Few Hong Kong companies have aligned their business strategy with the UN Sustainable Development Goals (SDGs). Pat Dwyer, Founder and Director, The Purpose Business, looks at how companies can overcome some of the constraints impeding businesses from unlocking the value of the SDGs.

They may be marking their third anniversary in 2018, but in Hong Kong the Sustainable Development Goals (aka the SDGs or Global Goals, see ‘Online links’ for the webpage of this and subsequent websites) rarely show up outside sustainability report launches and school campaigns. Designed to address the world’s biggest challenges – poverty, inequality and climate change – the 17 SDGs have been adopted by 193 countries of the UN and are a blueprint for collaboration between government, business and civil society.

Globally, there are examples that show how alignment of business strategy with the SDGs helps deliver on a company’s vision. Food conglomerate Pepsico’s ‘performance with purpose’ agenda, for example, maps the company’s ‘product, planet and people’ goals, as well as key performance indicators (KPIs) that allow them to make measurable and valuable contributions to goals shared by the global community. In Asia, companies like Vitasoy have done the same, mapping their own two fold strategy of ‘making the right products and making products the right way’ that directly maps to SDG 2 (Zero Hunger), SDG 3 (Good Health and Well-Being), and SDG 12 (Responsible Consumption and Production).

Businesses can do more beyond the strategy, however. For example, they can influence consumption habits, demand transparency in the supply chains, promote awareness and education, and even support policy changes. Each of these themes showcase not just what industry can do alone but, more importantly, can create greater value for business by being part of a global development agenda. They not only fill a gap in the market but can introduce meaningful products and services, promote innovation, create more jobs and ensure the long-term viability of economies contributing to overall growth and development.

Why is it that very few Hong Kong companies have truly unlocked the value of the SDGs and made them part of business as usual? Many companies talk about their commitment to inclusive development and long-term sustainable growth, yet very few use the SDGs as a tool to make it a reality.

The challenge, perhaps, is getting past the 17 goals, 169 targets and more than 230 indicators. That’s a lot to consider and while the SDGs are macro enough to be applied to businesses as diverse as airlines, hospitals, media companies, hotel chains and even zoos, this generalist approach can make it difficult for companies in complex and cyclical businesses to identify with them.

In order to start, businesses should recognise that they cannot – and are not being asked to – act unilaterally. We’ve all heard of the importance of the big ‘C’ – collaboration. Everyone seems to claim it, but very few have invested in understanding what collaboration truly entails. It isn’t just about going into a six-month project on gender diversity with two charities. Neither is it only about passively sponsoring a three-year initiative on integrated coastal management. True collaboration requires acknowledging other partners as equals – where non-profits are no longer just donee institutions. Rather, they can be regarded as local context experts, issue managers or research partners. Suppliers become business partners delivering on shared goals of customer satisfaction and responsible consumption. Real collaboration begins with trust in the people we work with. So, why is it so hard?

In March, UN Global Compact and Accenture Strategy released a special edition of their CEO Study focusing on transforming partnerships for the SDGs. The report builds on the 2017 CEO Study, in which 95% of business leaders said they felt a personal responsibility to ensure their company has a core purpose and role in society, and 87% saw cross-sector collaboration and partnerships as the critical means to accelerate progress towards Agenda 2030 and the SDGs. Yet while there is earnest desire to work on sustainable development, the report shows that there are factors that impact the private sectors’ ability to collaborate with other stakeholders in delivering on sustainable development. Businesses find that, internally, they do not have the capability or expertise to dedicate and manage partnerships, while pursuing collaboration entails a departure from policies and structures that have long been in place – impeding the intrapreneurial thinking that new management styles espouse.

Collaboration therefore becomes a viable option to mitigate limitations that the business community faces and still deliver on the SDGs. The question is, how can companies get started?

1. Find partners for leadership

Companies should generally know what their most material issues are, especially when it comes to environmental and social impacts. These are the urgent and critical issues that are important to business operations and stakeholders. A food and beverages company may focus on water quality and accessibility, while an apparel brand may prioritise labour practices and responsible sourcing. Both companies should also seek to understand climate issues, as well as resilience and adaptation as they remain vulnerable to impacts on business operations. Businesses have a responsibility to manage these issues well so that risks are reduced or mitigated. Equally, they should focus on identifying opportunities to enhance overall value through decent economic and environmental practices.

Let’s look at some examples of how a business addresses these risks using internal capabilities, either through more responsible operations or through governance structures. The core business of China Light & Power (CLP) aims to support SDG 13 (Climate Action) and SDG 7 (Affordable and Clean Energy). Where there are gaps in delivering on the SDGs, companies may consider working with other institutions to augment their capabilities. CLP’s commitment to developing more women in engineering has led CLP India to work directly with National Power Training Institutes to increase hiring pools. Group wide, CLP has launched a network of female engineers from India, Australia, Mainland China and Hong Kong to meet regularly and work on continued career development and mentoring programmes. Since its launch, CLP now has 174 women in engineering positions.

2. Commit to measuring impact

Apart from the fact that the SDGs aim to address some of the world’s most complex challenges of poverty, inequality and climate change, they are celebrated because of the inclusive process it took to create them. It is a celebrated outcome for the UN, garnering insights from governments, business corporations and investors, civil society and citizens. As such, it calls on every single one of those four stakeholders to respond, and to ensure that it measures impact and reports on progress. Otherwise, how are we to know whether we have achieved our objectives in this 2030 Agenda for Sustainable Development?

Business thrives on measuring impact, reporting and tracking progress around a target. This is why companies set out quarterly goals, annual plans and 5–10 year strategies. Everyone in business uses some form of KPI to measure outcome, whether in the form of talent management systems, productivity indices or financial and sales targets.

Despite this, the CEO Study mentioned earlier indicates that ‘97% of the CEOs surveyed believe that, for multilateral organisations to better engage the private sector and enhance impact on the SDGs, they must more effectively measure, track and communicate value’. The challenge perhaps is for business to balance the way it discloses and reports progress, whether it includes good or bad news.

If companies are truly committed to corporate governance as they state they are in their annual reports and company overview documents, then they have to uphold transparency to various stakeholders at all times. Shareholders expect accountability on the return on investment. Customers, business partners, employees and, increasingly, investors want to know how business operations are evolving so as to minimise environmental impacts, improve the quality of communities invested in and uphold human rights.

The UN Principles for Responsible Investment published a report on how investors are interested in the SDGs but have key constraints including ‘inadequate risk-return profiles, lack of data and insufficient investee company transparency on environmental, social and governance (ESG) issues’. Beyond ESG data, which is the subject of most sustainability reports, there is a greater need to demonstrate how these issues are being managed and governed.

We know that if you don’t measure, you cannot manage. Using the SDGs as a framework for measuring impact drives transparency and engagement towards a global sustainable development agenda. The Sustainable Development Knowledge Platform provides a starting point for managing specific areas of impact across the SDGs. For example, Swire Pacific highlights its approach to investments to align with SDG 9 (Industry, Innovation and Infrastructure) where they invest in augmenting industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean technologies and industrial processes. The return on investment hinges on cost-efficiency savings, for example with Cathay Pacific’s investment in fleet that are lighter, more cost-efficient and require less maintenance than previous aircraft, bringing a 25% improvement in fuel efficiency. Cathay Pacific is also acquiring 20 alternative fuel aircraft over the next four years. This addition to the fleet supports the airline’s commitment to achieving the goal of carbon neutral growth from 2020 onwards.

A common theme across all these best practices is the need to set targets. Targets, especially when stretched, stimulate internal engagement, innovative thinking, overall collaboration, new investments and, ultimately, performance. Leading companies are setting science-based targets, defined according to greater industry context, rather than what seems convenient or achievable internally. Globally, there are now 448 companies taking science-based climate action and about 124 who have approved science-based targets. For companies unsure where to start, the new Global Reporting Initiative and UN Global Compact report provides a three-step framework specifically to help embed the SDGs into existing business and reporting processes.

3. Share!

If collaboration is the goal, then communication is the key. Many organisations deliver on meaningful progress for social good but few tell their stories authentically and with purpose. Some companies claim to be wary of greenwashing accusations, and rightfully everyone should avoid that. However, with leadership comes responsibility – to share, communicate and inspire others to do the same.

An authentic narrative, based on issues that are material to your business and which demonstrates measurable progress and positive impact beyond the bottom line is key to successful communications. The SDGs provide an excellent opportunity and accessible framework to start meaningful conversations about how your company is faring in its ESG activities, and communicating authentically on these issues can grow a positive corporate reputation.

Yet impactful communications do not occur by accident or without effort. It takes a determined and considered approach, and this starts not with paying for individual campaigns, but rather by embedding this in your everyday work. Start by educating employees on key issues that matter to them – whether that be single-use plastics or air quality. It is time to encourage learning and development teams and communications colleagues to be champions of key environmental and social issues that are important to them. At AES Vietnam, for example, employees consistently drive the highest standards of occupational health and safety practices to the point of helping the agencies and contractors they work with to adopt the same values-based mindset and culture. The company has a reputation for the highest standards in hygiene, as well as healthy and safe work environments, and for its diverse workforce.

Because of its international reach, the SDGs provide an engagement model that cuts across individuals, companies, organisations or government bodies to be part of a movement for positive change. They provide an international common language and framework that businesses can use to demonstrate their value throughout their value chain.

Since the launch of the SDGs, Huawei has taken them as a framework to demonstrate its contributions through the ICT sector. With a mission to ‘bring digital to every person, home and organisation for a fully connected, intelligent world’, Huawei believes that ICT is a critical contributor and enabler of the SDGs, helping to quicken their reach and achievement, and has reported on how investment in ICT can affect countries’ performance on the SDGs and reinforce the strong link between a country’s capability to deliver on the SDGs and its performance on ICT.

Conclusion

There is an opportunity for business to develop large-scale solutions to addressing the world’s biggest development challenges. Hong Kong businesses have a role to play and by taking a closer look at unlocking the value of the SDGs, they can find themselves in a position to drive meaningful partnerships and overall leadership. This starts with a strong understanding of a company’s most material environmental and social issues.

Having a good set of corporate governance practices is critical to ensure that transparency and accountability to all stakeholders is attained, especially when it comes to the way environmental and social risks are managed. At the same time, successful planning, implementation, measurement and authentic communications can only happen with strong governance. Strong governance means better, healthier businesses, and bringing the SDGs into your approach can help demonstrate your progress and contributions to a better, healthier world too.

This article was first published in the September 2018 edition of CSj, the journal of the Hong Kong Institute of Chartered Secretaries published by Ninehills Media Ltd.

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