The ESG megatrend is everywhere, hence the question of Sustainable Development Goals (SDGs) is increasingly being raised. In this article, we take a look at these SDGs and show why it is crucial for companies to align themselves more closely with these goals.
What are the Sustainable Development Goals?
The 17 Sustainable Development Goals (SDGs), adopted by the United Nations General Assembly in 2015, set out a plan for creating a better, more sustainable society by 2030.
The Sustainable Development Goals (SDGs) are an expanded version of the eight Millennium Development Goals (MDGs) that formed the basis of global activities to reduce extreme poverty from 2000 to 2015.
For the first time in history, the international community was able to agree on a global and comprehensive sustainable development agenda that includes both social goals (based on the MDGs) and environmental goals.
Eradicating all forms of poverty in all regions of the world is the first and most visible of the SDGs. The creativity, know-how, technology and financial resources of the entire global community are needed to achieve the SDGs in every context.
The need for greatly expanded SDG funding
The Sustainable Development Solutions Network (SDSN) has identified the six investment priorities – areas where major societal “transformations” are needed to achieve the 17 Sustainable Development Goals:
- education and social protection to achieve universal secondary education (SDG 4) and poverty reduction (SDG 1).
- health systems to end the pandemic and achieve universal health coverage (SDG 3)
- carbon-free energy and circular economy to decarbonize and reduce pollution (SDG 7, SDG 12, SDG 13)
- sustainable food, land use and protection of biodiversity and ecosystems (SDG 2, SDG 13, SDG 15)
- sustainable urban infrastructure, including housing, public transport, water and sanitation (SDG 11)
- universal digital services (SDG 9) to support all other SDG investments, including online education, telemedicine, e-payments, e-finance, and e-government.
At the heart of each transformation is a large-scale, long-term public investment program. The biggest practical challenge for developing countries is to mobilize the additional financing needed for these six priority areas.
The need for increased SDG financing to achieve these six transformations is now widely recognized, making it essential for companies to act now.
How can companies align their strategy with the Sustainable Development Goals framework?
Many companies are supporting the achievement of the SDGs within their organizations, in part to attract funding from investors who are increasingly concerned about the environment. But how can companies use the SDGs to drive important change?
1. Understand the SDGs and link the relevant goals to your business activities
The first step for companies to achieve the SDGs is to learn more about each of the Sustainable Development Goals (SDGs), their associated expectations and KPIs to understand how they relate directly and indirectly to their business activities. it is not only relevant to monitor typical KPIs, but to put special focus on the achievement of a good ESG rating related to environmental and social commitment.
2. Set priorities
Companies should prioritize the SDG targets by identifying which targets will have the greatest impact in terms of risks or opportunities in the medium to long term and which targets the company can drive forward. Although a company can make contributions to all 17 goals, it is important to focus first on the goals whose achievement will have the greatest impact when allocating resources and setting the timeline.
3. Set the targets
Once the key SDGs are established, it is critical to link these goals to concrete and measurable business objectives and KPIs to track and share development. Often, companies already have goals and initiatives that they can build on when setting their SDG strategy. For example, many companies that have committed to science-based goals (SBTs) use their validated goals to track progress on SDGs 7 and 13.
The defined SDG targets for the company must be integrated into the current corporate strategy. In doing so, companies must consider, for example, business models, R&D and procurement processes, and supply chain reforms to make the SDG plan sustainable and effective. Current commitments and projects remain an important component. Therefore, it is now necessary to realign the sustainability strategy to meet both the business objectives and the SDGs.
5. Innovation and collaboration
The SDGs provide a framework for innovation and promote new business models, goods and services that advance the fulfillment of the goals. Adherence to the framework also makes it easier to find partners inside and outside the industry, so that companies can also intensify their efforts in partnerships and ultimately achieve their goals.
6. Reporting and communication
Companies must be prepared to communicate their progress toward achieving the SDGs. It is critical to integrate the Sustainable Development Goals into the core process of corporate reporting to avoid duplication of effort and to ensure transparency and accessibility of their performance to various internal and external stakeholders.
In this way, useful tools and methodologies can be found to enable companies to better understand how they can contribute to the SDGs in a holistic way.
In developing the ICT solution for collecting and reporting SDG-related data, it is recommended to draw on existing tools and data and leverage overlaps in various reporting requirements such as TCFD, CDP, DJSI, etc. The SDG Compass provides a directory of different reporting tools that can be helpful in disclosing different SDGs. Companies should choose tools that are practical, efficient, and can produce clear and transparent sustainability reports that are accessible to both external and internal stakeholders, with a clear link to the relevant SDGs.
Magility’s take on the Sustainable Development Goals
This decade will be a very challenging time for the global community to transition to a hopefully more sustainable future. Businesses are critical to meeting this challenge, as it is their role to drive innovation, introduce best practices into their value chains, and align their strategy and vision with the Sustainable Development Goals.
The financial benefits for companies are clear, although the guidelines and mechanisms for incorporating and reporting on the SDGs are still evolving. Companies that do not make a significant commitment to sustainability or align their business strategy with the SDGs are likely to face increased scrutiny from stakeholders. They risk losing access to finance and run the risk of missing out on new market opportunities if investors decide to channel their capital into sustainable companies and business models.
In a follow-up article, we will soon provide an overview of the current state of EU sustainability reporting and take a magility look at the European Sustainability Reporting Standards (ESRS) developed by the EFRAG Project Task Force. Follow us on LinkedIn to not miss our future articles!