Ethical Corporation is now Reuters Events - LEARN MORE
Alexandra Britton of positive impact consultancy Palladium says firms should focus on creating value in their core business if they want to make a meaningful contribution to the Sustainable Development Goals
It’s inevitable. A few times a week, I come across new statistics supporting the fact that for companies to remain competitive, they must pay attention and respond appropriately to evolving consumer demands for sustainability. According to one survey, 81% of millennials believe business has “a key role to play” in achieving the Sustainable Development Goals (SDGs); in another survey, 66% of respondents were willing to pay more for brands committed to making a positive social and environmental impact.
As a millennial, these statistics sometimes frustrate me – why is this even a question? That is why I’m excited to see more and more companies recognize the importance of SDGs and work to find new ways to support the goals. For instance, the World Business Council for Sustainable Development recently released a study that found 79% of corporate sustainability reports it reviewed acknowledge the SDGs in some way. At the same time, it found only 6% of companies are aligning their strategy to specific target-level SDG criteria and measuring their impact.
Focusing outside of a company’s core business means creating projects that don’t have clear feedback loops
Dutch dairy company Friesland Campina is one company that does a good job of this, connecting its corporate initiatives with SDG targets. So, what's stopping more from making these connections?
A major reason is that companies are struggling to meaningfully incorporate SDGs into their core business strategies. Some businesses that undertake sustainability initiatives use the SDGs as a starting point rather than starting with problems faced by their business. Rather than look at their unsustainable supply chains or shortage of skilled labour, for example, and ask, “How can we solve these problems while advancing the SDGs?”, they may create a new social corporate responsibility program to expand access to clean water.
Alexandra Britton: 'Companies should focus on value and transforming existing systems.'
That is not to say that helping to expand access to clean water is a bad thing, but focusing on programs outside of a company’s core business means creating projects that don’t have clear feedback loops, and also don’t advance corporate objectives.
So, what should companies do instead? They should focus on creating value and transforming the systems in which they operate. Here are five steps that can help companies boost their profits and contribute to the SDGs:
1. Start with major problems plaguing the operations and long-term viability of a business
Ask yourself what is threatening the sustainability and future of my operations? For instance, chocolate companies are facing sourcing issues. Their cocoa farmers are aging, impoverished, and operating on tiny plots of land. Younger generations are choosing not to enter the profession in favour of more lucrative opportunities. Simultaneously, volatile weather patterns are affecting farm yields. This means multinational corporations face major issues in their operations if they don’t create a sustainable supply chain of resilient farms that offer opportunities for farmers. Mars, Inc is addressing this with its $1bn Sustainable in a Generation plan, which it announced last year.
2. Document which SDGs relate to specific business challenges
The next step is to compare these business challenges with the SDGs and their top-line objectives. Critically think about which SDGs are affected by the problem you’re facing.
This may involve mapping your value chain to the SDGs and defining priorities for your company. For instance, in the context of the previous example of the cocoa supply chain and farmers, the most relevant SDGs are around the areas of poverty, food security, economic growth, climate change, and partnership. Specifically, Goals 1, 2, 8, 12, 13, 15, and 17.
3. Map the existing ecosystem and stakeholders
Prioritizing and target-setting starts with understanding the system in which you operate. One reason many CSR initiatives and one-off projects don’t move the proverbial needle is because they fail to answer “What’s in it for me?” for each stakeholder.
4. Identify main areas for value creation
To create enduring impact, companies need to find ways to move beyond short-term performance pressures that can prevent progress on sustainability. Ask what changes needs to happen across it (in the form of new or strengthened relationships, new business models, etc.) to generate more value. Look for points in the system that can lead to behaviour change and have the potential to scale. For example, in the case of cocoa, this can involve creating new organizational models around nucleus farming, aggregators, and supply chain managers to drive productivity, increased efficiency and higher quality.
Once you have identified the areas where you can create added value for your company and the areas where your company can improve its sustainability, design a solution that brings the commercial and sustainability goals together. A key piece of this is finding the right metrics to measure progress and aligning incentives to specific indicators that cover the business challenges and SDGs. For more guidance on this, refer to the SDG Compass and an analysis published by GRI.
Coupling clear reporting with an ecosystem approach makes it more likely for companies to positively contribute to the SDGs while driving long-term business growth. More importantly, though, it creates meaningful value for all players and delivers positive impact for both business and society.
Alexandra Britton is manager of global thought leadership at positive impact consultancy Palladium.