Large businesses will soon risk losing investor interest and stakeholder trust unless they stop “cherry-picking” which of the United Nation’s (UN) Sustainable Development Goals (SDGs) they report on and omitting negative impacts from their sustainability reports.
That is according to UN Global Compact’s (UNGC) chief of programmes, Lila Karbassi, who recently worked on the Compact’s new “practical guide” for businesses seeking advice on prioritising which SDG targets to act and report on.
Published earlier this month, the guide seeks to provide the tools necessary for businesses to move beyond the current trend of mapping their existing activities and programmes against the 17 goals in order to drive new action. The guide builds on the UN Guiding Principles on Business and Human Rights and the GRI Sustainability Reporting Standards to detail nine reporting steps businesses can implement.
The guide encourages companies of all sizes to stop “cherry-picking” which SDGs they include in their sustainability reports. With members of the UNGC noticing a trend among corporates towards selecting the easiest SDGs and related targets to report on, Karbassi urged companies to focus on targets that are most material to their operations.
“Companies are becoming increasingly driven to understand, measure and communicate their societal impacts – but doing so is a very hard exercise and, so far, we only have proxies to measure the real impacts which organisations make,” Karbassi told edie.
“The aim of the guide is to enable businesses of all sizes and across all sectors to prioritise their actions around the SDGs. It helps them to avoid making goals and targets based on which SDGs are easier for the company to report on, rather than those which represent the largest negative impacts or those where they have the possibility to create the largest positive impacts.”
Karbassi explained that the Compact had seen a growing number of investors moving to increase funding for green business projects, indicating that companies which fail to track and communicate both positive and negative contributions to all 17 Global Goals could soon lose out on investment.
With some investors fearing that the next financial crash will be climate related, the finance and banking sector is increasingly looking to divest from companies linked to coal power projects and deforestation. To gain access to this growing green investment market, the UNGC has urged companies to improve their disclosure practices.
Karbassi explained that, given a current “lack of traction” amongst national governments to set higher regulatory standards, investors are likely to “lead the charge” in spurring business action over the coming years.
“We see now that many institutional investors are developing impact measuring systems of their own – and that they want to rely on data from corporates which, at the moment, is very poor,” Karbassi said.
“After many years of near-dormant movements from investors, this is where the pressure is coming from. There is, therefore, a lot of competition between corporates to improve their transparency and reporting if they are to secure investor backing in the next couple of years.”
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Avoiding a wash-out
For businesses that are monitoring progress against the SDGs, the normal process has been to act on areas where companies are performing well. However, the UNGC guide warns companies against the practice if it ignores “important negative impacts”, which it dubs “SDG-washing”.
Instead, it encourages members of the business community to build a “broad picture” of “actual and potential negative impacts or risks” related to the SDGs, encompassing those which could be caused at any level of their organisation’s supply chain, or through its partnerships. The guide recommends that businesses should first identify priority risks by considering those which are most likely and most severe, before linking them back to the Global Goals and their 169 targets – including in areas where repercussions may not seem obvious.
The Compact believes that all businesses must begin examining and communicating negative contributions to the Global Goals, even though concerns exist surrounding the potential reputational damage of doing so. Karbassi added that a new approach would help companies “get a handle on their footprints as they try to minimise them”.
“Reporting negative impacts gives stakeholders confidence that a company understands its impact fully and is willing to manage and reduce it,” she added.
“Of course, there is a tendency to communicate positive contributions – which is important, but it is not the full picture. You can’t offset your negative impact, particularly in regard to social and ethical issues, with positive contributions.”
Karbassi’s insight echoes the key talking point of edie’s SDG Power Hour webinar last month. During the session, representatives from BT, the British Retail Consortium (BRC), the UK Stakeholders for Sustainable Development (UKSSD) and DNV GL concluded that businesses should do more to track and report their negative impacts through the lens of the SDGs.
For companies that are still attempting to engage with the Global Goals, edie has published a two-part, roundtable feature detailing the insights of 13 sustainability experts. Read part one of the SDG Engagement feature here.
By Sarah George, edie.net