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Can the private sector fulfil its role in achieving the UN Sustainable Development Goals (SDG’s) by 2030?

  1. Introduction

Sustainable development was notably defined by the Brundtland Commission (1987) as “…the kind of development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (UN, 2008; p.16). Global trends such as population increase are threatening sustainability by intensifying social, economic and environmental pressures on the world. The global population is expected to reach 8.3 billion by 2030, with 5 billion people expected to migrate to cities. The way in which we are living is placing unprecedented stress on the earth’s ecosystems and supplies of food, energy and water. Globalisation as is has failed as a solution because the resultant income gap between rich and poor countries is now far greater than inequality within any country. The United Nations (UN) developed eight Millennium Development Goals (MDGs) in 2000 to address this issue, with the overall aim of eradicating poverty by 2015. Developing countries were the main targets of these goals, with developed countries expected to play more of a supportive role through finance and technology (PwC, 2015). The MDGs contributed to some progress in the fight against poverty and generated a consensus that globally agreed goals to fight poverty should continue beyond 2015. The resultant United Nations Sustainable Development Goals (SDGs) call for private, public and third sectors to join forces and achieve global sustainability. This report aims to critically assess the role of corporations and the private sector in attempting to accomplish the SDGs by 2030. This will be approached with a discussion about the purpose and aims of the goals as well as the attitudes and roles of business in achieving them. The barriers, challenges and support mechanisms in doing so will be identified before the paper evidences SDG achievements so far and concludes with a balanced assessment of the prospects for achieving the SDGs in their entirety by 2030.

 

  1. Analysis

       2.1. The Sustainable Development Goals

fig1 sdg

In January 2016, 17 SDGs (Figure 1) came into force, detailing a total of 169 targets that need to be met in order to achieve them. The SDGs aim to unite developed and developing economies, calling on businesses, governments and civil society actors to take equal responsibility in achieving global wellbeing for this generation and those to come. They are not legally binding, but the SDGs aim to act as de facto regulation and guide the implementation of national regulation and incentives to see them succeed. Figure 1 indicates the UN’s appreciation of the various social, economic and environmental factors that affect sustainable development and this report highlights the ways in which such factors may interlink. For example, Bhattacharya and Kharas (2015) argue that:

It is inconceivable to think today about ending poverty without simultaneously achieving peace, dealing with natural disasters, connecting people to a market economy via better access to infrastructure, or reducing the impact of climate change.

This interdependency is echoed throughout this paper. Due to capacity limits, the focus will be on three goals, namely; no poverty (SDG1), decent work and economic growth (SDG8) and partnerships (SDG17). But, as shown above, in covering these goals, the report inherently addresses some other SDGs.

2.2. Business Attitudes

Friedman (1970) argued that CSR is a profit-maximising activity because it is positively related to better financial performance. Therefore, businesses that are embracing sustainable development may not necessarily be doing so for moral or ethical reasons. A study of 40 corporations found that the motivation to pursue sustainable and inclusive business practices ranged from “maintaining competitive position” as the leading motivator, followed by “avoiding reputational damage,” “avoiding future supply disruptions,” and “capturing revenues and building loyalty”’ (Chakravorti et al., 2014:2–3). However controversial they may seem, such motivations are not necessarily a bad approach. An example is IBM’s employee development plan, which works with NGO programs in developing countries to develop responsible leaders who will have access to and knowledge of new markets. This win-win method can add value to the organisation and the target market, making it effective on a wider scale. The SDGs can act as guidance for corporations developing new models for growth and opportunities to be product, service and market leaders (PwC, 2015:6). It can be suggested that corporations are embracing the stakeholder approach, which Freeman (1984) uses to hold businesses accountable to:

…any individual or group who can affect or is affected by the actions, decisions, policies, practices or goals of the organisation.

(Carroll and Buchholtz, 2000:38)

Consumers, NGOs, the media and employees can now hold businesses accountable for treatment of workers, the sourcing and quality of their products and their corporate culture (PwC, 2015). This has resulted in the practice of corporate responsibility and transparency as Sir Mark Moody-Stuart, former chair of Shell, states that corporations need to be seen as constructive members of society through their corporate social responsibility and management of the environment.

fig2

2.3.The Roles of Business

2.3.1 Support

The development of the SDGs included contribution from private sector leaders such as Paul Polman from Unilever, who was part of the UN’s High Level Panel, which was tasked with creating a post-2015 vision to follow the MDGs. Blowfield (2012) finds that business is increasingly being considered a development agent rather than a development tool. This means that business is taking on the role of a ‘consciously engaged agent of development’, contributing in a variety of ways including responsible business models and public policy influence instead of simply making economic contributions to development.  Companies are increasingly addressing stakeholder concerns, which adheres to Porter and Kramer’s call for the creation of shared value, referring to ‘economic value in a way that also creates value for society by addressing its needs and challenges’ (2011:4). Examples of ways in which businesses have taken stakeholders needs into account to create shared value include:

  • Vodafoneʼs M-PESA mobile banking service in Kenya: low-priced mobile phones that provide mobile banking services to help the poor save money securely and help small farmers to produce and market their crops. 10 million customers signed up in the first three years and the financial portfolio represents 11% of Kenyaʼs GDP
  • IBM; allowing 25% of its 320,000-employee workforce to telecommute, partly because of environmental concerns. The reductions in travel time, travel costs, and energy use led to hundreds of millions in annual savings for real estate costs alone

These examples show that what is good for business can also be good for society by creating double- or triple- bottom lines. Addressing SDG1 using SDG17 can allow for innovative ways to create SDG8.

2.3.2 Hindrance

The stakeholder model links to the consequential concept of externalities, which Friedman (2003) describes as the effect of a transaction between two parties on a third party who has not consented to or played a role in the carrying out of that transaction. He labels corporations as “externalising machines”, designed to prioritise their bottom line at the cost of public good if necessary. An example of this is when Royal Dutch Shell PLC was taken to the British High Court in November 2016 after being sued for its alleged corporate social responsibility failures in the Ogoni Kingdom, Nigeria, following decades of oil spillage in the region originating from the corporations’ historical oil operations.  Shell’s alleged failures overshadowed their positive community development contributions and created tensions that cost people their lives, their health and their livelihoods and has the potential to hinder Shell’s reputation internationally. This case demonstrates that conforming to the gold standard globally actually saves companies money as such externalities actually inflict internal costs that ultimately outweigh regulation or resource taxes.

2.4.Barriers and Challenges

Porter and Kramer (2011) argue that companies have traditionally had a ‘short-term’ approach to value creation, so they prioritise financial success and keep stakeholder concerns at the periphery of strategy, which could potentially hinder long-term success. Sustainability needs to be integrated into strategy and daily practice so that SDG outcomes can be assessed and reviewed accordingly. This also carries with it the strategic challenge of adopting suitable reporting systems. There is currently no consensus in CSR reporting, which makes it difficult to assess the impact of business contribution to development.  A current cause of this is the lack of knowledge amongst businesses themselves about their impact on SDGs. As illustrated in Figure 4, the goals with the greatest business opportunity are those which businesses are most likely to prioritise under the disguise of being the area where they have the most impact. PwC (2015) suggest that once companies get to grips with the interdependency amongst the SDGs, currently ‘neglected’ goals may be adopted by corporate agendas. Echoing this, Nilsson et al. (2016) argue that:

If mutually reinforcing actions are taken and trade-offs minimised, the agenda will be able to deliver on its potential. For example, educational efforts for girls (SDG4) in southern Africa would enhance maternal health outcomes (SDG3), and contribute to poverty eradication (SDG1), gender equality (SDG5) and economic growth (SDG8) locally.

International corporations face the additional challenge of understanding different priorities between different countries and the national policies implemented to deliver them (PwC, 2015:4). Business model logics from developed countries may need to be adjusted to the cultural, economic, institutional and geographic context of other markets, which may require collaborating with an organisation that possesses local experience (SDG17). This model can provide intangible assets such as knowledge, reputation and brand; and tangible resources, such as human capital, production capabilities and market access; allowing companies to deliver value while minimising costs and risks.

fig3

 2.5. Achievements

Some international corporations have been using their supply chains to create mutually beneficial outcomes. An example of this is Anglo American in South Africa, providing local entrepreneurs with investment funds and technical assistance (SDGs 1 & 8) to set up their own businesses related to the company’s supply chains (SDG 17). Coca-Cola is another example, offering ownership of manual distribution centres (MDCs) to local entrepreneurs (SDGs 1,8 & 17) in rural Africa to deliver products to small-scale retailers in dense urban areas while serving markets which cannot be reached by traditional delivery trucks. Companies have also been excelling in partnered working (SDG17), particularly in public-private partnerships (PPP). NGOs have been forming alliances with corporations in PPPs, providing corporations with access to resources, competencies and capabilities which can help with market entry, while mobilising the impact of NGOs.

 

  1. Conclusion

This report has shown that the private sector is increasingly acknowledging that what is good for society is good for business. A business needs a fruitful society (SDG1) to consume its goods and society needs successful businesses to provide employment and wealth opportunities (SDG8). The consensus throughout this paper has been that corporations do well in addressing societal needs when working in partnership (SDG17). Multi-stakeholder partnerships are pivotal to the SDG agenda, with businesses, governments and civil society expected to make equal contributions and business labelled a “vital partner in achieving the SDGs” (Ki-Moon 2015). However, commercial motivations run the risk of short-term thinking. By prioritising those goals that present the greatest opportunities (Figure 4), there are some that stand to be neglected e.g. life below water (SDG14). Corporate cultures have little time to adopt a long-term mentality where less-obvious impacts on overlooked SDGs are realised and responded to accordingly. This report predicts that although some goals present great potential to be achieved, the prospects of the SDGs being achieved in their entirety by 2030 is bleak. Nonetheless, the private sector is heading in the right direction, using commercial incentives (e.g. reputation or market entry) to contribute positively to development. Indeed, an important finding of this paper is that commercial motivations are not a bad thing, by capitalising on their inherent strengths such as innovation and opportunity-exploitation, businesses can maintain commercial performance while achieving sustainable development goals.

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