26 June 2024
Businesses are Committing to the SDGs, But What About Their Impact?
Photo Credit: Lynn Wagner
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Businesses can play an important role in delivering urgently needed progress on the SDGs and are increasingly stepping up to do so.

Ensuring their participation and factoring their impact into national and global SDG progress records will help determine where we are at as a collective.

So far, measuring private sector progress on sustainability is fragmented, raising the question of how its contributions can be better reflected in SDG follow-up and review.

By Pytrik Dieuwke Oosterhof, Senior Sustainable Development Consultant and Founder of O-Land Consulting

In the past years, research has indicated an increase in private sector interest and involvement in the SDGs, but this engagement doesn’t come without question marks. In the 2023 Global Sustainable Development Report, the UN indicates that businesses are increasingly engaged through SDG-aligned business strategies, however, there is a risk of overclaiming and ‘SDG-washing.’

KPMG’s Survey of Sustainability Reporting found that 74% of the world’s largest companies report on the SDGs, but only 10% report on the entire 2030 Agenda for Sustainable Development. When it comes to measurability of impact, the survey found that only 6% of the companies are reporting on their negative or positive impacts on sustainable development. Another survey of 206 companies found that while 83% expressed support for the SDGs, only 40% had put in place measurable commitments and only 20% included evidence to assess their impacts. These and other results indicate that sustainability is a growing priority for businesses, but when it comes to reporting, more must be done.

Among the key sustainability reporting mechanisms available are Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG). While both concepts have helped put sustainability on the radar of businesses, they have also led to discussions on what their real impacts are.

CSR has been around for decades and is promoted by the UN Global Compact’s ten principles that include human rights, labor, environmental, and anti-corruption issues. While these principles relate to some of the SDGs, they fail to address the 2030 Agenda as a whole. Moreover, in most countries, reporting on CSR is not mandatory.

The adoption of ESG considerations in private investments is gaining traction. While the UN considers ESG as consistent with the SDGs, concerns have also been raised. Although ESG may create a sense of value-based investments for shareholders, it is not standardized, leaving its impact open for interpretation. ESG scores depend on rankings that rely on criteria set by various ranking agencies, each applying a different set of criteria. This makes measuring the actual impact of an ESG score, or using it as a baseline for private sector sustainability performance, difficult.

In addition to CSR and ESG, various sustainability compliance initiatives are available, including the Global Reporting Initiative, CDP, Sustainability Accounting Standards Board, and regulatory standards such as the EU’s ESRS are emerging. While these may help improve monitoring efforts, they also add further complexity to the reporting landscape.

This fragmented picture is inherently problematic, especially at a time where urgent action is needed to achieve progress on the SDGs. According to the 2030 Agenda, governments have the lead in reporting on SDGs through the voluntary national reviews (VNRs). Although voluntary, many countries have by now reported several times and made efforts to measure national progress, including the development of indicator frameworks. While VNRs offer an opportunity for businesses to engage, VNR reporting on private sector progress remains limited and rarely covers CSR, ESG, or other standards.

This raises the question of whether the 2030 Agenda is an appropriate model for measuring private sector contributions in the first place. The SDG indicator framework is challenging for businesses to apply, as measurements are based on sovereign indicators and come without a clear scorecard for businesses. The Goals should ideally be approached from an interconnected and systems-wide perspective, which may offer a tailored approach for governments, but not so much for businesses. While all businesses should mainstream the SDGs into their strategies, some SDGs are relevant for one business but not for others, making a comprehensive impact assessment difficult. At the same time, the evolution of varying reporting standards may have steered businesses away from in-depth reporting on the SDGs, establishing parallel reporting practices.

As the regulatory framework for private sector sustainability reporting is changing rapidly, it is critical to make sure businesses fully participate and contribute to the SDGs through:

  • Critically looking at ESG: Since ESG is increasingly prominent, the basis for sustainability performance on ESG needs to be critically looked at. If this is considered a baseline, how can it be aligned with the SDGs to better measure the impact on the collective sustainable development ambitions?
  • Mandatory reporting on the SDGs: To solidify the measurement of our global sustainability efforts in a post-2030 era, country reporting on the SDGs should be mandatory and based on harmonized standards for measuring the impacts of all key stakeholders, including businesses.
  • Standardized corporate reporting standards on the SDGs, including a scorecard: To counter the fragmented reporting landscape, corporate sustainability reporting needs to be standardized. In creating universal reporting standards, a clear scorecard for private sector contributions should be considered. A simple SDG scorecard that is based on standardized criteria can help businesses universally in the application and review of the SDGs.
  • Strengthening corporate accountability: Given the growing corporate value in supporting the SDGs, businesses themselves should future-proof their business model and advocate for standardized corporate reporting. In addition to establishing a track-record of the global sustainability progress, this can help avoid overburdening businesses with various reporting responsibilities and also support the legitimacy of sustainable business practices that many consumers seek.

To improve follow-up and review of the 2030 Agenda, it is essential to solidify the measurement of our global sustainability efforts, universal standards, and mandatory reporting, as well as to provide clear criteria for private sector reporting.

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