Are the SDGs fit for purpose?

A recent report published by the United Nations (UN) confirms that the coronavirus pandemic has put the initial aims of the Sustainable Development Goals (SDGs) out of reach. The SDGs Report 2020 explains that much of the work achieved since the launch of the goals in 2015 has now been eroded[i]. The worrying finding is confirmed by The 2020 Social Progress Index. It estimates that the world will not now achieve the SDGs until 2092, 62 years behind the 2030 schedule! [ii]

So why have the SDGs received so much attention post-COVID-19?

Despite the above findings, the pandemic and resulting crisis has exposed and intensified fundamental weakness in our global systems. Challenges such as weak health systems, accessing education and finding decent work, together with achieving economic growth, have, broadly, affected every citizen on the planet. [iii]

Ironically, the pandemic coincides with the fifth birthday of the SDGs, which were constructed to address such global sustainability issues and their inherent interconnectedness. And the problems we currently face within our global societies as a result of Covid-19 raise some probing questions about the UN’s global goals.

The lack of resilience from many of our institutions faced with a pandemic is surprising. At the same time, the frailty of the SDG framework to maintain the progress made thus far brings into question its future effectiveness to rally the global community in responding to challenging social and environmental issues.

Or are we being unfair?

Could the example of the international race to find Covid-19 vaccines actually be a harbinger of potential future global co-operation?

Is this actually a moment to celebrate the SDGs framework and intensify our efforts around it to identify risks, build resilience and devise strategies for companies, investors and stakeholders to help in solving complex societal ESG problems?

The inescapable prominence of the SDGs in corporate reporting discussions invites the question: what actually have companies been doing in terms of concrete actions? After five years, one would expect to see evidence of tangible, quantitative performance results.

PWC embarks on an annual exercise looking at the key trends around incorporation of the SDGs into corporate strategy and reporting. Its latest publication, The SDG Challenge 2019 report, which looked at over 1,000 global corporate reports, says companies generally acknowledge the goals, but show little real action in supporting them via their business activities. The report said that 72% of companies mentioned the SDGs in their reporting, while just 25% of companies included the SDGs in their published business strategy, and only 21% of CEO or Chair statements made reference to them.[vi]

Why isn’t there more real take up by companies? Our experience suggests that a combination of previously better understood concepts of sustainable development set against the structure of the SDGs and their accompanying disclosure framework could be part of the confusion and a potential barrier to progress.

Are there too many SDGs?

This question was posed in 2015 by Bjorn Lomborg, President of the think tank, Copenhagen Consensus Center. Together with a group of eminent scientists he argued that a reduced list from 169 targets to 19 targets would be more effective, as not all targets are equal. Some high performing SDGs are found to generate significant economic, social, and environmental benefits per dollar spent. Others generate only slightly more than a dollar per dollar spent. Some even generate a net loss, doing less than a dollar of good per dollar spent. Every dollar spent on the high performing SDGs will likely produce US$32 of social good – more than four times more effective than spending on all 169 targets, the report says.[vii]

Sustainable development though is hugely complicated and interconnected, so an argument for the large number of SDGs could be warranted as a useful upgrade to the eight previous Millennium Development Goals, which fell far short in outcome.

The visibility of the 17 SDG issues with their colourful iconic graphics that capture the full list of global social and environmental issues, already sends a powerful message of the full-scale work programme needed for success.

It is estimated that between US$ 5-7 trillion per year is needed to fund the SDGs to 2030.[ix] The remarkable rise of ESG investing since 2008 and the emerging focus on impact investing indicates that the capital markets are channelling funds into companies with good ESG profiles that are able to make positive effects on social and environmental issues and remain competitive.

Investors are also now more likely to avoid supporting damaging corporate policies which expose their investee companies to often costly ESG risks. Impact investments are gaining traction.   According to the Global Impact Investing Network, 1,700 impact investors now manage aggregate assets under management that have increased from US$502bn in 2019 to US$715bn in 2020.[x]

In addition, green bonds have been a feature of the market since 2008, and along with social bonds, and sustainability-linked loans have been growing in popularity over the last five years. In September this year, Enel, the Italian oil company created the world’s first SDG-linked bond; a milestone in the evolution of sustainable fixed-income investment.[xi]