The transition from Millennium Development Goals (MDGs) to Sustainable Development Goals (SDGs) is a process of redefining development priorities and targeting causes of poverty instead of trying to ameliorate it’s symptoms. However, this comes at a pricey cost: the United Nations Conference on Trade and Development (UNCTAD) estimates US$5 trillion to US$7 trillion per year must be invested at the global level in order to measure any real impact in key sectors related to the SDGs. To reach the possibility of sustainable development, the role of stakeholders must be re-imagined, and that is exactly what the United Nations Global Compact has been doing through publications, conferences, and action items. Everyone – business, government, non-profits, etc. – has a role to play and tremendous value to gain from converging the goals of business and sustainable development.
The Private Sector
The private sector contains the greatest potential impact, but how do we engage businesses to care about social and environmental issues? And to what magnitude and range? Businesses have begun to realize that we must look in the long-term and not the short-term. Once we do this, we realize that sustainable development principles (i.e. social equality, inclusive growth, progress) and long-term business goals (i.e revenue growth, resource productivity, risk management) are interconnected. If attention to climate adaptation and mitigation is not adequate, businesses that rely on Earth’s resources (which is virtually every business) will suffer due to decreased yields. The ability of business to prosper and grow is deeply entrenched in the existence of a sustainable society.
There are a variety of business types in the private sector, and each can contribute to investment and furthering of sustainable development. The Global Compact has differentiated contribution capabilities between companies in the real economy, institutional investors, banks and insurance, and foundations/philanthropy.
Companies in the real economy are producers of goods and services. They have a direct effect on the environment and workforce, touching upon issues of resource management, gender equality, labor fairness, infrastructure, and social services. By transforming the way companies in the real economy conduct business, private business can contribute to good corporate governance. Companies can also influence other companies they interact with, such as suppliers, by requiring attention to sustainability in their supply chains.
Institutional investors like pension funds and insurance companies tend to invest in companies that operate in high income countries and look in the short-term. However, there is great potential for institutional investors to invest in environmental and social causes such as microfinance, affordable housing, renewable energy, energy efficient technology, and women’s empowerment. The Global Compact recognizes there is a limit to the impact institutional investing can have, which requires innovation to raise the capacity of investing.
Banks and insurance need to provide transparency in the banking system and provide financial services to those who typically experience blocked access.
Foundations and philanthropy sometimes have a higher level of expertise and are involved in early stage development around a particular issue. They also tend to look long-term and have the ability to fill in gaps where it is not possible for the private and public sector.
According to the International Business Forum, the private sector provides more than 90% of jobs in developing countries and accounts for more than 50% of DNP, which means the role we carve out for the private sector is essential in the future of sustainable development.
Government, like business, can alter their internal operations to be gender equal or more green, but it’s most important task is to implement a policy framework that makes sustainability viable. After all, environmental and social sustainability is only possible when coordinated with financial sustainability. Government must create incentives for the private sector to embrace responsible business.
As mentioned previously, non-profits are typically involved with initial research and problem solving around an issue, so they are great partners to have. Public-private partnerships or private-private partnerships offer possibilities and innovative solutions to difficult issues.
Governments, business, and nonprofits already have policy frameworks and partnerships underway, but these are still exceptional cases. The reworking of sustainable development goals and inclusion of various stakeholders will serve to make social, environmental, and financial sustainability the norm, but there is still much work to be done in re-imagining the roles of different stakeholders.
Author: Jessica Tomaz, Sustainability Initiatives Outreach Coordinator, Global Sourcing Council