Why Supporting the Sustainable Development Goals Is Good for Business

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SEATTLE — In September 2015, more than 150 world leaders convened for a United Nations summit and adopted a set of 17 Sustainable Development Goals (SDGs). The 17 SDGs aim to end poverty, protect the planet and ensure prosperity for all by 2030. Although agreed upon on at an international level, the SDGs will be achieved only with contributions from both governments and corporations. In April, the U.N. published its preliminary SDG Commitment Report 100 which shows how well global companies are supporting the Sustainable Development Goals in their annual reports.

The SDG Commitment Report scoured the 2016 annual reports of top global companies, looking for the implicit or explicit commitment to the Sustainable Development Goals. The report then analyzed the correlation between the visibility of the SDGs in annual reports and positive media coverage and investor sentiment. The list of 100 blue chip companies included the 50 most profitable global companies in 2015, the largest companies by revenue on each continent, the largest family-owned corporations and businesses with a presence on Fortune magazine’s list of most admired companies.

More than 80 percent of the top 100 companies recognize the importance of the SDGs to some degree in their 2016 annual reports. Additionally, there has been a 150 percent surge in financial analyst coverage of environmental, social and governance (ESG) topics between 2000 and 2017. Despite a large number of companies supporting the Sustainable Development Goals to some degree in their annual reports, it is evident that there are significant differences between geographical regions.

In Europe, an impressive 97 percent of companies either directly reference or implicitly mention the SDGs in their annual reports. In Asia, 86 percent of companies indirectly support the SDGs in their annual reports. However, in North America, only 66 percent of companies have statements in their annual reports supporting the Sustainable Development Goals.

Surprisingly, notable North American brands such as Apple, Walmart, Boeing and Disney all have no references to the Sustainable Development Goals in their 2016 annual reports. Google and Microsoft have fewer than 10 statements referencing the SDGs in their annual reports.

According to a 2016 joint study from the MIT Sloan School of Management and the Boston Consulting Group (BCG), “sixty percent of investment firm board members are willing to divest from companies with a poor sustainability performance.” The study cites increasing evidence of the synergies between ESG performance and long-term financial success. In other words, committing to sustainability goals is vital to securing short-term investment and long-term profitability.

The MIT-BCG study also highlights an interesting disconnect between the opinions of top managers in publicly traded companies and those of executives in investment firms. According to a survey cited by the study, 75 percent of investment firm executives confirm that sustainability performance is a key factor in their investment decisions, whereas only 60 percent of top managers in publicly traded companies believe that sustainability matters for investors.

The SDG Commitment Report identifies an association between the visibility of SDGs in annual reports and positive media coverage. Companies with prolific references to the SDGs in their annual reports earned significant amounts of positive media coverage, often exceeding the 20 percent minimum guideline for building a solid brand image. Financial analyst reports also favored companies with much greater visibility of SDGs, with the top 25 companies receiving 32 percent positive media coverage, compared with 25 percent for the group as a whole.

As investors increasingly turn to corporations with a strong sustainability focus, it is apparent that companies need to communicate their commitment to the Sustainable Development Goals effectively. North American firms, in particular, are not doing a great job of communicating their sustainability focus in their annual reports. It is clear that supporting the Sustainable Development Goals shows a commitment to a sustainable future and is inextricably linked to long-term financial success.

Michael Farquharson

Photo: Flickr

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About Author

Michael Farquharson

Michael writes for The Borgen Project from Madison, WI. His academic interests include international relations, economics, current affairs and politics. Michael was born in France, grew-up in the U.K. and now lives in the U.S.A.. He also has a passion for cooking.

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