Business and the SDGs
The SDGs represent an unprecedented global consensus and is the result of 193 countries coming together in agreement on a comprehensive and ambitious development agenda for people and planet towards 2030. The SDGs describe the greatest challenges and needs of our time and the goals for addressing these. Achieving these goals require collective action across governments, civil society, private sector and dedicated individuals and communities and need to be matched with the necessary resources, innovation capacity and partnerships to drive implementation.
The private sector, in this context, is an indispensable partner and has a critical role to play in advancing the global development agenda. In developing countries, private sector operations constitute, in average, 60 percent of GDP, while generating 90 percent of jobs and 80 percent of capital inflows (OECD). The private sector further contributes to development by providing goods and services, financing social and economic investments through taxes, and creating innovative solutions to help tackle development challenges. Innovation in the private sector across the world is a prerequisite for achieving the 169 ambitious targets, which collectively make up the 17 SDGs.
It is important to recognize that the private sector is extremely diverse and not defined only by multinational corporations and industry giants. Unleashing the transformative capacity of the private sector for development is not possible without small and medium sized enterprises (SMEs) and social enterprises. For example, SMEs create over 50 percent of formal jobs globally and many innovation leaps have happened in SMEs as well as start-ups.
Where the SDGs can create value for business
The SDGs represent a major opportunity for businesses to shape, steer, communicate and report their strategies, goals and activities, allowing them to capitalize on a range of benefits. There are a number of compelling reasons for businesses to pursue social impact and engage with the SDGs. Beyond the need to heed society’s call for greater transparency and accountability, blending purpose with profit can generate a unique competitive advantage to meet the expectations of discerning consumers, investors, and employees. Five distinct drivers of financial value compel companies to make both social impact and SDG alignment part of their core business:
- Generate new revenue by creating new opportunities for market differentiation, expansion and growth including though innovating to access extremely promising markets which do not yet exist or are in their early days.
- Employer attractiveness for improved recruitment and retention.
- Increase supply chain resilience by enhancing supply chain sustainability and operational efficiency.
- Spawn investor interest by increasing attractiveness to a wider range of investors.
- Being “ahead of the curve” in assuring license to operate by addressing regulatory compliance and managing risks.
Achieving the SDGs create at least US$12 trillion in business opportunities
There is a clear business case for the private sector to invest in SDG implementation. According to the Business and Sustainable Development Commission, achieving the SDGs opens up some USD 12 trillion of market opportunities in the four economic systems examined by the Commission. These are food and agriculture, cities, energy and materials, and health and well-being. They represent around 60 percent of the real economy and are critical to delivering the SDGs. The total economic cost (and business potential) of implementing the SDGs could be 2-3 times bigger, if the benefits are captured across the whole economy and accompanied by much higher labour and resource productivity.
Every year, US$ 5-7 trillion or Japan’s entire GDP is needed for fulfilling SDGs
Reaching the SDGs will require a step-change in both public and private investments. Public sector funding capabilities alone may be insufficient to meet demands across all SDG-related sectors. Today, however, private sector investment in these sectors remains relatively low. Only a fraction of the globally invested assets of banks, pension funds, insurers, foundations and endowments, as well as transnational corporations, is directly targeting SDG sectors. Tis figure is even lower in developing countries and particularly the poorest ones (LDCs).
At the global level, total investment needs are in the order of USD 5 to 7 trillion per year. Developing countries alone are expected to need investments totalling some USD 3.9 trillion per year, mainly for basic infrastructure (roads, rail and ports, power stations, water and sanitation); food security (agriculture and rural development); climate change mitigation and adaptation; and health and education. Current investment levels in these sectors stand at around USD 1.4 trillion leaving a gap of around USSD 2.5 trillion and implying an annual investment gap of between USD 1.9 and USD 3.1 trillion (UNCTAD). If just some of this investment gap is filled, the opportunities for business to deliver services and solutions will grow manifold.