Environment, Social & Governance (ESG) Business Pillars - Synergies with the UN SDGs

Sustainability is the Way Forward
18 March 2021
Content from a Premium Partner
FEEEDS Initiative (Washington, DC)
analysis

Over the last two decades, the framework known as Environment, Social and Governance (ESGs) has gained prominence as a basis for measuring a company's efforts toward sustainability, socially responsibility (values), and acceptability as a set of metrics to gauge operations, investment, shareholder decisions, and inclusion in capital market listings.

ESG pillars first began to take shape in 2004-2005, stemming from thought-provoking reports like the "Who Cares Wins," by  Ivo Knoepfel, connecting financial markets to a changing world, and advocacy by the late UN Secretary General Kofi Annan encouraging CEOs of financial institutions to view ESGs as having a positive impact on capital markets. These efforts led to such important related programs as the New York Stock Exchange's 2006 Principles for Responsible Investment (PRI), and the Sustainable Stock Exchange Initiative (SSEI).

Fast forward to today. The recognition, and visibility of ESGs, as well as the importance of the sustainability elements therein, have been expounded on extensively in a variety of documents from the UN Global Compact, business advisory reports (e.g. PWC, Deloitte), articles (Forbes), fora such as  World Economic Forum ESG meetings, and the World Bank, including its new ESG portal.

The ESGs have grown to be more or less reflective of certain actions under each of the E, S & G Pillars, which FEEEDS sees as being synergistically connected to the UN SDGs. This connecting allows for the E, S & G Pillars to be both measurable, and also thematic related to the SDGs:

Environment: For FEEEDS, this is the Climate Change Thematic Pillar, as it incorporates many of the key climate change sub issues such as waste management, reduction in pollution and carbon emissions, incorporating renewables, and natural resource protection that companies are addressing.

Social: We view as the Humankind or Human Protection Thematic Pillar, given this is where the treatment of personnel, relationships with outside stakeholders, communities, and consumers come in, including issues of human capital, good labor practices, and product liability.

Governance: Is the Inward-Looking Thematic Pillar, meaning how well a company is managing itself from its governing board (including board diversity), to transparency on financials, taxes, investments, risks and ethics.

An urgent call for action - 17 Sustainable Development Goals (SDGs)

Given the importance of the ESG Pillars to businesses and organizations today, adding a thematic lens to the measurable metrics can be useful. Moreover, it helps connect ESGs synergistically with the globally-agreed upon UN Sustainable Development Goals (UN SDGs), running from 2015-2030, which seeks to improve the overall well-being of mankind. Historically, this ESG-SDG discussion makes even more sense if one thinks back to the early 2000s when the ESGs were being bandied about. This was just after the creation of the 2000-2015 UN Millennium Development Goals, the first global iteration of measuring mankind's well-being -- a precursor to the current SDGs.

The SDGs, with its 17 goals (and 169 subsections) encourages and measures a country's (and by extension the world's) concerted efforts to improving mankind's well-being by addressing extreme poverty, development shortcomings in education, food security, health and joblessness, particularly for women and children. The SDGs and their progress are analyzed by a wide variety of organizations. This includes the UN SDG 2020 Report & Progress Tracker, the latter highlighting COVID's role in unfortunately pushing 71 million people back into poverty, the largest poverty rise since 1998; Gallup World Poll, tracking SDG progress on food insecurity (790 million people facing hunger), labor & safety practices, financial inclusion; the World Health Organization, monitoring progress on both core and attendant health-related SDGs; the World Bank's SDG Atlas Tracker, on energy and hunger; and the Sustainable Development Solutions Network's SDG Index.

So, what is the argument on linking ESGs synergistically with relevant thematic SDGs? And, would that be for all 17 goals? The answer is no.  But consideration should be made toward those SDGs that are complementary to a business and its sector(s). Where a company can thematically link (directly or indirectly), it should. By doing so, the SDGs provide a way forward for a company to plug into the "greater good" themes agreed upon by 193 countries, contributing to improved optics, perceptions and by extension, positive metrics and visibility on its ESG framework.

Linking up ESGs to appropriate SDGs shouldn't be that hard to do. The bigger value-addition is, by doing so, we all speak with one "improving humanity voice" as we work across business and development sectors (as opposed to stove piped). Moreover, the SDG link can provide the twofold benefit to companies of:

Badagry Agric Project in Lagos, Nigeria
  • shining an international (or country-level) light on a business' positive actions; and,
  • serving as touchstones to (directly or indirectly) aid or assist boards and investors evaluate or further appreciate the outcomes of their ESG efforts.

In analyzing the 17 SDG goals, there are 10, of the 17, which FEEEDS views with direct thematic synergy to the ESGs, and seven, which could be viewed as indirect. The blend, in the end, is up to companies.

The 10 SDGs with Direct ESG Synergies :     

The 10 SDG goals, we see with direct thematic connections to the ESGs fall mostly under Environment and Social. They include, SDGs 5-9, 12-15, and 17. Granted, many businesses are focused already on these in internal operations, therefore linkages should be easy. Below highlights which SDG goal make sense under the ESG Pillars:

Under the Environment (or Climate Change) Pillar, SDGs 6-7, 9, and 12-15 since these SDGs primarily focus on climate change issues of water, waste management and sustainable energy; to climate smart manufacturing, industrialization, production patterns and agricultural practices; to protecting land and ocean biodiversity systems.

Under the Social (or the Humankind) Pillar, SDG 5, 8, and 17 since these SDGs focus on key elements of equality, empowerment, productive employment and partnerships. But can also apply to a company's internal operations such as human capital and ensuring living wages; to productive, descent work and healthcare for employees; to safe and humane working conditions.

SDG 17, on strengthening Global Partnerships for Sustainable Development, further underscores FEEEDS' core argument for the ESG-SDG synergy discussion. Businesses which see this interconnectedness will likely benefit with quality relationships with outside stakeholders, contribute differently to communities where they operate, and improve partnerships or corporate social responsibility projects. These changes can help reduce risks factors to bottom lines, which recent and historic events continually show can lead to financial loss and instability costing billions.

Building a better world with ESGs & SDGs

Under the Governance (or Inward-Looking) Pillar SDGs 5 and 8 are also applicable. Although this pillar tends to be focused on a company's internal governance, regulations and transparency, there is still synergy with these SDGs. The connections are on diversity and equality -- not only in the board room, but also with executive pay, investment dollars in minority and small businesses, and shares in ownership. Studies show less reluctance today accepting female managers than five years ago, in places like Canada (Randstad), and as shown in Gallup's recent polling in Latin America, Eastern Europe, and the U.S. Whereas, in the 21 African countries polled, the region's reluctance level toward women managers is still high (a median of 47% of the population prefer men, while a median of 34% said they prefer woman). Companies which systematically address this data point in their governance pillar – increasing the number of female managers – would go a long way in synergistically advancing SDG goal 5, while providing productive and descent work helps goal 8.

The Seven SDGs with Indirect ESG Synergies:

The seven SDGs where a company's good ESG report card can be helped indirectly, include SDG goals 1-4, 10-11, and 16 given these are the larger greater good SDGs (ending all poverty, hunger, and overall improving the human condition). Certainly, good ESG stewardship will have an attendant contribution to these global SDGs as companies uplift the lives of their employees with good practices. All of which can be achieved through climate-smart behavior, providing good healthcare and life-long learning opportunities, and ensuring equitable pay, diversity and gender equality from the board room through to the assembly line and agricultural fields – all very synergistic to these seven SDGs.

___________________________________________________________

Dr. Robin Renee Sanders is CEO-FEEEDS, an advocacy initiative which focuses on a range of global development and business issues, partners with a number of organizations, and holds the annual FEEEDS-GALLUP Africa Forum. Sanders is also the former United States Ambassador to Republics of Nigeria, Congo, U.S. Permanent Representative to ECOWAS, Africa Director at the White House National Security Council, and the author of several books. This is a FEEEDS article not requested by any organization.

AllAfrica publishes around 600 reports a day from more than 100 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.