Business alignment with SDGs in 2019: Will we see an increase in the quality of corporate reporting?
The approaching year end marks the first three years of implementation of the UN Sustainable Development Goals (SDGs) which officially came into force in January 2016.
While fundamentally the SDGs are to be implemented by governments at national level, the business sector has been called on to help achieve the global goals as a source of finance, and driver of economic growth and innovation.
PwC’s recently published SDG Reporting Challenge 2018, suggests that the SDGs have broken into the mainstream of sustainability reporting. 72 percent of the 729 companies analyzed worldwide mention the SDGs in their annual corporate or sustainability reports (a 10 percentage point increase compared to the previous year).
Despite promising gains, the report highlights that there remains a gap between companies’ good intentions and their ability to embed the SDGs into actual business strategy, as only 23 percent of companies disclosed meaningful key performance indicators related to the SDGs and only 27 percent mentioned SDGs as part of their business strategy.
As governments and investors have started paying closer attention to corporate reporting on the SDGs, 2019 looks to be a promising year for the SDGs to start shaping business strategy.
Increasing government recognition
Reporting on the 2018 session of the UN High-level Political Forum on Sustainable Development (HLPF) this summer, GRI’s Pietro Bertazzi and Charlotte Portier found promising signs for governments’ increasing recognition of the business sector’s key role in achieving the Sustainable Development Goals (SDGs).
At this annual Forum, national governments present their voluntary national reviews (VNRs) to showcase country-level progress on the SDGs. 94 percent of the presenting governments at the 2018 HLPF had consulted the business sector in their progress review process. An outstanding example was the government of Columbia which aggregated corporate sustainability data provided by Colombian companies at national level to inform its VNR.
There is a growing number of governments putting in place mechanisms to monitor the business sector’s contributions towards achieving the SDGs. As an example, the UK government, in preparation for the 2019 HLPF, recently launched its first voluntary review into how the nation’s business community is contributing to the SDGs. Businesses and civil society can submit their contributions to the VNR through an online platform.
While these efforts are laudable, they miss the opportunity to inform business strategy. Another monitoring platform that went a step further and sought to catalyze data-driven business contributions aligned to national was developed by UNDP and the Business Council of Papua New Guinea in partnership with SocialCops. Their #Business4SDGs Dashboard provides a monitoring platform that tracks the country’s SDG efforts and helps businesses identify opportunities to increase their impact towards the SDGs. The platform layers data about corporate SDG initiatives with data about government initiatives, budgets and outcomes to calculate a sustainability score for every participating business.
Growing investor interests
There are clear expectations of investors to help provide new flows of private sector capital towards solutions that help achieve the SDGs. The investor initiative Principles for Responsible Investment (PRI) has helped build the SDG investment case. Now a growing number of frameworks and tools are emerging that help guide investors in aligning their investment strategies with the SDGs through providing access to quality data on corporate SDG performance.
These include, for example, the MSCI ACWI Sustainable Impact Index which is designed to identify listed companies whose core business addresses at least one of the world’s social and environmental challenges, as defined by the SDGs. To be eligible for inclusion in the Index, companies must generate at least 50% of their sales from one or more of eleven defined sustainable impact categories and must maintain minimum environmental, social and governance (ESG) standards.
Another example is the Trucost SDG Evaluation Tool which provides a quantitative analysis of corporate performance on the SDGs across the value chain, from raw material inputs to product use and disposal, within the context of a company’s geographic operations. Supported by an advisory panel of investment professionals, interest group representatives, and academics, the Trucost SDG Evaluation Tool aims to provide a holistic set of SDG metrics that quantify both SDG-linked risks and opportunities. The inaugural application of the tool this year analyzed 13 inaugural company participants and revealed that they are already capturing over $232.98 billion in revenue from SDG aligned products, services, and technologies.
Business action is vital to achieving the SDGs and companies have signaled a clear interest in the global goals. But the SDGs are not yet shaping business strategy. The emergence of new measurement frameworks and evaluation tools is set to drive and shape SDG reporting among the world’s largest listed companies. As the SDGs are building up momentum with companies, standard-setting organizations, financial analysts and investors, there is an opportunity for governments to take greater leadership and incentivize and facilitate the alignment of business strategies with national development priorities.