The Business Roundtable turned heads last month and redefined their Statement on the Purpose of a Corporation to elevate their commitment to equally serve all stakeholders. One hundred eighty-one CEOs agreed to invest in their employees, deal ethically with suppliers, protect the environment, and offer value to customers – all while also creating value for shareholders. This move is a step in the right direction.
Another vital step for organizations and society? Creating shareholder and stakeholder value through the Sustainable Development Goals.
A recent report found that the 17 goals can drive $12 trillion in annual cost savings and revenues directly linked to the SDGs. This applies across sectors: energy and materials, cities, food, agriculture, health, and well-being. In this light, the SDG targets move beyond an aspirational policy statement to become a way to operationalize purpose and profit. The SDGs provide a win-win – driving social goals (such as equitable working environments, a cleaner environment, better health) and driving purpose and profit.
Research proves that doing good helps companies do well.
Purpose-driven firms outperform the market by 5-7% a year. The link between purpose and profit is only effective if managers communicate the importance across the organization – and if they provide a clear roadmap to achieving it.
- Safaricom, a Kenyan telecommunications company which made a serious effort to embed the SDGs in its business strategy, saw year-on-year growth hit 7.7% in 2019.
- When Danone purchased WhiteWave Foods in a move to double its North America business, it made a deliberate decision to pursue B Corp Certification and cement the tenets outlined in the Business Roundtable letter into the company’s legal framework.
But despite these examples, SDG progress remains in its early stages. While 84% of G250 companies reviewed by KPMG have identified the SDGs most relevant to their business, only 20% report on relevant SDG targets.
Fortunately, the incentives for companies to advance the SDGs are growing.
Firms in sectors such as consumer goods and fashion are re-aligning their business models. With a growing recognition of market opportunities, investor interest, and risk management, firms are taking a longer-term view of business sustainability. Investors representing $89 trillion in funds under management have signed the UN’s Principles of Responsible Investment. What’s more, they’re pushing companies to link investments with social impact.
Finally, foundations are using program-related investments to pursue their charitable goals while seeking financial returns. By linking business lines to SDG value creation, they open opportunities for companies to align charitable giving with impact goals.
The SDGs can provide a balanced way for companies to turn purpose aspirations into business reality. But the clock is ticking. The political window created by the SDGs expires in just 11 years. The BRT letter is a terrific start. Now, companies need to engage stakeholders and shareholders alike. Here’s the goal: To find tangible ways that make capitalism work for the betterment of all.