The year 2015 was of great importance, since it marked two new historic milestones, the declaration of the United Nations Global Agenda and Paris COP 21. Following these events, the majority of countries agreed to take measures in controlling their negative impacts on the environment and climate change. To this end, they agreed to begin moving towards sustainable development models and carbon emission reduction targets. In today’s world, where sustainable development has become a necessity for the well-being of humanity, the 17 interconnected Sustainable Development Goals (SDGs) has gained significant importance.
The SDGs[1] cover broad challenges such as economic inclusion, diminishing natural resources, geopolitical instability, environmental degradation, and the multifaceted impacts of climate change. They define the agenda for inclusive economic growth through to 2030 and were developed with inputs from business, academia, and nonprofit organizations globally.
Many companies have been working to address environmental, social, and economic issues. Leading companies have begun to recognize that they can only address the complex sustainability challenges by scaling up their efforts through collaboration with peers, industry and sector organizations, customers, governments, nonprofit organizations, and society. The SDGs provide a universal and visionary framework for this global cooperation and action, bringing all stakeholders together to proactively address and solve these challenges. Organizations are facing challenges that limit their potential to grow, such as scarce natural resources, weak financial markets, limited local buying power and lack of qualified talent.
Business growth in general is tied to the achievement of the SDGs at a macro level; however, to act at a local level, companies should identify how they can contribute to meeting the goals in a way that drives financial performance in the markets they operate in. While SDGs Nos. 8, 9 and 12 refer directly to economic growth, employment, sustainable industrialization, innovation, and sustainable production, many of the other SDGs also offer business advantages through expanding into new markets, attracting talent, and reducing risk from operations.
For instance, when beverage companies invest in improved watersheds by working to replenish the aquifer water they use, thereby also committing to provide access to clean water to people in those water-stressed regions, their strategy aligns with SDG No.6 – Clean Water and Sanitation. While providing water supplies to sustain their bottling franchises near those watersheds, they are also investing in their social license to operate and thus strengthen their brands in these communities. All companies stand to gain from more resilient communities, 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, they can help to secure their ability to generate capital and shareholder value over the long-term.
Companies may not be able to continue to create capital over the long term if natural, social, financial, and manufactured capital is being eroded elsewhere. Each SDG represents a risk area that is already presenting challenges to businesses and society, and these risks are likely to only continue and grow if not addressed. Supply chains are particularly exposed to the effects of climate change and depletion of natural resources, which align with SDG Nos. 12, 13, 14 and 15. Geopolitical instability (SDG No. 16), inequality (SDG No. 10) and lack of development in some regions (SDG Nos. 1, 2, 3 and 4) limit the potential of these emerging markets. Addressing these and other risks can make good business sense as stakeholders hold companies accountable for their role in creating or exacerbating these risks. Organizations can maintain their social license to operate by responding to stakeholder needs in these areas. Investors are increasingly paying attention to environmental, social and governance (ESG) risks when making investment decisions.
The SDGs will likely have an important impact on the purpose of many companies around the world. Contributing to the SDGs is a way to create shared value for all stakeholders and therefore businesses will be a strong driving force to galvanize stakeholders around a common shared outcome. When companies focus on a purpose that is rooted in creating value for others, improving the world we live in and inspiring the organization at all levels, they may increase their ability to drive profits and create sustainable value. The SDGs can focus a company’s purpose on challenges that act as a catalyst for innovation, engage and motivate employees, open new markets, and opportunities, and may future proof the company against a wide range of risks. For purpose to be activated, to resonate and ultimately to reach its potential, it should have business relevance, be implementable and have a transformational impact. The SDGs can help a company define its aspirational purpose in a way that is relevant and inspiring to stakeholders, allow purpose to become the foundation for its strategy, and ignite long-lasting positive change that may increase shareholder value over the long term.
SDGs offer a road map for companies to engage with stakeholders on how to create sustainable strategies that can transform business models, products and services, and the communities where they operate.
