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Sustainable Developments Goals five years on

26 March, 2020

The UN’s sustainable development goals are even more relevant to business sustainability today in the face of a global pandemic and devastating climate change

 

By Duncan Levine

 

In September 2015, the United Nation’s (UN) General Assembly adopted the 2030 Agenda for Sustainable Development that includes 17 Sustainable Development Goals (SDGs). Building on the principle of “leaving no one behind”, the new agenda emphasised a holistic approach to achieving sustainable development for all. Four and a half years on, climate change and a global coronavirus pandemic are wreaking havoc on the planet, economy and threatening our very way of life, making the SDGs more relevant than ever.

 

Since the SDGs were adopted, the progress report card has been somewhat mixed. Some countries have made remarkable progress towards meeting some of the goals while others are struggling. As reported in the ECCT’s 2020 Sustainable Development Goals Forum, many ECCT companies are making great contributions towards meeting the SDG goals. Moreover, it should be pointed out that the SDGs are just the latest in efforts towards promoting sustainable development that have been underway for decades, especially in Europe.

 

The UN’s 2019 Sustainable Development Goals Report notes progress in some areas, such as on reducing extreme poverty, widespread immunization, a decrease in child mortality rates and an increase in people’s access to electricity. However, it also warns that the global response has not been ambitious enough, meaning that the world’s most vulnerable people and countries are suffering the most. The Asia Pacific 2019 SDG progress report notes that, based on the current trajectory, Asia will not achieve any of the 17 Sustainable Development Goals (SDGs) by 2030. The UN report notes, to put the planet on a sustainable track requires changing course and transforming a number of key areas of human activities including food, energy, consumption and production, and cities.

 

Several problems have been noted regarding meeting SDGs. Perhaps the principle one is that reporting on and meeting SDGs is still a voluntary effort. While many countries are making progress towards meeting the goals, they may not see this as a priority. Developing countries, especially, are much more concerned about achieving economic growth and tend to devote most of their time and energy on boosting growth. Unfortunately, the focus on GDP growth is very often in opposition to SDG goals. New coal-fired power plants, for example, provide much-needed power for communities lacking them and contribute positively to economic growth. However, they also have a negative impact on the environment and on human health. Yet, it is only the positive economic impact that is counted in official data. This is one reason why it is proving so difficult to shift to renewable energy. One solution might be to factor the cost of environmental degradation into national accounting, although there is as yet little consensus as to how this would be done.

 

Moreover, much of GDP depends on consumption which is why consumption is actively encouraged in order to spur GDP growth. The UN report cites projections that the global use of materials is set to almost double between 2017 and 2060, from 89 gigatonnes to 167 gigatonnes. In doing so, the related activities will also double the levels of greenhouse gas emissions, and other toxic effects such as those from manufacturing, mining and other pollution sources. To achieve the SDGs, therefore, fundamentally requires decoupling economic growth from the consumption of non-renewable resources and environmental degradation. Of course, this is far easier said than done. There has been much talk of moving to circular economic models in recent years but the linear model remains stubbornly prevalent and entrenched across almost all industry sectors globally. 

 

There is not only bad news, however. Countries in Europe and Taiwan (although it is not a member of the UN) are much further advanced along the path towards meeting SDG goals. All European countries and most companies have set ambitious targets in line with SDG goals and are already working hard to meet them both within Europe and around the world.

 

For their part, companies are now paying much more attention to environmental, social, and governance (ESG) issues. According to Eliza Li, General Manager and Partner of Sustainability Services for PwC Taiwan, speaking at the ECCT’s 2020 Sustainable Development Goals Forum, citing PwC’s SDG Challenge 2019, which surveyed over 1,000 global companies, 72% of them mentioned SDGs and 21% of them made specific mention of the SDGs in their CEO or chairperson’s statements, indicating that the goals are moving up the executive agenda. In addition, 25% of companies analysed by PwC mentioned the SDGs in sections of their reporting that discussed business strategy. However, only 1% of these companies’ global reports set quantitative goals for SDGs and tracking the results. Moreover, according to Li, the PwC’s survey found that most companies did not consider the impact of SDGs when formulating operational strategies.

The current coronavirus epidemic may tempt companies to put SDGs on the back burner. Harsher operating conditions tend to prompt CEOs to cut optional programmes. According to a survey by FCLTGlobal, a group formed to encourage corporate “long termism”, 61% of executives would cut discretionary spending to avoid missing their profit forecast. When choosing between addressing a long-term environmental crisis and more imminent supply chain upheavals, many companies will shelve the less pressing demand. At a time when large parts of the global economy have seized up and governments are now fighting on all fronts to prevent and mitigate the impact of the epidemic on their healthcare systems and economies, not so much attention is being paid to the SDGs. However understandable, this is misguided since there is considerable overlap in addressing Covid-19 and the drive to meet SDGs given the fundamental focus of many SDGs to safeguard and promote human health and well-being. Moreover, ignoring SDGs now will expose executives who have embraced the ESG demands of a growing universe of ESG funds to uncomfortable scrutiny. 

 

Investors are increasingly demanding that business leaders focus on ESG metrics because they believe that it is going to drive everything else they care about: growth, market share and profitability. Large asset management firms and pensions funds are now pressuring corporate leaders to improve sustainability practices in material ways that both benefit their firms’ bottom lines and create a broader impact.

 

According to BNP Paribas, the return on investment of bonds is directly linked to the stock performance of companies included in the Solactive Sustainable Development Goals World Index of recognized leaders in their industries on socially and environmentally sustainable issues. This demonstrates how companies with SDG-aligned business models can benefit directly from new sources of capital.

 

Ignoring SDGs, even at this critical time, is clearly an oversight since integrating SDGs into planning and operating strategies is both good for a company’s image and its bottom line. The broader point is that all companies will benefit if they operate in resilient communities with reliable access to natural resources, and an educated and healthy population to support their workforce. By helping drive progress toward these outcomes and creating shared value, companies can help to secure their ability to generate capital and shareholder value over the long term.

 

Moreover, companies will not be sustainable over the long term if natural, social, financial and manufactured capital is being eroded elsewhere. Each SDG represents a risk area that is likely to continue to grow if it is not addressed. It therefore makes business sense to integrate SDGs into business and operational plans.

 

Returning to the point about the current coronavirus pandemic, companies will be aware that they need to be focused not only on protecting their own employees and operations but also on cooperating with governments, NGOs and other companies to address the fallout from the epidemic since their own survival depends on it.

 

Most business will not be able to survive if the current movement and other restrictions continue indefinitely. The health of the global economy is dependent on the overall health of the population and the sustainable development of the planet. This implies the need to not only overcome the current crisis but also to ensure that we future proof our development plans. The 17 SDGs are accompanied by 169 specific, global and universally-applicable targets. Companies that have not yet done so would do well to identify their priority SDGs and begin to devise business strategies and plans towards meeting the goals that include clear targets and key performance indicators to monitor and communicate progress. Their own future sustainability may depend on it.

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