Take a minute to scan your last sustainability report’s CEO statement, and to peel back the glossy SDG infographics. Can you say, hand on heart, that your company’s current SDG response really is creating system-wide value?
In the first article in this series, it was noted that the SDGs can help us chart a path out of the current socioeconomic crisis and into a more resilient and regenerative future. At this point you may be thinking: Our company has already figured out our SDG approach. Well, before you get too comfortable, not all SDG responses are created equal.
The Future-Fit team has examined hundreds of sustainability reports over the past few years, and we’ve found that business responses to the SDGs typically follow one of three patterns: Defensive, Selective or Holistic.
Image credit: Future-Fit Foundation
Defending the status quo merely justifies ‘business as usual’
The first pattern is to defend the status quo — to tell a story about what the company is already doing on topics relating to the SDGs, rather than seeking out opportunities to change.
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For example, a company which already has a target to reduce its greenhouse gas emissions might claim it is aligned with SDG 13 – Climate Action. But most of today’s GHG targets fall far short of the rapid decarbonisation trajectory we need.
Or a company might say it is contributing to SDG 8 – Decent Work and Economic Growth – merely because it is creating jobs. But what if those jobs pay less than a living wage, or if working conditions are so onerous that employee wellbeing suffers?
Emphasising storytelling over action merely justifies business as usual — which is what got us into this mess in the first place.
A defensive approach to the SDGs may appeal to CEOs who still believe in the primacy of shareholder value, whereby companies exist only to deliver financial returns. But defensive claims lack both ambition and authenticity, and only leave companies open to accusations of SDG-washing.
Any company taking a defensive route is unlikely to attract and retain great employees, loyal customers, and increasingly-concerned investors.
A selective response can be counterproductive
The second pattern is to consider just one or a few of the 17 SDGs.
This selective approach is akin to the notion of Creating Shared Value: focusing on areas where the company’s current business model already intersects with a societal need.
For example, a pharmaceutical company may choose to focus on SDG 3 – Good Health and Well-being – by making medicines that help people to live productive lives. Such efforts may indeed make a genuine contribution to SDG 3 — if the medicines are affordable and accessible to those who need them most.
But is that enough? What if manufacturing the medicines uses huge amounts of fresh water, and the production takes place in a water-stressed area? For local communities in that region, the company may actually be undermining SDG 6 – Clean Water and Sanitation.
And what if that same company can only bring its medicines to market profitably by relying on low-cost suppliers who aren’t paying their workers a living wage? In that case, the company’s success may actually be slowing down progress toward SDG 1 – No Poverty.
The reality, of course, is that today’s companies exist only as part of a complex value web that touches multiple, interlinked systems: markets, communities, ecosystems and so on.
In this sea of complexity, linear notions of cause and effect start to evaporate — and without careful consideration, any action in one area can lead to undesirable consequences elsewhere.
So, a selective approach to the SDGs can be counterproductive: Even the most well-meaning company might be inadvertently exacerbating one problem attempting to solve while another.
Are such trade-offs acceptable? Possibly, but how can we be sure if we do nothing to identify and measure them?
A holistic approach measures and mitigates trade-offs
That brings us to the third pattern: taking a holistic approach — one which considers all of a company’s SDG impacts, both positive and negative, across the company’s value web.
No business decision is ever free of trade-offs. But if we take a systems approach — by looking at all interactions between the company and its suppliers, its customers, other socioeconomic actors, and the environment — it is possible to identify otherwise unforeseen issues. Negative trade-offs across the company’s value web can then be anticipated and avoided — or at the very least mitigated.
This kind of systems approach to managing extra-financial performance is crucial, because positive and negative impacts almost never cancel each other out. Greenhouse gas emissions are an exception: a ton of CO2 emitted in Johannesburg may be ‘neutralised’ by a ton of CO2 drawn down from the atmosphere in Tokyo. But other kinds of impact — product waste, water stress, land use change, human rights violations — cannot typically be netted out, across time or location.
Gradual improvements in one area, and the expense of exacerbating problems elsewhere, aren’t going to bring the SDGs in reach. We must eliminate — and eventually reverse — all of the damage done to our natural systems and social fabric; and that means striving to maximise the good while working consciously, continuously and collectively to eliminate the bad. Such a holistic response is essential if we are to make the SDGs a reality.
We can think of this third option as striving to create not just shareholder value, or even shared value, but system value.
Take a minute to scan your last sustainability report’s CEO statement, and to peel back the glossy SDG infographics. Can you say, hand on heart, that your company’s current SDG response really is holistic? Are you committed to creating system value?
If the answer is yes, that’s fantastic — and I’d love to hear from you, because such examples are few and far between. And if you’re not so sure, maybe the Future-Fit Business Benchmark can help you get there. Take a look at our SDG Explorer, which explains what every company must strive to do, to be sure it in no way undermines our collective progress toward a resilient and regenerative future.