Is Corporate Sustainability Reporting the Last Hurdle in Achieving the Sustainable Development Goals?
If someone told you that you could end poverty and hunger, promote equality and sustainable economic growth around the world, and protect the environment, all while realizing $12 trillion dollars in economic opportunities, would you invest? I am betting most people would! The SDGs - the United Nations Sustainable Development Goals - present this kind of opportunity in the coming decades, and investors and corporations are taking note.
Several of SustainabilityNext’s clients have either started or are getting ready to adopt the SDGs as a tool to help contextualize or lay out their corporate responsibility priorities and initiatives, so it seemed timely to review some of the data and reasoning behind this trend.
Investors are a big part of what’s driving the trend in corporate reporting on environmental, social and governance (ESG) issues. According to the UN Global Compact, the share performance for companies in the Global Compact 100 Index (a group of companies measured on ESG issues, along with profitability) actually outperformed other major indices. So, it’s no surprise investors are making the link between corporate alignment with the SDGs and where they want to put their funds. And it’s getting easier for investors to figure out how to do this.
In addition to the ESG rating tools mentioned in my previous blog post, new resources for investors focused on the SDGs have emerged. For example, PRI (Principles for Responsible Investment) created an Impact Investing Market Map that helps mainstream investors understand different SDG thematic areas of impact and how investments can align with these areas. It also provides a sample of KPIs (key performance indicators) to help track company social and environmental performance.
Another resource is Financing the Sustainable Development Goals: Impact Investing in Action, a report published by GIIN (Global Impact Investing Network) which includes case studies showing how impact investors are taking action to finance the SDGs. The UNDP also created an SDG Impact platform which offers country mapping reports, convenes investors and enterprises, and offers training on impact measurement and management as it relates to achieving the SDGs.
With these tools, investors have a more clear path for how and where their investments can help the world make significant progress toward ending hunger, poverty and the unsustainable use of our natural resources, while providing financial return. Companies can benefit from reviewing these resources and others related to the SDGs because they provide management strategy/prioritization frameworks for corporate social responsibility and sustainability strategy.
One of the remaining challenges to achieve the SDGs may be the depth and transparency of corporate reporting. While the SDGs are not a standalone checklist or reporting standard, they can and should be linked to other corporate reporting frameworks that allow investors to understand a company’s CSR strategy and achievements and to the process of determining materiality and business value for your company. In December 2018, PIMCO, the world’s biggest bond issuer, released a report showing that existing levels of disclosure make it difficult for investors to allocate more capital to the companies best aligned with the SDGs, putting the achievement of the SDGs and the economic opportunity connected to them at risk. According to the report, companies “still lack the expertise to identify activity and targets that can add business value".
SustainabilityNext can help you determine how the SDGs will impact your industry, where they may create business value for your company, and how to align the SDGs with your chosen reporting framework or approach to enhance your performance management systems and to provide your potential investors with a clear sightline to your CSR achievements. To learn more, email ann@sustainabilitynxt.com or click here.