discussed the end-of-life collection, recycling and repurposing of its products and its renewable-energy usage."
The result of that discussion was a direct and public call from a major investor for the company to develop a sustainable rubber sourcing policy, systematically consider sustainability and circularity in product development processes, and set a group target for renewable energy use. "Already, the company has demonstrated a willingness to continue these discussions," Hermes said. A cynic might argue it is not like it had much choice. But then again, that is the point of effective investor engagement.
At BNP Paribas, Anjuli Pandit says the SDGs have had a profound impact right across the global bank. "I wouldn't say we have reorganised, but we have reframed our business based on what the SDGs require," she explains. "We have assessed our entire business - that covers a lot of ground, in the UK we do everything from car leasing to managing buildings, we do personal finance, and we do corporate and investment banking. Once we'd looked at all those areas, we created a map to show where we can move capital to support different SDGs."
Consequently, the company knows that it has $150bn - about 16 per cent of its loan book - already invested in businesses that directly contribute to the SDGs. It has also strengthened its screening policies so that the rest of its loan book does not detract from the SDGs. "We have some strict policies, such as divesting away from financing coal fired-power plants, as that is SDG7, we don't invest in tobacco, as that is SDG3," says Pandit. "We have rules on animal welfare and modern slavery. These are decisions that go beyond just legal compliance."
The bank has also put in place a well-staffed team of sustainability experts, set up training across the UK businesses to inform employees about the SDGs, and put in place a remuneration policy where the top 1,000 executives in the business have KPIs tagged to achieving sustainability goals, including the commitment to contributing to the SDGs. As with many of the businesses embracing the SDG agenda, Pandit insists there is a clear commercial imperative around the company's approach that brings together brand opportunities, the chance to secure new markets, and improved risk management.
"If there is a company that tends to follow all the SDGs, if it offers good working conditions, has good environmental stewardship, then their operations tend to be more expensive," she explains. "We can potentially offer preferential pricing for a loan to that company because those suppliers are almost always the best performers. Companies that are thinking about the SDGs tend to run their business well and more holistically. You see that in the academic research, but we also see it in our client base."
The combination of SDG-related bonds and indices, SDG-informed investment criteria and engagement strategies, and other SDG investment tools are all ratcheting up pressure on businesses to take the goals seriously. However, some question whether that pressure is acute enough. "Investor influence is very important," says WRI's Moss. "Investors can look at the SDGs as a map of risks to be mitigated and opportunities to be explored. It is a giant signpost. But the rubber hits the road though when the CEO and Investor Relations (IR) manager hear this directly from investors. The gap we often need to bridge is that you hear talk of environmental issues from investors publicly but I still hear from some CEOs and IR executives that they are not being asked about it in meetings. I am reserving judgement as to whether we have passed that point with the SDGs. It is certainly better than it was, but it is still a variable picture."
'The question of how?'
The gap between investor intention and action remains a perennial challenge, but the reality is interest in the SDGs is gathering momentum and leading businesses are responding. The big unresolved question is how they should respond. "I think we have seen a lot of good take up for the SDGs to date," says Vrettos. "A lot of organisations have at least started to explore what the SDGs mean for them. What we haven't seen is the question of how? How can businesses take meaningful action to actually address them?"
There are broadly two schools of thought on how best to develop an SDG strategy, although both start from the same place. As with any new corporate strategy some form of audit to assess current performance and progress is widely regarded as essential. However, experts issue a note of warning when it comes to SDG audits, arguing there is a risk companies limit their assessment to the goals that have the most obvious implications. Gomme highlights the example of a mining company that inevitably gravitates towards SDGs covering energy, consumption, industry, and climate action, but gloss over SDG3 and its commitment to good health and well-being. It may not seem like it has much to do with mining, but SDG3 incorporates targets for reducing traffic accidents and health impacts from air and soil pollution, both of which have implications for the mining sector.
"You have to look beyond the goal level and look at the targets that sit beneath," advises PwC's Scott. "The colourful logos are great for creating engagement, but they slightly dumb down what the goals are… Underneath each goal there is a lot of breadth and depth to the targets. And it is when you get to the target level you can think as a business what you can do towards them."
It is also important to remember the SDGs will be enacted differently and at a different pace from country to country. "We encourage businesses to look at the target level and also look through a country lens," Scott continues. "The SDGs will be pursued by governments at the country level - governments need to solve them and to do that they will bring in regulations, taxes, and policies. If you have thought about that you will be ahead of the curve and will be responding to changes, not having them done to you." She points to the recent 'war on plastic' and the plastic bag taxes that have been rolled out around the world as a prime example. "Many people saw that as a big knee jerk move, but if you had looked at the SDGs you might have seen the chances of those taxes coming in," she notes.
This is not agenda where you can wait too long - James Gomme, WBCSD
Once the audit is complete observers point to two common approaches: one that seeks to maximise a company's contributions to a handful of SDGs and a more holistic approach that tries to integrate them all into a corporate strategy. Although in truth both approaches can overlap with companies engaging with all the SDGs, but prioritising where they can make the biggest contribution.
"The response to the SDGs is almost a measure of the sophistication of a company's approach to sustainability," observes Vrettos. "Some have gone in and said 'where are we doing work that contributes to an SDG?' But the more meaningful conversation is to go in and ask where are the SDGs that will shape our business and our sector over the next 15 years? That is more dynamic, but it is also more difficult. That requires you to review everything and make tough choices and change things. I am not suggesting businesses should change their model overnight. But they need some idea over which parts of their business are not currently fit for purpose for an economy that is delivering the SDGs, and what parts can thrive."
WRI's Moss makes a similar point, describing simply mapping current activity onto the SDGs as "entry stakes and the beginning of a journey". "What a company needs to be saying is 'how does my business contribute to increasing social well-being while decreasing the impact on the environment'?" he argues. "It is all about managing that tension."
When faced with such a daunting agenda what does best practice look like? The truth is it is hard to say. This is still an evolving field, but a growing body of work is emerging to help support businesses' SDG efforts. WBCSD, the Global Reporting Initiative (GRI), and the UN Global Compact have published a SDG Compass detailing how businesses can support the goals, while the GRI and the Global Compact have also launched the SDG Reporting Action Platform in an early attempt to establish some standard guidelines for SDG disclosures. Meanwhile, WWF Switzerland and Gold Standard published a SDG best practice report for businesses earlier this year, and various private sector index providers and consultancies are offering an expanding array of tool kits and guidelines to help businesses navigate the SDGs.
WBSCD's Gomme recommends a five-step approach to engaging with the SDGs: understand them, prioritise them, set clear goals, integrate them into your operation, and then report on progress. It is easier said than done, but it also points to how companies with good sustainability strategies should be able to adapt and enhance them to support the SDGs.
However, he also has another important word of advice. "A lot of companies are already doing a lot of great stuff in sustainability - this is not a new agenda," he concedes. "Companies have made great progress and it is important they translate that into the SDGs and show how they have contributed already. But it is also important they integrate sustainability into new strategy and production development. It is vital you highlight what you are already doing, but it is also important you have new projects coming through."
And time is of the essence. "The big danger is you wait for governments to clarify their targets or see what rivals will do, but this is not agenda where you can wait too long," he warns. "2030 is just around the corner."
Other common tips? Experts advise that firms should use their lobbying muscle to call on governments to adopt sufficiently ambitious sustainable development policies and impress upon suppliers the importance of the SDGs. They also stress the importance of making your SDG strategy resonate with employees. "We ask how are we going to move capital, how are we going to serve our clients in pursuit of the SDGs, but we also go into every department and say 'we are going to give you reusable cups and stop using disposable cups', because that goes to SDG12 responsible production and consumption," says BNP Paribas' Pandit. "We encourage people to do volunteer initiatives with homeless people as that helps with SDG1 and zero poverty, or we help teach English to refugees as that helps with SDG4 and SDG5 on education and equality. We do a lot of that, breaking it down to the human level, because we are not going to get to a place where the SDGs are met unless people understand why they are so important."
Finally, try not to be too daunted by the scale of the SDGs. One senior business leader is said to have joked that "if the SDGs don't scare you, you don't understand them". That sounds about right.
Can they be met? Will the world really eradicate poverty by 2030, will everyone have access to clean power, will production and consumption be transformed, will genuine equality and access to justice be the norm, will we be on track to build a net zero emissions global economy, and all by the end of the next decade?
Liebreich is broadly optimistic. "We are making unbelievable progress on things like poverty and infant mortality and women in the workforce and education," he says. "The problem is that with the SDGs there are those 169 targets - we will meet some and not meet others. But we'll make progress on most, barring some massive catastrophe like the failure of monsoons or a massive trade war."
At WRI Moss reckons that regardless of whether or not all the goals are met, businesses need to prepare for a decade of massive flux, much of which will centre on the issues the SDGs are trying to address. "How likely are we to see the level of transformation we need?'" he asks. "What gives me encouragement is a lot of industries are being disrupted anyway - it is at times of disruption that there is an opportunity for the balls to fall in a different order. With all the technology progress going on with the internet, blockchain, AI, renewables, electric vehicles, there is the opportunity to see real transformation. But technology is not inherently good or bad. We have to work hard together across business, government, and civil society to ensure it is transformation that makes things better and not worse."
But ultimately everything rests on the choices political and business leaders make. "Energy access is absolutely achievable, but it comes down to your theory of change," says SE4All's Kyte. "If your theory of change is to put up pop up coal plants across the Sahel, then that is not going to solve the problem effectively or cleanly. But if you embrace renewable energy there is no reason why integrated energy plans - both grid connected and off grid, both traditional and renewables - there is no reason why that energy access goal can't be achieved… The SDGs are the ultimate challenge for the international community and the ultimate challenge to the development community. We set ourselves these goals. Are we really serious about organising ourselves to delivering them?"
Well, are we? Kyte pauses. "I think there will be a reckoning if we don't," she says, "because we cannot continue to organise the global economy in such a way that not everyone has got a fair shot of benefiting from it. And we cannot continue to run the global economy in such a way as we keep pinging through the elastic limit of this planet. There is a reckoning if we don't do this. And the price of inaction is much higher than the price of action… If you are in elected office during this 15 year period this is an agenda that you or your predecessor agreed to. And I don't know where else you are going to look. Look around, if not us who, if not now, when…"
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