SDG-Related Reporting Provides a Compass for Your Sustainability Efforts

While it is expected that national governments would take the lead in efforts to pursue and achieve global progress with respect to the ambitious Sustainable Development Goals (SDGs) established a few years ago, the SDGs are often incorporated into the sustainability-related mission and objectives of individual businesses and other organizations.? This is especially true with respect to the activities undertaken in the local communities where the organizations operate since this is the level at which organizations have the best opportunity to make an impact through their community involvement and investment programs.? Businesses have been called upon to contribute to certain of the SDGs such as access to basic services, participation in decision making, full and productive employment and decent work, reducing income inequality, ensuring equal opportunity, promoting peaceful and inclusive societies, providing justice for all, and building effective, accountable, and inclusive institutions at all levels.? Delivery of the SDGs should be important to businesses that realize that they will not be able to achieve sustainable success in a world of poverty, inequality, unrest, and environmental stress.? As such, it has been argued that companies should contribute to the SDGs not just by “doing good”, but also by upholding recognized standards and principles on human rights, labor, the environment, and anti-corruption and transparently reporting on their SDG-related priorities and efforts to investors and other stakeholders.[1] ?

In “Integrating the SDGs into Corporate Reporting: A Practical Guide” (“SDG Reporting Guide”), a report prepared and issued jointly in 2018 by the Global Reporting Initiative (“GRI”), the Principles for Responsible Investment (“PRI”) and the United Nations Global Compact, the argument was persuasively made that SDG reporting matters to both businesses and investors, which means that businesses should integrate SDG-related considerations into their business strategies and processes and existing reporting processes and engage in dialogue with their investor stakeholders to under their needs and expectations on SDG reporting and how the reports will be utilized.[2]? Some of the specific benefits to businesses from a global effort to make advances in business reporting on the SDGs include:

• Solidifying a common language for reporting the contribution of a business, and consequently its investors, to the SDGs, streamlining the reporting burden on sustainability issues
• Sparking collaboration along the investment chain to direct funds to more sustainable business practices, thereby incentivizing businesses to align core business activities with the SDGs
• Helping unlock potential business opportunities, both by addressing risks to people and the environment and by developing new beneficial products, services and investments--while mitigating business risks related to the SDGs
• Helping define a shared purpose between companies and investors about expected impact performance and commitment to support it

At the level of a specific company, SDG reporting can serve as a valuable strategic tool for engaging stakeholders, supporting sustainable decision-making processes at all levels within a company, shaping business strategy, guiding innovation and driving better performance and value creation and opening up new sources of capital.[3]? In fact, the report referred to above also noted that research had shown that responsible business practices attracted sustainable finance, thus ensuring a virtuous cycle in the flow of goods, services and capital that benefits other stakeholders and the natural environment.? All of this is obviously important for businesses of all sizes; however, for sustainable entrepreneurs seeking capital for their business models it reinforces the need for them to understand the needs, expectations and investment criteria of impact and other investors who have elected to focus on new businesses interested in addressing specific environmental and social issues and problems.

As for investors, corporate SDG reporting can provide the following benefits:

• Obtaining additional insights to make better informed investment decisions that secure stable returns in line with fiduciary duty
• Representing their values or the values of their stakeholders
• Offering sustainable and inclusive financial products that differentiate them in the market
• Understanding and improving their own SDG impact across their portfolios
• Exploring new business models, markets, systems and platforms (e.g., artificial intelligence or blockchain technologies) that would support the increased availability and reliability of SDG-related data
• Identifying and promoting innovative financing mechanisms (e.g., SDG-related reporting could support the issuance of bonds for projects that aim to create a positive contribution related to the SDGs
• Meeting the requirements of national policies and investment strategies that incorporate the SDGs, which is particularly relevant to state-owned investment institutions

SDG-related reporting also helps investors make informed investment decisions and direct their capital towards projects with positive real-world impact.? In addition, collecting further information on business efforts relative to the SDGs is a valuable risk management tool for investors.? For example, the costs from environment or climate-related events will come back into investors’ portfolios as insurance premiums, taxes, inflated input prices and physical cost associated with disasters, social concerns, such as poverty and inequality, can lead to societal and political unrest and instability that could reduce future cash flows and dividends.? Finally, investors have their own set of stakeholders, including pension funds and other institutional investors as well as wealthy individuals looking to make an impact through their own investment activities, and it is becoming increasingly important for them to demonstrate that sustainability, as demonstrated by requiring SDG-related reporting form their portfolio companies, is part of their strategy.

There is no formal disclosure framework that has been specifically developed relating to business reporting on the SDGs; however, reference can and should be made to several useful and evolving guidance documents and related tools including the SDG Reporting Guide.? To learn more, read my recently updated chapter on SDG-Related Reporting .

Notes

[1] Integrating the SDGs into Corporate Reporting: A Practical Guide (Global Reporting Initiative, Principles for Responsible Investment and United Nations Global Compact, 2018) , 4.

[2] In Focus: Addressing Investors Needs in Business Reporting on the SDGs (Global Reporting Initiative, Principles for Responsible Investment and United Nations Global Compact, 2018) .

[3] Integrating the SDGs into Corporate Reporting: A Practical Guide (Global Reporting Initiative, Principles for Responsible Investment and United Nations Global Compact, 2018) , 4.