The SDGs Can Benefit Society And Profit Margins
Profit is the primary reason for being in business. It shouldn't be considered a dirty word. Making money can be done while also making society better. In short, satisfying the pocket and the heart are not mutually exclusive.
To sustain a healthy bottom line, your organizational reputation is critical. It is based on trust and high quality relationships with stakeholders. If you can get that right, commercial success should take care of itself.
It’s important to remember that the customer is your key stakeholder. They’re becoming far more aware about whether businesses are a force for good, or not. That’s why engaging with the United Nation’s 17 Sustainable Development Goals (SDGs) is increasingly important for companies.
Signing up to help achieve the SDGs is an ethical and perhaps pragmatic move. If adopting the goals influences whether customers are more likely to buy products, services or shares in a company, can you afford not to?
The SDGs can benefit society and your profit margins precisely because long-term commercial success is threatened by a world that doesn’t prioritize social development. Larry Fink, CEO of the world’s largest investor, Blackrock, recently outlined this reality in stark terms: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
Established in 2015, the SDGs are a 15-year ambition to turn the tide on the major social, economic and environmental issues of the world. Governments have agreed to embrace the SDGs by introducing new regulation, incentives and strategies.
It would therefore seem prudent for businesses to position themselves as cheerleaders, putting sustainability at the core of business growth – not only to stay ahead of the competition but also be on the receiving end of reasonable regulation.
“As well as representing a clear moral imperative, the Sustainable Development Goals also present undeniable market opportunities for responsible businesses,” said Borge Brende, President, Member of the Managing Board, World Economic Forum.
A large amount of investment is required to achieve the SDGs. Governments and donors including foundations and individual philanthropists cannot foot the bill alone. One UN study has calculated $1.4 trillion of investment is needed per year until 2030 of which $600 billion will have to come from the private sector.
We believe that for business to be involved, the SDGs have to be clearly linked to fundamental business challenges and opportunities. The future growth and prosperity of many companies depends on finding solutions. For example: unsustainable supply chains, accessing difficult to reach populations and bridging the skills gap.
Solutions to these challenges can be structured in ways that make a profit for companies and investors, while also creating new opportunities for millions of entrepreneurs and social enterprises in revitalized ecosystems.
For many businesses, the SDGs articulate noble aspirations that are supported through Corporate Social Responsibility (CSR) programs. By donating to mission-driven NGO’s and charities, companies prepare CSR reports on how they contribute to addressing the SDGs (while also receiving a tax deduction). Other companies encourage (and report on) employee engagement which is also seen as useful in both motivating staff and recruitment.
But is CSR effective? It’s a communication tool to tell everyone what the company is doing to help the community in which it sells its services or products. But does it fundamentally change much? Is it just an add-on, a nice-to-have? We believe a different approach is needed where contributing to society should be at the heart of your business operations, embedded in every part of the value chain.
Of course, saying and doing are very different things. How can you possibly make this all possible? This month’s Harvard Business Review outlines in detail the four steps to truly inclusive growth: Be Bold, Think Collaboration, Unlock Capital, Align and Govern. The Positive Impact Summit 2018 being in held in London this March will look at how this concept can be turned into reality.
The SDGs are a motivational rallying point for governments and civil society. But more than that, they represent a business opportunity for progressive corporate leaders who recognize that commercial and social impact and inextricably linked. How are you going to rise to the challenge?
This article was written by Palladium's Director of Thought Leadership, Eduardo Tugendhat, for Real Leaders.