Evolution of Corporate SDG Adoption from strategic opportunity to moral imperative 

by | Dec 8, 2023

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Written by Martina Castelli, Research Analyst, MainStreet Partners 

The UN Sustainable Development Goals (SDGs) were never designed for financial markets or corporates, it was national policy agendas in the crosshairs.

However, since their adoption by the United Nations in 2015, the 17 objectives to promote global prosperity, social justice, and environmental sustainability by 2030, have had a seismic effect on financial markets and corporates alike. 

 
 

In fact, today the SDGs often form the bedrock of corporate environmental strategies and are a component of investment management analysis alongside more traditional financial metrics. So, are UN SDGs still fit for this purpose? 

Evolution of SDG Adoption 

Since the inception of the SDGs, their role in shaping corporate strategies has undergone a remarkable evolution, steadily gaining prominence. 

 

Initially, companies approached SDGs by merely mapping their existing goals and initiatives onto this global framework, essentially seeking alignment without substantial integration. 

As companies delved deeper into the SDGs, they came to understand the interconnected nature of these goals, appreciating that progress in one area could significantly impact others. This realization encouraged a more holistic approach to sustainability, where social Key Performance Indicators (KPIs) gradually emerged, albeit with some delay compared to their environmental counterparts, primarily due to the inherent complexities in measuring social impact accurately. 

The SDGs also played a pivotal role in emphasizing the importance of quantifying impact, as they provided a framework that allowed companies to align their strategies by setting concreate, measurable objectives. This shift enabled them to monitor progress and to prevent any adverse effects on other interconnected goals. 

 

Equally important is how the SDGs have highlighted the significance of collaborative efforts in attaining these goals. Many companies now actively engage in partnerships with governments, non-governmental organizations (NGOs), academic institutions, and various stakeholders to make a more substantial impact. A notable illustration of this collaborative approach can be seen in the campaign involving Unilever and the British government. Together, they spearheaded a global hygiene initiative to combat the COVID-19 pandemic, reaching a staggering one billion people. This initiative stands as one of the largest efforts to promote hygiene on a global scale. It exemplifies the growing trend of companies working in concert with other sectors to address pressing global challenges, even before the full integration of the SDGs into their corporate strategies. 

Finally, when precise goals are established and aligned with the company’s objectives throughout the value chain, the next step is to actively integrate them into the core day to day activities of the company. These objectives should not only be an integral part of the sustainability strategy but also the financial and operational strategies, ultimately becoming embedded in the company’s vision and mission. If this trend continues, the efforts of companies towards achieving the SDGs have the potential to permeate the companies’ primary operations, not just limited to secondary initiatives. This, in turn, can lead to a notable enhancement in ESG performance and a far-reaching impact. 

Two prime examples of this phenomenon include: 

 

1. ESSILOR-LUXOTTICA 

The mission of Essilor-Luxottica focuses on improving visual health and the well-being of people worldwide. In 2019, the group defined a detailed plan with the goal of eliminating poor vision by 2050 in collaboration with the United Nations General Assembly. In 2022, it established the “OneSight EssilorLuxottica Foundation” to enhance collaboration with NGOs, governments, and other organizations and concentrate efforts into four key actions: 

· Training individuals to become primary vision care entrepreneurs, supporting them in opening optical shops, and providing mobile services in their communities; 

 

· Investing in innovation and the development of low-cost automated digital tools that require less operator training, as well as digitizing existing activities; 

· Funding free services for the neediest communities; 

· Ensuring that vision care receives the attention it deserves among policymakers, decision-makers, and local communities. 

 

Based on MainStreet Partners’ own SDG model, the company is “Strongly Aligned” with SDG 3 “Good Health and Well-being” and SDG 8 “Decent Work and Economic Growth”. 

2. ENEL 

Enel, one of the leading global energy companies, has developed a sustainability-focused strategy to contribute to global decarbonization. The company focuses on SDGs 13, 7, 9, and 11 and has defined a strategic plan with specific objectives. 

For example: 

Objective – Reduce greenhouse gas (GHG) emissions intensity of Scope 1 related to energy generation by 80% by 2030 compared to 2017. This target is certified by the Science Based Target Initiative (SBTi) and aligns with the goal of limiting global warming to 1.5°C.; 

Action – Develop new renewable energy production capacity to achieve fully renewable generation facilities by 2040, while simultaneously phasing out coal-based energy generation by 2027 and gas-based energy generation by 2040. 

The company is “Aligned” with SDG 13 “Climate action” on MainStreet Partners’ SDG model” and to SDG 11 “Sustainable Cities and Communities”, but not to SDG 7 “Affordable Clean Energy” as the company is still in a transition phase, and it is still exposed to coal and fossil fuels. 

The SDGs are not merely a strategic opportunity for companies, but a moral imperative, and they are gaining significance among investors as an integral part of their fiduciary duty. Despite 90% of Executives recognizing the importance of sustainability, it’s noteworthy that only 60% of companies have a well-defined sustainability strategy in place, based on the Global Sustainable Development Report 2023 by the UN. While the integration of SDGs into corporate strategies and the emergence of collaborative efforts between nations and companies are promising developments crucial for goal attainment, we must acknowledge that we still have a considerable journey ahead of us to fully realize these objectives.

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