COP24 Report – When Words Are Not Enough

 Now is the time for serious climate action in your supply chain

By Arnaud Brohé, GSC Board Member and CEO of CO2Logic

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Dr. Wanda Lopuch

3 Years into the SDG Journey: How Are We Doing?

Today we are closing 2018 by crossing the 20% milestone on the journey to achieve the 2030 Agenda for Sustainable Development.  We are 3 years into this journey framed by the 17 Sustainable Development Goals (SDGs). The 2030 Agenda, signed by 195 countries, is considered to be a monumental achievement in global collaboration.  The Private sector is expected to play a significant role in delivering on 17 SDGs.

So – how are we doing?   Well…it depends.  Here are few perspectives:

Lead, Follow, Standby or Disavow.  

SDGs present an inspirational vision of the world we aspire for ourselves, our children and our grandchildren.  SDGs are inter-related and co-related, addressing the most critical challenges for individual countries, for regional and global economies, for communities that live, prosper and survive on finite resources, and are interconnected across political borders and economic systems. Set up in 2015, the 164 global targets for specific SDGs marked the beginning of the journey of translating inspirational ambitions into goals, plans, procedures and measurable outcomes.

Business has embarked on the SDG journey by doing what businesses do best: focusing on challenges and turning them into opportunities; on defining and quantifying them so they can be measured and managed. Various enterprises embrace SDGs at a different pace.  The majority have started by mapping visionary goals into their own enterprises’ strategic plans. Once a strategic alignment has been identified, the hard job of actually setting corporate targets has begun, followed by translating goals into operational plans and reporting on them across their business units, geographies and regions.

At this point in the SDG journey, one may distinguish four categories of businesses that have emerged:  SDG Leaders, Followers, Bystanders and Skeptics.

  • SDG Leaders are the “Build to Last” enterprises that have already entered the trajectory of sustainable growth. They have moved swiftly to embrace the SDG framework and clearly articulated an alignment of business strategy of profit with purpose with SDGs. Moving from inspirational vision to business goals, the Leaders have set ambitious targets, such as sourcing only sustainably grown products by 2020 (Unilever), designing technology-enhanced practices to bring dignity to work, eliminating forced labor from global supply chains (Coca-Cola), implementing unprecedented transparency to report on SDGs to legitimize the goals, and in-depth disclosures on diversity in supply chains (Intel).  The Leaders are setting the tone and inspiring other businesses regarding how to use the SDGs as a framework to mitigate risks, increase innovation and competitiveness, and improve market-share while supporting local economies and implementing sustainable business models.
  • SDGs Followers:  These businesses have been taking time to develop a clear SDG alignment for their enterprises. Materiality assessments and mapping exercises assist in determining where the business opportunities are. With SDG Leaders serving as their examples, the Followers ask themselves and their boards “Which goals are material to OUR enterprise? What are the real business benefits of SDGs?  How many SDGs should we focus on?  What’s the best method of reporting the results? How do we communicate this to our stakeholders?” Current practices vary broadly:  from 1-2 SDGs to all 17 goals being embraced by one enterprise. From what this author has seen and discussed with various industry leaders, tackling 3 to 5 goals is the most common for-profit business approach in shifting into an SDG framework.
  • SDG Bystanders do not see SDGs as relevant to THEIR business. Typically, these are short-term focused enterprises with short-term opportunistic approaches to the marketplace that compete on either a price or labor arbitrage.  They neither deny the need for an SDG-compass for business, nor do they explicitly critique SDG principles, unless one way or the other, the SDGs support or inhibit their opportunistic position. Only then will the Bystanders take a position on SDGs. Until such time, the Bystanders, have made the deliberate decision not the get THEIR BUSINESS involved.
  • SDG Skeptics question the business value of SDGs as irrelevant or even anti-business.  SDG Skeptics come in various forms and shapes: from open critics to “greenwashers.”  There are those who publicly state that they don’t believe in the scientific foundation of SDGs, such as the science of climate change.  Others use deceptive marketing strategies, or “greenwashing”, to give the impression that they’re supporting the SDGs, but it’s seldom much more than a PR spin to grab the attention of value-driven consumers.  Some Skeptics dispute or minimize the benefits of the SDGs on a national policy level, citing ways local economies could be penalized if new technologies or approaches were applied. Others skillfully manipulate the disclosure systems for their own short-term gains. SDG Skeptics, with their sharp focus on profit here and now, see SDGs with its 15-year-horizon and global-focus as anti- business, or more often than not, anti- THEIR current business.

A question arises about the prevalence of these groups, which is not an easy task to estimate.  No comprehensive body of research exists that would estimate the depth of adoption of SDGs in business and the prevalence of various groups.  However, there are some indirect measures, such as an increasing amount of capital flowing into “responsible investments” which utilizes ESGs (Environmental, Social, Governance) analytics and is becoming one of the most sought-after investment pools within the mainstream capital market.

In or out, We’re Still IN

Arguably the biggest challenge for our generation is climate change.  It impacts all areas of the 2030 Agenda. The Paris Agreement, signed on Dec. 12th 2015, solidified national and regional level commitments to SDG 13:  Climate Action. At the writing of this article, COP24 is taking place in Katowice Poland, which continues the negotiations of adopting climate action targets.

Along with 195 other countries, the United States signed the 2015 Agreement. In June of 2017, President Donald Trump announced that the US would withdraw from the Agreement because he believed that it would undermine the economy and put the US at a disadvantage.  This means that the US joined Syria and Nicaragua as the only nations that did not agree to the pact. Even Palestine and North Korea signed it.” (Business Insider, Rebecca Harrington and Skye Gould, Jun. 1, 2017, 5:18 PM)  According to Article 28 of the Agreement, the earliest the US could technically withdraw would be 2020.  But that hasn’t stopped the US, the largest global economy and one of the largest democracies in the world, and its federal government to put in place plans that abdicate its social responsibility and moral leadership in the name of nationalistic, short-term gains.  

Despite the absence of the current US government’s commitment to Climate Action (SDG 13), corporations, small businesses and individuals have stepped in and stepped up.  We Are Still In is a coalition of over 3600 businesses and civic leaders that includes mayors, governors, tribal leaders, academia and investors who support taking action to ensure the goals of the Paris Agreement are met.  They currently represent over 154 million Americans and approximately $9.46 trillion in GDP of the US economy. As a presence at COP24, they are in Poland showcasing their stories of collaboration and innovation that stretch across all business sectors.  Their members have openly and proudly signed a pledge to honor the objectives of the Paris treaty, to improve the deteriorating state of the climate, and have disclosed this promise in many official company documents.

So…HOW ARE WE DOING?  

All things considered, I’d say we’re making progress.  Kudos to the private sector as they have assumed the leadership role in executing the 2030 Agenda.  

Unfortunately, that’s not the case with governmental leaders.  Over a period of 3 years, governments that signed the 2030 Agenda for Sustainable Development have weakened their SDG commitments.  These newly elected administrations are focusing on immediate local priorities while the UN is preoccupied with internal reforms. It is the private sector that has stepped into the SDG implementation vacuum and is taking the lead on the execution of the 2030 Agenda. It is the private sector, who did not sign the 2030 Agenda, who sees the compelling business case for its implementation, and who has the expertise, skills, discipline and the capital to execute the 2030 Agenda.

At this stage of the SDG journey, investors are the driving force behind solutions that support and embrace SDGs. They are evaluating and mitigating risk on one hand, exploring business opportunities for sustainable growth on the other, and combining those efforts to generate revenue and develop new technologies that meet SDG goals.  

There’s much to be done in the realm of measuring outcomes in a universally accepted manner, tracking good intentions with actual results, and fine-tuning the analytics that are applied to ESG policies.  Among most urgent priorities, there is a need to bring ESG-discipline and analytics into supply chains. With supply chains contributing up to 80% of the global footprint, we must continue examining the entire procurement process and manage supply chains through hopeful yet critical ESG lenses. We are at the early stage of the transformation of turning supply chains into responsible supply chains. This transformation, driven by ESG analytics, will be enabled by technology, where automation and AI (Artificial Intelligence) push productivity while intersecting with market pressures to deliver sustainable products.  And supply chains will be center stage for this intersection.

So, fasten your seat belts for the 2019 ride embracing SDGs in supply chains.  The ride is full of acronyms – SDGs, ESG, GRI, AI just to start with– and there are bound to be technological bumps and turbulence along the way.  The entire GSC global community will actively participate in this transformation. We invite you to come on this ride and encourage you to identify an active role for yourself in this journey, claiming a seat at the table in your area, department or region! Jump into the driver’s seat to be a part of transforming supply chains into responsible supply chains.  Share your experiences for others to learn from and be inspired by along the way.

 

We wish you a productive and rewarding journey.

 

Welcome to responsible sourcing of 2019 and beyond!

 

Wanda R. Lopuch, Ph.D.

Chair of the Board

Global Sourcing Council

 

In preparation for 2019 tasks, the December issue of The GSC Source, looks deeper into the current status of how businesses, and especially supply chains, embrace and evaluate SDGs.

 

 

Sustainable Development Goals and Global Supply Chains: Why is this not considered a more convenient marriage?

The GSC’s 3T Summit: Technology, Transparency, Trust

Opening Remarks by Wanda Lopuch, Ph.D., Chairman of the Board, Global Sourcing Council …..

Technology, Transparency, Trust:  the 3T Summit (), presented by the Global Sourcing Council (GSC) in collaboration with Thomson Reuters and Refinitiv, was part of the GSC’s thought-leadership series addressing major issues in today’s supply chains.

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VIDEO 2: Reverse Engineering an Effective ESG Supply Chain Policy

 

Hosted by Rosemary Lapka of the GSC and Louis Coppola, GSC Board Member and Co-Founder & Executive VP of the Governance & Accountability Institute (G&A)

This conversation is about how reverse engineering ESG Investor Datasets is an effective tool that can help to inform a strategy to improve your ESG supply chain policy. The work at G&A focuses particularly on providing advice to corporate and investor clients related to ESG sustainability strategy, disclosure/reporting, investment, and performance. Lou Coppola is the Chair of the US SIF- Social Investment Forum – Company Calls Committee (CCC), which serves as a resource to companies by providing a point of contact into the sustainable investment analyst community and is an active NYSSA- New York Society of Securities Analyst, Sustainable Investing Committee steering member.

The G&A Institute was founded 12 years ago with the concept of helping companies do the right thing for the right reasons. They operate at the intersection of ESG issues, the capital markets, and publicly traded companies. With reputations and evaluations being increasingly impacted by ESG factors, G&A helps companies identify material ESG issues and helps companies to proactively measure, manage and disclose on these issues in a standardized way. The G&A Institute serves as the data partner for the Global Reporting Initiative (GRI) in the United States, United Kingdom and The Republic of Ireland. In this role, they collect and analyze every sustainability report published by companies headquartered in these countries and publish reports on reporting trends to create a greater awareness of best practices in sustainability reporting and sustainable investing.  

To identify and extract ESG data points that investors use to assess supply chain, sourcing and procurement policies, G&A conducted a study evaluating the data points collected by 4 respected and often-cited sources that feed the capital market:  Thomson Reuters Eikon ESG Data, Bloomberg ESG Dashboard, MSCI ESG Research, and Sustainalytics ESG Research. What they found was that up to 30% of the data points were inaccurate or incomplete because most of the time, the company itself did not disclose their activities in a standardized or easily accessible format for the analysts at these organizations to identify. This lack of standardized ESG disclosure negatively influences the company’s ESG investor profile. The analyst helps to identify how the capital markets and investors assess company’s supply chain policies and identifies best practices. The primary focus of the study examined the subset of ESG data points related to supply chain procurement, purchasing policies and codes of conduct.  

G&A grouped the various providers ESG Data points and identified 6 key stages of supply chain policy ESG integration:  

Stage 1:  Commitments (Environmental, Social, Governance)

Stage 2:  Target Setting

Stage 3:  Monitoring and Reporting

Stage 4:  Engagement and Training

Stage 5:  Systematic Consideration and Incentivization

Stage 6:  Termination for Non-Compliance

These stages are often done in a continuous cycle. Some of these stages may also overlap.  For example, companies should go back to review their commitments each year and improve them based on engaging with stakeholders, evaluating what has become more important to society and customers, and they may set new targets and expectations.

By including specific language and data identified in each of these categories data points, it will provide a more accurate picture of a company’s policies and practices and make it easier for ESG Data Providers’ analysts to assess the company, leading to improved investor ratings in these areas. This is the information ESG data providers are looking for when they go through CSR or other company reports that is then input into their evaluation databases.  

Human rights and employee safety policies are examples of key data points that are weighted and evaluated based on how they meet recognized standards and conventions as set forth by policy leaders such as the UN’s Sustainability Development Goals and the International Labour Organization (ILO). As a UN agency that sets internationally recognized standards on human rights, the ILO’s 1998 declaration on fundamental principles and rights at work set out 8 core conventions whose principles are binding on all ILO-member states. As several of these minimum labor rights are not currently achieved within international supply chains, especially in the developing world, it’s increasingly common to include codes of conduct based on these ILO minimum standards into contracts with suppliers.  

Click on the video to continue learning more about

  • What information should go into reports and how to standardize that policy language disclosure
  • How to highlight your policies so that your ESG investor data profile is accurate and complete
  • Suggestions on how to implement the 6 stages of supply chain policy ESG integration
  • Other tools and resources that will help companies design world-class ESG supply chain tools policies

For more information about G&A Institute or if you have any questions for Lou, you may reach out to him directly at lcoppola@ga-institute.com or visit their websites:  www.GA-Institute.com  |  www.Accountability-Central.com  |  www.SustainabilityHQ.com