This Is How It’s Done: How The SDGs Will Ensure Long-Term Business Profitability
Christina Mallin | Dec 16th 2016

When a solution to a given problem doesn’t lie in front of our eyes, it is easy to assume that no solution exists. The same applies to turning the UN Sustainable Development Goals (SDGs) into a value-driving component of business operations.

As a social enterprise focused on developing sustainable solutions, especially on climate change, there is hardly a project or mandate that does not relate to one or several of the SDGs. Turning the SDGs into a catalyser for better, climate-friendlier business should have been straightforward for South Pole Group. Far from it. Going from this intuitively obvious framework of targets to a strategy and practical approach did not come without some sweat and tears.

And why did we put in all this effort? Because the SDGs are here to stay. Businesses who do not do their part in attaining these goals will have a tough time justifying their operations.

The Sustainable Development Goals are effective since January 1st, 2016 and will define global policy priorities and funding for the next decade to come. Inked in by heads of states, the SDGs are primarily a reference framework for the public sector. The relevance of the SDGs is becoming increasingly apparent as the global public agenda begins to align with the Paris Agreement and the Proclamation of Action made at the COP 22 in Marrakech. The Proclamation underlines that is is now “our task to rapidly build on that momentum, together, moving forward …. supporting the 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs).”

Despite the fact that in the UN Framework, only Governments are officially held accountable for achieving the SDGs, the corporate sector will be vital in helping to achieve them. This aspect of the partnership is recognised by SDG 17 that calls for support from all stakeholders – public and private alike. For corporates, having a long-term strategy that, at a national level, is goal-congruent with government ambition makes business sense: put simply, the SDGs will guide government spending – if a business can tackle any of these goals, there will be money to be made. Working with the SDGs has the potential to support all stakeholders in making the right choices as the world transitions to a ‘2°C economy’.

The 17 SDGs span a wide area of topics and are strongly interconnected.  At first, this seems to make it easier for the private sector to act and support the SDGs. However, even here at South Pole Group, where our core business and consulting services are neatly aligned with the majority of the goals, we found it challenging to work with the SDGs specifically because they are so broad.

 

So how should organisations untangle this jumble? Based on our experience, we propose two key steps to ensure a clear approach and a solid base for future action:

STEP 1. We made the SDGs a central element of our core business. By developing a quantification scheme and process, we are able to measure the progress of our carbon reduction and renewable energy projects in achieving the relevant SDGs.

While many of the SDGs and their numerous targets are within the scope of operations of SPG, we decided to select only the goals that are most material to our core business and project activities. For these selected SDGs we defined targets and indicators to be measured, and included the measured SDG-impacts in our internal and external standard reporting structure. This allows us to transparently communicate how our work supports the SDGs. We also encourage our Project Managers to add substantiated information on other SDGs that are especially relevant for their specific projects and have made sure to communicate our approach and quantified SDG impacts in our marketing & corporate communications. An example of this is our Kariba REDD+ forestry project in Zimbabwe: the structured approach used has led to a reliable assessment of our overall business impact on the SDGs.

We also support our clients to best realise their sustainability strategies by showing them the proven SDG impact of the projects they invest in. This allows them to make sure that all projects are relevant to their individual goals. As as part of our tailormade offer on offsetting, our client Interface Inc, for example, is working to meet their sustainability goals in the realm of renewable energy by investing in a renewable energy solution with quantified impacts.

So what does reporting on SDGs look like in practice? Let me revisit our Kariba REDD+ project: we have documented the project’s contribution to four SDGs quantitatively: SDG 1. No Poverty, SDG 4. Quality Education, SDG 13. Climate Action and SDG 15. Life on Land.

 

Another example is the Guanyin Wind Farm in Taiwan, which provides sustainable energy in a country heavily reliant on imported fossil fuels for energy production. This project contributes to the SDGs 7 Affordable and Clean Energy, 8 Decent Work and Economic Growth and 13 Climate Action.

We know that measuring the SDG impact of any action is frequently a challenge in both the public and the private sector. To address this, we’ve developed a tool for the United Nations to evaluate Nationally Appropriated Mitigation Actions (NAMAs) with regards to their contribution to the SDGs. This tool can be easily adjusted to evaluate private sector business operations and project activities.

STEP 2. We chose to anchor the SDGs to the core of our corporate structure by integrating them in our balanced scorecard system, which measures the progress made on realising our company strategy. A Balanced Scorecard is a strategic performance management tool, designed in a way that allows us to keep track of our performance against our key performance indicators (KPIs) and targets. We have linked the most material SDGs to one of our key objectives, “value creation”.

By linking them to our Balanced Scorecard, the SDGs become an integral part of our company-wide goals and targets, ensuring that they are an integral part of our operational management processes. This support a continuous process to quantify the impacts and strategically adjust our day-to-day business accordingly. We are currently developing and tracking our SDG impact on a quarterly basis. In the long run, we will be able to better understand the business’ impact against the SDGs.

It is easy to wave the SDGs off as another, high-level concept that will not directly apply to your organisation and operations. Aligning organisational strategy with the SDGs will ensure long-term business value. But without taking the time to understand the SDGs and how they relate to an organisation’s core business and strengths, it will be hard to use them as catalysts for shared value. This, in turn, would mean missing an opportunity: as public and private funding start trickling into realising these global goals, the best-positioned businesses will be those that have solutions ready to address sustainability-related issues. Albeit tricky to work with, the broad reach of the goals make them a great reference framework for corporate CSR and ESG strategies, and provide a clear approach that is recognised on a global scale.

The SDGs are also an opportunity to show the positive impact of businesses in a time when investors and shareholders are questioning the sustainability of an investment. Proof of this is the constantly growing number of investors signing up to initiatives such as the Montreal Pledge and the Carbon Disclosure Project.  Unwillingness to show progress on sustainability or misleading investors and shareholders can lead to serious consequences, as the current investigation into Exxon shows.  Finally, In addition to future-proofing operations, aligning corporate strategies with national priorities will ensure support from governments and citizens alike.  

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There needs to be a change of mindset within the private sector. Turning the SDGs into corporate value-drivers is an opportunity and ensures one’s license to operate for years to come. The list of positive examples is growing day by day, and working with the SDGs is a must for any company wanting to show true leadership in the 21st century. Missing the bandwagon of defining business models to fit a future painted by the SDGs will challenge the very existence of a company. Going forward, the corporate sector needs to be ready to show that it is part of the solution, not the problem. Integrating the SDGs into corporate operations is an effective way to do so. Not only for communication and marketing purposes, but to ensure one’s license to operate, improve risk management, and boost market competitiveness.

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