Some 40 percent of the world's largest companies are referencing the Sustainable Development Goals (SDGs) in their corporate reporting, according to our latest publication, suggesting that the goals are resonating strongly with business. This is significant considering the global goals were only launched in 2015.
Businesses that take action to help achieve the SDGs stand to benefit, not least because the goals have the potential to create market opportunities worth US$12 trillion or more (Business & Sustainable Development Commission). Other benefits include the potential to improve or maintain social licence to operate, enhance relationships with customers, employees and other critical stakeholders, and the opportunity to develop a sustainability strategy that zeros in on the business's biggest societal impacts.
On the downside, companies that don't link their business activity to the SDGs risk losing public trust as they will increasingly be seen as out of step with the global business community and disconnected from society.
While a growing number of businesses are promising to take action on the SDGs, as yet no established framework or standard exists to help them report that action. This makes it difficult for businesses to know where to start when it comes to reporting. To address this market need, we at KPMG set out to understand what good SDG reporting looks like and how the world's largest companies are performing.
SDG reporting made simple
To help companies assess and improve how they report on the SDGs, we have formed a simple checklist based on nine criteria. We developed these nine criteria by drawing on the knowledge of our sustainability services professionals worldwide and incorporating key elements of the SDG Compass along with guidance from the International Integrated Reporting Council (IIRC).
Companies can demonstrate their SDG activities are well-planned, relevant to, and integrated into their business strategies by discussing the business case for SDG action within their reporting. This means including the business risks and opportunities presented by the SDGs. They can show that SDG leadership comes from the top by referencing the global goals in their CEO and/or chair's message.
Businesses can build trust and credibility by being transparent in their reporting about both their positive and negative impacts on the SDGs. As certain SDGs are more relevant than others, companies should prioritize SDGs and include the process for prioritizing these within their reporting. They should also specify which of the UN's 169 targets (which underpin the 17 SDGs) they are focusing on.
Companies should be sure to not only set SDG performance goals, but to set ones that are SMART (ie specific, measurable, achievable, relevant and time-bound) and disclose these, as well as the indicators used to collect data and report on these SMART SDG goals. All of which help show businesses are serious about measuring, managing and communicating their SDG activities.
Inside look: How the world's largest firms are performing
How do the top companies measure up against our SDG reporting checklist? To help paint a picture of the current SDG reporting landscape, we investigated the reporting practices of the world's 250 biggest companies as part of our study How to report on the SDGs.
Which industries come out on top? Our study shows consumer facing sectors such as utilities, automotive and retail are more likely to report on the SDGs compared to those in heavy industry sectors like manufacturing and oil and gas. The appetite for SDG reporting seems to be highest in Germany, followed by France and the UK.
Which goals resonate the most for business? The most popular goals are Climate Action (SDG13), Decent Work and Economic Growth (SDG8), and Good Health and Well-being (SDG3). Less attention is being paid to Life on Land (SDG15), Zero Hunger (SDG2) and Life Below Water (SDG14), which could make achieving these goals more problematic.
Firms are recognizing the importance of prioritizing specific SDGs, as 84 percent of companies that discuss SDGs in their reporting are identifying the most relevant goals to their business. However, far fewer (34 percent) are setting related business performance goals, and fewer still (only 10 percent) are setting performance goals that are time-bound and measurable (SMART). It is possible that since it is still early days for the SDGs, companies are focusing first on prioritization and we will see more of them setting measurable performance goals in the next couple of years. Time will tell.
A key focus for companies should be on reporting the business case for the SDGs, however only 8 percent are currently doing so. This suggests that many companies are struggling with translating their well-intentioned support for the SDGs into business strategy. We also discovered that the majority of companies reporting on SDGs only discuss the positive impact their business has on the goals, not the negative. This reflects an imbalance in reporting, which will start to raise issues of credibility if not corrected.
While many of the world's largest companies are showing an interest in the SDGs, our study shows most are still finding their feet when it comes to reporting on their SDG-related activity. The majority are also yet to demonstrate that they are ready to take full advantage of the opportunities the SDGs present. However, some good practice examples of reporting are emerging and we expect to see more in the near future.
For further insights into how business can report on the SDGs, what good looks like, and more, check out our latest thought leadership publication How to report on the SDGs.
This article was originally published on Ethical Corporation.
Partner in Charge, Climate Change & Sustainability
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