“The change we need to see in the Decade of Action will not happen through incremental improvements and adjustments to ‘business-as-usual.’ Now is the time for CEOs to speak up and ensure all companies fully integrate the Ten Principles and raise their SDG Ambition to meet the needs of society and the planet” said Lise Kingo, the former head of the UN Global Compact (1). How many times have you heard something similar?
SDGs: Pain or gain?
While this is all true, the idea that business should be used as a force for good is not stressed enough. Our world is slowly shifting from a market economy to an impact economy as humanity is confronted with yet its biggest environmental and societal challenges. As society is becoming more affluent, companies are increasingly faced with a collective responsibility to operate in an ecologically sustainable and socially equal environment (2).
Simultaneously, having a sustainability action plan is often viewed as a necessary step to comply with consumer’s demands or governmental regulations. As such, complying to the ESGs and/or the SDGs is often viewed as a pain rather than a benefit. Operating in a more sustainable environment does not necessarily require concessions and/or sacrifices. While we do have to rethink our consumption patterns, companies also need to start providing environmentally friendly options for example and actually, this can all be done through win-win situations.
Sources of value for Companies
Based on the three main sources of values for companies, here are reasons why adopting a sustainability action plan where your ESGs are matched with the SDGs should not be neglected:
Business opportunities & cost of capital: Purpose-driven organizations are outperforming traditional for-profit organizations. Moreover, the cost of capital is decreasing for impact organizations. Today 33% of total U.S. assets under management are scrutinized under ESG criteria (with a 42% growth from 2018 to 2020) but companies are struggling to link them to the SDGs. However, the co-existence and synchronization of ESG considerations with the SDGs can accelerate corporate contribution within the broader space of the Global Goals, leading to a new decade of action, including responsible investing (3)(4)(5)(6).
Talent: 94% of millennials want to use their skills to benefit a cause or want to work for impact-driven organizations (7), even if this entails working for a lower income as the opportunity cost of working for regular companies is real. They are prioritizing working for companies that treat them as human beings instead of human resources.
Societal goodwill or brand perception: Thinking about what happened to BP after the deep-water Horizon Rig (8), recovering societal goodwill is extremely difficult which is why effective and transparent communication is a must. This will help propel your societal goodwill to the next level.
Gatekeeper vs. Gateopener
Against these broader trends, it becomes clear that companies will only benefit from more transparent and effective sustainability practices - especially when it comes to attracting top talent, increasingly conscientious consumers, and investors.
Ultimately, the question companies should really be asking themselves is: are you going to be a gateopener or a gatekeeper?
- Gatekeepers maintain the status quo by adjusting the business reactively (example: How can we produce more eco-friendly/greener cars)
- Gate openers view impact as a business opportunity. They ask questions such as: how can I reinvent my business, taking into consideration these aspects? This means you should be willing to revolutionize an industry and think outside of the box (example: what would a world without cars look like?)
Being a gateopener also means thinking of new ways to better measure and track your impact. Companies should not stop at the ESGs or at their annual reporting. Instead, think about how your sustainability action plan could be integrated into the SDGs and how you can communicate it more effectively.
The future is up for you to decide.
Photo by Keith Hardy on Unsplash
Sources:
(1) UN News. 2021. Business sector still far from reaching sustainability goals, UN report shows, 20 years on from landmark summit. [online] Available at: <https://news.un.org/en/story/2020/07/1067662> [Accessed 27 April 2021].
(2) Kate Raworth | Exploring Doughnut Economics. 2021. Doughnut | Kate Raworth. [online] Available at: <https://www.kateraworth.com/doughnut/> [Accessed 27 April 2021].
(3) Chakravarty, N., 2021. ESG to SDGs: Connected Paths to a Sustainable Future - SustainoMetric. [online] SustainoMetric. Available at: <https://sustainometric.com/esg-to-sdgs-connected-paths-to-a-sustainable-future/> [Accessed 27 April 2021].
(4) Bloomberg.com. 2021. Bloomberg - Are you a robot?. [online] Available at: <https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/> [Accessed 27 April 2021].
(5) 2019. European Responsible Investing Fund market 2019. [pdf] KPMG. Available at: <https://assets.kpmg/content/dam/kpmg/lu/pdf/lu-en-European%20Responsible%20Investment%20Fund-2019.pdf> [Accessed 27 April 2021].
(6)CNBC. 2020. Sustainable investing’ is surging, accounting for 33% of total U.S. assets under management. [online] Available at: <https://www.cnbc.com/2020/12/21/sustainable-investing-accounts-for-33percent-of-total-us-assets-under-management.html> [Accessed 25 June 2021].
(7) Korn Ferry. 2021. Millennials: The Purpose Generation. [online] Available at:<https://www.kornferry.com/insights/this-week-in-leadership/millennials-purpose-generation> [Accessed 27 April 2021].
(8) Rohrer, F., 2010. Just how angry are people at BP?. [online] BBC News. Available at: <https://www.bbc.com/news/10233882> [Accessed 27 April 2021].