2015 was a watershed year that witnessed 193 nations coming together to form a set of 17 “Sustainable Development Goals” (SDGs) to address contemporary developmental challenges and ensure a sustainable future. These global goals have played a crucial role in charting out a roadmap for nations to re-align economic policies and financial systems to sustainably meet the growing needs of the growing population by 2030.
Evident from the estimated financial requirement of USD 90 trillion by 2030, public finances alone would not be sufficient in achieving these global goals, requiring urgent and effective participation from private sector. While the state needs to continuously provide socio-economic stimuli, private sector has to play the role of transformative agent in realigning and re-orienting economy and fuelling sustainable growth. With an estimated SDG (Sustainable Development Goal) investment requirement of USD 960 billion annually, India has a pivotal role to play, as its success in achieving these goals would mean reaching the halfway mark.
While the crucial role of businesses in the achieving SDGs is evident, it is important to realize that dependence between SDGs and businesses is not unidirectional. SDGs are becoming increasingly relevant and critical for businesses from both a growth and continuity perspective.
By outlining the need and aspiration of society, SDGs provide businesses with a new lens to embed these into their business propositions and enhance value creation. Climate change, water and food crises, poverty, and poor healthcare, amongst other global and domestic challenges are creating a surge in the demand for scalable innovative business solutions and thus creating new opportunities for private sector. Around USD 3.1 trillion investment opportunities are emerging in India in six sectors alone till 2030 – green energy, green buildings, transport, waste management, urban water and climate-smart agriculture.
Investors are also increasingly becoming concerned with a company’s sustainability risk profile and are including ‘Environment, Social and Governance Criteria’ alongside financials for decision making. In response to this, the National Stock Exchange (NSE) arm India Index Services & Products Ltd (IISL) launched two indices — Nifty100 ESG Index and Nifty100 Enhanced ESG Index — to capture the environmental and social governance score of NIFTY 100 companies. On the other hand, consumer demand and preference for sustainable products and brands has also seen a steady rise over the years, emphasizing the need for companies to focus on sustainable business models.
Realizing the unfolding opportunities, some of the companies have started aligning their business strategies with SDGs. However, majority of businesses are yet to accelerate their efforts in this direction. With frameworks such as SDG compass, developed by UN Global Compact and Global Reporting Initiative and World Business Council for Sustainable Development, that enable and assist businesses in mapping and maximizing their contribution to individual, the ground work is set. However, in order to have a comprehensive approach for alignment with SDGs, there are some crucial points to be considered:
- Target setting and Disclosures: A targeted approach towards re-calibrating and re-orienting businesses along with enhanced transparency and accountability is the need of the hour. These are quintessential for moving the needle in right direction and boost market confidence. Often it is said, ‘What gets measured, gets done’. We need to couple it with ‘What gets targeted, gets achieved’. This is why benchmarking, target setting and reporting are crucial for driving ambitions and commitment.
- Holistic Risk Management: Integration of an effective “Environment and Social Risk Management System (ESRMS)” with Enterprise Risk Management is crucial. For an activity to be truly aligned with SDGs, contributing to one goal shall not adversely impact achievement others. While each business needs to prioritize relevant SDGs where they can have most impact, it is equally important to keep a check on and mitigate any inadvertent negative impact on other.
- Strong Governance: A very strong buy in from top management is essential to drive the sustainability through every aspect of organization. In addition, allocation of adequate resources would be crucial in effectively re-aligning and implementing short, medium and long term strategies.
- Culture: Developing a responsible culture within organizations is key to align the organization with SDGs at a micro level. Every employee and team need to work together in realization of the opportunities arising out of alignment with SDGs.
- Stakeholders: For maximizing impacts, collaboration among upstream, in-stream and downstream is quintessential. Through creation of right alliances both internally and externally, the value creation at every stage of the supply chain can be enhanced exponentially.
SDGs and business objectives have strong interdependences, with one influencing and complementing other. While the private sector has an indispensable role to play in achieving SDGs, integrating these goals into their own business strategies is imperative for companies to achieve sustainable profitability and stay future ready.