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Business as Usual Will Not Save the Planet

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The  United Nations’ 17 sustainable development goals (SDGs) were explicitly designed to engage the private sector in addressing the world’s most pressing challenges. Four years into the UN’s 15-year timeline, the question is whether companies are advancing serious solutions or are simply embarking on a massive global public relations charade. Unfortunately, our internal research points to the latter. A dramatic and immediate change in direction by both companies and the UN will be essential if there is to be any chance of avoiding an embarrassing failure. The we describe in this article offers the necessary steps to reverse course and deliver urgently needed progress.

The commercial opportunities for business solutions to the SDGs are real and extensive. A CEO commission chaired by former Unilever CEO Paul Polman reported that meeting the SDGs offers a $12 trillion business opportunity. And, according to the UN Global Compact, more than 80% of its 9,500 corporate members have committed to advancing one or more of the goals. Ninety-five percent of those companies anticipated having a “significant” or “substantial” impact on the goals. To find out if corporations were acting on their words, we reviewed the websites of 100 of the largest global companies, interviewed executives at a selection of companies that appeared to have significant SDG efforts, examined UN and other SDG-related reports, reviewed FSG’s past corporate clients and members of the Shared Value Initiative, and tested our hypothesis with an international gathering of corporate leaders at the Shared Value Leadership Summit. Our finding: The commitment of almost every company we studied appears to be merely cosmetic; existing corporate social responsibility (CSR) initiatives were simply relabeled with the relevant goals. We found very few companies doing anything new or different to advance the goals. Do these companies really expect that business as usual will deliver the kind of outcomes that the SDGs require?

The SDGs are highly aspirational, of course, but their predecessor from 2000 to 2015, the eight Millennium Development Goals (MDGs), demonstrated the potential for such goals to help galvanize organizations in ways that bring about meaningful progress. Although the MDGs never targeted the private sector, they deeply influenced governments, NGOs, and development agencies around the world. Infant mortality rates dropped by 45%, five times faster than before the MDGs were adopted. Malaria deaths plunged 58%. Primary school enrollment in sub-Saharan Africa increased 20%. Ninety-five countries met the sanitation target, and 147 countries met the target for clean drinking water. Official international development aid increased 66%. These changes may not be entirely attributable to the MDGs, but there is no doubt that many public and social sector actors changed their priorities, action agendas, and funding allocations to align with the MDGs in a way that contributed to these results.

When the SDGs replaced the MDGs, the decision to engage corporations reflected a substantial shift in policy after a long history of UN reluctance to work with business. Between 2000 and 2015, many leading actors from every sector began to accept the idea that social problems could be solved at a profit and that engaging the private sector might lead to even greater innovation, efficiency, and scale of impact. Social entrepreneurship, microfinance, impact investing, and other new approaches gained momentum and credibility. Concepts such as “creating shared value,” put forth by Harvard Business School’s Michael Porter and one of us (Mark Kramer), suggested that companies could even gain a competitive advantage and generate healthy profits by helping to overcome the challenges of poverty, education, nutrition, clean energy, and many other problems included in the SDGs.

There is no denying the scale of resources that the private sector can mobilize: In the United States, for example, private sector spending of $22 trillion is more than 7X government spending and 20X the nonprofit sector; there is also trillions of investment dollars available via the capital markets. But this scale of resources is only available if companies find opportunities to advance the SDGs through their core business activities. Corporate philanthropy and CSR can never deliver the scale of impact that the SDGs require. Even if all corporate philanthropy, a mere $20 billion in the United States in 2018, were entirely dedicated to the SDGs, it would be an immaterial addition to the $149 billion in development aid mobilized by the MDGs.

To be sure, there are a few companies that have taken seriously the business challenges inherent in the SDGs. Both DSM and Novozymes have engaged their senior executives in using the SDGs to prioritize their product development pipelines and strategic priorities, resulting in new and profitable product offerings that can be scaled up to make measurable progress toward specific goals such as the Novozymes’ BioSec technology that reduces the water required in treating waste. Enel, the global energy company, is accelerating its retirement of coal-fired power plants and investing only in renewable energy going forward. Capturing the innovation and potential scale of private sector solutions through efforts like these are exactly what will be needed to reach the goals.

Sadly, these are the rare exceptions. For example, although 27 of the 50 largest U.S. companies explicitly claim to be working to advance an average of nine SDGs per company, hardly any are doing anything new or different in their core business activities to advance the goals. Very few are even doing anything different in their philanthropy or CSR efforts.

The universality of the goals and the lack of a mechanism to hold anyone accountable for their vague promises to address them has made it all too easy for corporations to sidestep serious commitments. It was hard to claim under the preceding MDGs, for example, that one was working toward reducing mortality rates of children under five without actually doing something about it. But goals like SDG 3, “to ensure healthy lives and promote well-being for all,” can encompass just about anything.

In many cases, companies’ core business activities seem to contradict their commitments. Philip Morris, the tobacco giant, claims to advance this health goal. Really? ExxonMobil’s commitment to SDG 7, affordable and clean energy, doesn’t seem to have changed its business model. No doubt these companies are doing something somewhere that contributes to the stated goals in some way, but their core business activities are also obstructing progress far more significantly toward the very goals they proclaim. The proverbial fox seems entirely welcome in the SDG henhouse.

The tragedy is not merely that companies can make such superficial and, at times, contradictory claims; it is also the loss of an immense opportunity to engage the private sector in a meaningful way that would help reach these urgent goals. We’ll never make progress without a dramatic change course.

For companies that are serious about addressing the SDGs:

Choose fewer and more specific goals. Limit yourself to between one and three SDGs that are most central to your business. A number of companies claim to be addressing all 17 goals and, as noted above, the average number of goals that the large U.S. companies we surveyed claimed to be pursuing was nine. No company can seriously pursue so many different goals. If companies are to tie the SDGs to genuine business opportunities, they will need to be far more selective and precise. Toward that end, companies should shift their focus from the 17 broadly framed SDGs to the 169 far more specific sub-goals that the UN has defined and frame their commitment in terms of those more concrete and measurable outcomes.

Focus on the most promising business opportunities. Companies should do this when selecting which goals to pursue. The larger and more profitable the opportunity, the faster new products and services can scale up to advance the goals. This means that the SDGs must move out of the CSR department and into corporate strategy and operations. The CEO must set the agenda and task the relevant business units with implementation.

Adopt meaningful near-term targets. Companies must commit to specific and measurable targets that include both the social progress they intend to achieve and the value that such impact can bring to their shareholders. The remaining 11-year timeline is too long to wait for reports on progress. Companies must translate the relevant SDGs into three- to five-year targets and report publicly on their annual progress toward achieving the targets, just as they would with any other serious business initiative.

Reallocate resources. No significant innovation will happen without dedicated resources, and the resources cannot be limited to corporate philanthropy. Companies must make substantial investments to expand the effectiveness and reach of products or services that can advance their chosen goals.

Be honest about and address inconsistencies. Most companies will have product lines or activities in their value and supply chains that work against the SDGs. Companies must acknowledge these conflicts and offer a plan and a timeline for mitigating their negative impact.

The UN and its affiliated agencies will also need to act very differently to push companies beyond the current public-relations campaign and meaningfully enlist them in advancing the goals:

Require accountability for and verification of all corporate claims. The UN must hold companies accountable for their commitments and, equally important, for sidestepping inconvenient goals or claiming to work on goals that their fundamental business model undercuts. This will require an official approval process for companies that wish to make SDG commitments. Rather than welcome all companies that voluntarily commit to the goals, the UN must review all corporate commitments to ensure their integrity and seriousness, rejecting false, contradictory, or exaggerated claims, and publish a registry of officially endorsed private sector participants.

The UN’s endorsement should clearly delineate between companies that are advancing the SDGs through philanthropy and CSR versus those that have embedded the SDGs in their core business model through their product development, sales promotion, supply chain procurement, and the budgetary allocation decisions made by senior management. And in both cases, companies should be required to articulate what they are doing differently in order to animate their commitment to the SDGs. The CEO task force, since disbanded, could be reconstituted as a review board to validate company claims.

Add up the commitments. There is a very real risk that the goals voluntarily chosen by companies, even if quantified and seriously undertaken, would never add up to discernible progress toward the needed outcomes. The UN should therefore aggregate the specific targets set by each authorized company and report on whether the cumulative efforts of different industries will add up to material progress on each goal and then proactively encourage new companies to join and existing companies to expand their ambitions so that the combined efforts will likely show actual progress.

Facilitate partnerships. The UN, its agencies, and CEO coalitions must actively organize multi-sector coalitions to work in partnership toward each of the goals, as contemplated by SDG 17. The goals create a common language across companies, NGOs, governments and development agencies that enable these different sectors, long used to speaking different languages and pursuing different goals, to find common cause and a single framework that illuminates opportunities for collaboration. A “collective impact”  framework that FSG developed can help players in these different sectors form effective coalitions to tackle ambitious initiatives by defining an agenda, implementing shared measurement systems, engaging in mutually reinforcing activities, continuously communicating, and creating backbone support to hold the coalitions in place.

The SDGs offer the potential to unite the most powerful organizations in the world — governments, corporations, and civil society — behind a single agenda to save humanity and the planet from suffering and devastation. Including the private sector in their development and execution can greatly magnify the odds of success. But unless we change course to ensure that the private sector’s engagement goes beyond mere lip service, we will never reach these vital objectives. Companies will proudly boast of their commitments while leaving billions of people to suffer the life-threatening consequences of inaction.

Source: HBR.org
Author: Mark R. Kramer