The UN's tenth sustainable development goal sets corporates a major challenge to disrupt systemic inequality the world over
"Inequality is a policy choice". So say campaigners, mindful that much inequality stems from political choices such as the level of taxation levied on the richest, whether to turn a blind eye to tax avoidance, and whether to legislate to tackle discrimination faced by minorities.
But if so, it's a choice that many governments are opting for. According to the latest report from UN secretary general António Guterres, published at the High Level Political Forum (HLPF) on the SDGs in July, progress on SDG10 - the goal to "reduce inequality within and among countries" - "continues to be a significant concern", with income inequality in particular on the rise in many parts of the world.
On top of all the day-to-day problems experienced by people suffering from low incomes, discrimination, and disempowerment, the increasing gap between rich and poor has been blamed for the political polarisation being experienced in multiple countries. Much rhetoric from politicians, businesses, and campaigners stresses the importance of "leaving no-one" behind, but the reality on the ground reveals a paucity of progress. Moreover, the myriad ways in which inequality undermines the wider sustainable development agenda and hampers efforts to tackle the climate crisis are becoming better understood. From the way in which gender inequality fuels higher birth rates or exacerbates skills shortages, to the manner in which income inequality creates a fertile territory for those who seek to mobilise opposition to new low carbon industries, a failure to tackle inequalities make the achievement of many of the UN's Sustainable Development Goals (SDGs) harder to achieve.
Admittedly, there have been efforts by countries to narrow disparities of opportunity, income and power, as the UN report acknowledged. However, income inequality continues to rise around the globe, even as the bottom 40 per cent of the population - whose income compared to the national average is used as a barometer of inequality by the goals - has seen its incomes improve in more than half of the 92 countries monitored.
Despite these gains, the bottom 40 per cent still received less than 25 per cent of the overall income in these countries, with an increasing share going to the top one per cent of earners, thereby widening the gap between richest and poorest, the UN noted. Analysis of incomes in 110 countries found that the most unequal country had 26 per cent of its population living below 50 per cent of the median income level, while the most equal had just three per cent of people below that threshold.
Anti-poverty campaigners have been tracking progress on fighting inequality in its many forms for decades. Oxfam works with consultants at Development Finance International to track countries' commitment to tackling the issue. Their second rankings, published in October 2018, found that overall, the average proportions of government spending going to education, health, and social protection, which it deems the three key anti-inequality sectors, have risen only marginally since the previous year.
Spending on education rose from an average of 14.7 per cent of government budgets to 14.8 per cent, health funding grew from 10.36 per cent to 10.6 per cent, while social protection spending stayed broadly flat at 18.5 per cent on average, it found.
The number of people living in income poverty in the EU has risen by over eight per cent since 2005
Progress on making taxation fairer was found to be mixed, with global average rates of corporate income tax (CIT) falling slightly from 24.65 per cent to 24.48 per cent. Some 15 countries reduced rates in 2017 compared with only 10 raising them, though most of the cuts were under 2.5 per cent, and some were limited to smaller companies. Hungary made the biggest reductions in CIT, from 19 per cent to nine per cent. Average top rates of personal income tax rose very slightly from 30.5 per cent to 30.8 per cent in 2017, the research found.
Meanwhile, SDG Watch Europe, a cross-sectoral civil society alliance made up of over 100 organisations, has focused on whether sufficient progress is being made by the European Union, one of the many political bodies with a mantra to "leave no-one behind". Its recent report found the EU is failing millions of vulnerable and marginalised people who are falling victim to widening inequalities, putting the bloc and its member states at risk of not meeting SDG10.
For example, the report found the number of people living in income poverty in the EU has risen by over eight per cent since 2005. This is compounded by the fact that wealth inequality, which refers to the accumulated assets owned by households, is greater than income inequality, ensuring that privilege and advantage are passed down from generation to generation.
The Equal Treatment Directive, which implements the principle of equal treatment between men and women in EU labour law, was proposed in 2008, but has still not been adopted, the organisation noted. Globally, EU policies often run counter to its international development objectives, for example, the pursuit of advantageous trade deals, including arms sales, SDG Watch Europe says.
The report also highlights the problem of environmental inequality. Though not included as a specific target or indicator in SDG10 itself, SDGWatch Europe makes the link between poverty and exposure to environmental impacts that damage health. The poorest households, who have contributed the least to global pollution, are the populations most exposed to air pollution and environmental disasters such as floods, it says. Environmental inequalities can therefore lead to the deepening of social inequalities, the organisation concludes.
"The typical inequality indicators are about income distribution and so on, but inequality isn't just about how much a person has in his or her pocket, there are so many aspects that go beyond financial questions," says Patrizia Heidegger, director of global policies and sustainability at the European Environmental Bureau, which is part of SDG Watch Europe.
SDG10 - a framework for action
Of all the 17 Sustainable Development Goals (SDGs), SDG10 is perhaps the broadest. Targets encompass removing a host of inequalities, including income; social, economic and political inclusion regardless of age, sex, disability, race, ethnicity, origin, religion or economic status; discrimination and harassment; and representation of developing countries in global decision making.
Progressive policies on tax, wages and social protection are also required under SDG10, as are improvements to the regulation and monitoring of global financial markets and institutions. In addition the goal covers migration, requiring it to be "safe and responsible" through well-managed policies, while transaction costs of migrant remittances should be reduced from around seven per cent to less than three per cent.
But as should be obvious to anyone who picks up a newspaper or turns on the TV, progress against SDG10 remains slow, and in some cases even appears to be going backwards. On top of the overarching data confirming the entrenched nature of income inequality, the recent UN report revealed that while more than 75 per cent of countries have policies to promote cooperation on migration, there are significant gaps in policies that seek to give migrants rights and socioeconomic wellbeing, with over 40 per cent of countries lacking a comprehensive set of measures. The persistent marginalisation of developing countries in international decision-making bodies was also acknowledged by Guterres. For example, the World Bank adopted governance reforms last autumn to try and give developing economies more space at the table, but even with full implementation, developing countries will still only have just over 40 per cent of the voting rights, despite them making up 75 per cent of the bank's membership, the UN said.
At the HLPF meeting, there was an acknowledgement that despite evidence of some encouraging developments, action is not sufficient to meet SDG10, reports Chiara Mariotti, inequality policy manager at Oxfam. "That [conclusion] was important because it had been said in many fora throughout the year, but not in a very official way," she said. "There is no official agency or mechanism from the UN specifically on goal 10. You can tell that this is a problem because there is a lack of monitoring, no-one is accountable for the achievement of this goal."
Interlinking with other SDGs
One of the many problems with the lack of progress in tackling inequality is that SDG10 is one of the foundational goals that can help unlock advances across the entire sustainable development agenda - if inequality persists, it will be all but impossible to meet SDG1 to eradicate poverty, campaigners say. SDG10 is also closely correlated with SDG5 on gender equality, and supports SDG8 on decent work and economic growth by enhancing the population's working potential and increasing diversity of thought. It should also help build more stable and peaceful economies in line with SDG16 by abating social tensions, which in turn serves to reduce hunger to meet SDG2, tackle ill-health as set out in SDG3, and improve access to education under SDG4.
The UN Global Compact (UNGC) has also noted that reducing inequality could indirectly benefit environmental goals, for example, bringing marginalised communities into the formal economy can reduce their dependence on harmful activities such as logging and illegal poaching.
And there is an indirect link with SDG13 on climate action, as it will be much harder to secure public support for meeting carbon reduction targets if people are struggling with poverty and discrimination, notes Aris Vrettos, director of open and international programmes at the Cambridge Institute for Sustainability Leadership.
"No goal can be delivered in isolation, and SDG10 is highly linked to others," he says. "Increasingly we're finding that in order to address climate change, we have to address inequality between and within countries. Big gaps do not allow for consensus to be built and collaboration and trust so that we can form the coalitions and methods to address climate change." It is a concern anyone who has observed UN Climate Summits and watched the fierce disagreements between industrialised nations and developing economies over climate justice and 'loss and damage' will share.
Similarly, Vrettos points out how some of the disparities and inequalities within societies may need to be addressed to create the right conditions for green financing, since as the world moves towards lower carbon infrastructure some areas of the economy, or some geographic regions, might win while others lose out. "Whatever finance exists to make progress in those areas cannot ignore the economic and social disparities that exist, or that are being created," he warns.
Heidegger notes that despite the clear connections social, environmental, and climate policies are typically not being considered together. "There's no coherence between the solutions we're trying to find to the different challenges," she argues. "At the European level, we need to look at a broader approach to tackling inequalities. There's few structures in place that allow for that dialogue, for example, how often has the environment committee of the EU parliament discussed inequality? Probably not at all."
Failure to connect the dots leads to political, social, and environmental problems, Heidegger warns. "Environmental taxes should be looked at in terms of creating both the best possible impact for the environment, but also for reducing inequality," she advises. "If they're not developed together, you see policies making social problems worse, as we have seen in France." The reference to the protests by the 'Gilet Jaunes', which originated with motorists in rural areas opposing increases in fuel taxes and quickly turned into a more generalised protest against societal inequalities, has become a common refrain amongst environmental campaigners who fear a failure to deliver 'climate justice' risks sparking an anti-green backlash.
Business involvement lacking
Despite the critical importance of SDG10 and its central role in driving progress against many of the goals, research has shown it is one of the sustainable development areas that businesses engage with the least. In a survey of nearly 1,000 businesses across 10 sectors by consultants at PWC, SDG10 did not appear in the top five goals for prioritisation for over 80 per cent of businesses.
"This is particularly concerning for the financial sector, where they make the lion's share of wealth gained, and yet they haven't prioritised inequalities," says Ruth Mhlanga, private sector policy advisor at Oxfam. "But there was very clearly a misunderstanding on what the goal is. I saw one report that said this SDG was irrelevant to business."
The sense that tackling inequality is not part of the corporate remit runs deep, Mhlanga warns. "We see that the behaviour of companies is squeezing workers - more and more money is going to shareholders, and less to wages," she says. "Part of that is a business model where they've prioritised profit maximisation. That's not to say that companies can't make money obviously, but often this is done by treating labour and taxation as costs to be reduced. This is when we see the creation of tax havens, and tax evasive behaviour, and even where that is not illegal, it's still drawing wealth away from public services, wages and communities."
Heidegger has noticed that companies tend not to think about how their actual business practices links to inequality, but rather analyse specific aspects such as gender equality. "With inequality, it's not an easy assessment to do," she explains. "It's not sufficient to analyse your gender equality policy, you should look at your wage structure, the way you interact with subcontractors. Also consider environmental discrimination - do your businesses expose some of the population to more environmental impacts than others?"
In addition, many companies do not use their influence on government responsibly, Mhlanga argues. This can lead to a "race to the bottom" on regulation, under the guise of asking governments to be 'business friendly', she says.
"It's sometimes the hidden hand, corporates will say one thing, but their engagement with government takes a different direction," she says. "They must say the right thing, and they must do the right thing."
Business case for SDG10
But there is a compelling business case for engagement with SDG10. A spokesperson for the World Bank says greater equity is in the interest of businesses as it will allow the world to harness human potential better, which will lead to more skilled workers, innovators, and entrepreneurs. In turn, this will bring about stronger long-term economic growth and higher incomes for consumers. Better tax, wage, and social protection policies will allow workers to be more secure and productive, while improved regulation and monitoring of global financial markets and institutions will enable strong and sustainable growth. All of the above should help to tackle the climate and environmental crises, which may impact poorest communities first and hardest, but ultimately will fail to discriminate, making long term economic growth and commercial success a potentially unwinnable struggle for all economies and businesses.
The imperative to eradicate poverty and inequality and stem runaway climate change has never been more acute - Paul Polman
The case for firms in the environmental and clean tech sector to engage with SDG10 is even stronger. Vrettos says that these companies need to be mindful of focussing solely on environmental solutions and ignoring social and economic considerations, or risk undermining their licence to operate. "Many of the NGOs that you would associate with more environmental subjects over the past decade or so have increasingly integrated climate and green considerations with social and economic considerations, because they are inextricably linked," he notes.
A small cluster of forward-looking companies are doing just that. For example, IKEA's People and Planet Positive plan and Unilever's Sustainable Living Strategy are just two well-known illustrations of a growing trend whereby consumer-facing companies seek to enhance both their environmental and social performance. But overall the business community is only now waking up to the interconnected nature of socioeconomic, environmental, and economic inequality issues, Vrettis believes.
Former Unilever CEO
A notable example of looking at environment and socioeconomic issues in tandem is Paul Polman, former chief executive of Unilever. During his time at the multinational, Polman famously ended the practice of quarterly reporting, and revealed in 2015 that climate impacts were already costing Unilever €300m a year. He has now set up a foundation and consulting firm to tackle inequality and climate change together.
His new organisation "Imagine" will work with companies to step up action towards achievement of the SDGs, Polman said in an email to colleagues, adding that "the imperative to eradicate poverty and inequality and stem runaway climate change has never been more acute".
Some companies have implemented progressive policies on aspects of SDG10, for example, extending employee benefits globally, so that staff in countries where there is little legislation in this area receive the same as those in countries where rules are more robust. This can be a major challenge for businesses looking to take action on inequality, according to Lila Karbassi, chief of programmes at the United Nations Global Compact (UNGC). Some countries have no guidance or legislation on what a minimum wage would be, for example, and no incentives for businesses to increase wages, she argues.
"If a company decided to equalise wages, and their competitor is just following the minimum legal wage, or there's not even any sort of regulation, then you're losing out in terms of competition," she says.
However, in 2017, chemical and materials company Solvay announced a minimum benefits package that applies to all its 30,000 workers globally. This means that, not only are staff treated equally irrespective of where they live and work, but they receive social securities over and above those provided by the government in many countries. In the US, employees will receive better maternity leave, while in China and Poland staff will have disability insurance, while teams in India and Russia will receive life insurance. Many staff did not have paternity leave before the package was introduced - now they do.
IKEA UK, meanwhile, opted to pay the real Living Wage and London Living Wage to all employees in 2016, leading to wages rising to £8.75 per hour nationally and £10.20 in London. On a global level, the company conducted fair wage assessments together with the Fair Wage Network in nine countries in 2016, and has improved payments in several countries as a consequence. It is developing a global approach to Responsible Wage Practices for its own units and for its partners. A team with good compensation and working conditions will provide better customer service, it says.
There are reasons to hope that initiatives like this are part of a trend. Just this week a group of nearly 200 CEOs from many of America's largest companies signed off on a statement from the Business Roundtable group that publicly ditched the idea that maximising shareholder profit was the sole priority for corporates. It instead argued businesses should look to serve all stakeholders, delivering value for customers, employees, suppliers, communities, the environment, and shareholders. The letter was signed by the likes of American Airlines CEO Doug Parker, Amazon's Jeff Bezos, Apple's Tim Cook, and David Solomon, CEO of Goldman Sachs. "This new statement better reflects the way corporations can and should operate today," said Alex Gorsky, chairman and chief executive officer of Johnson & Johnson. "It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders."
Of course, it remains to be seen if some of the world's largest multinationals will start to turn these new aspirations into a reality, and plenty of critics will argue the track records of some of the companies involved hardly instil confidence that a step change in corporate behaviours is on the way. But the move represents a public statement of intent that would have been hard to envisage even two or three years ago.
That said, SDG10 remains difficult for many businesses, regardless of their intentions. "It's such a big, systemic issue, that working out what you can do as an organisation is quite challenging," says Emily Auckland, network director for UK Stakeholders for Sustainable Development (UKSSD). "What often happens is that people see it as a single issue, so they do a project with kids and disadvantaged communities, or they have a gender policy. But inequality runs across the whole SDG framework, so it's about thinking how inequality interfaces with the other issues they're working on."
Davide Fiedler, manager for social impact at the World Business Council Sustainable Development (WBCSD), argues inequality is harder for businesses to deal with than climate change or environment, because it is so hard to measure.
"How do you measure your social impact beyond how many accidents have happened?" he asks. "How do you measure the contribution you have as a company to reducing inequality within a country? You can use how much tax you pay, but that doesn't really tell you that the inequality in the country has changed because that can be outside the scope of a company."
Supply chain challenges
There are good examples of companies improving human rights and inequalities deep in their supply chain, but that is a big task, which often competes with other business interests such as the bottom line. "The way markets function is not the way they need to function to make sustainability a key issue," warns Fiedler.
Karbassi agrees that tackling inequalities in a company's supply chain is a particularly acute challenge. "There's a difficulty in understanding the supply chain beyond tier one - as soon as you go beyond that, it's very hard to understand what's going on," she says. "We know that over 90 per cent of our members have systems to audit their suppliers to ensure they have the right policies in place. But when you look at the number of companies that are actually assessing how these policies are being implemented, and what the impact of the policy is on people, then the number drops dramatically - we get around 35 per cent of companies that go to that extent. We have to work with companies to increase that percentage, but it's still a very emerging practice, and it's time-consuming and an investment to conduct."
But Vrettos remains optimistic business attitudes are beginning to change. "Responsible businesses know that they cannot operate in places where there is great inequality," he reflects. "Starting to understand these issues and questions is a priority for many businesses. It's already becoming more normalised to ask how much money a business should make, how much they should pay chief executives above what they pay its average employee, and how much profit should be distributed to shareholders. All those questions that were a bit lefty a few years ago are getting closer and closer to the mainstream. It's a complicated but ever-increasing issue and we will see more and more attention being placed on it in the next couple of years."
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