Building back better and greener with the private sector

June 30, 2020

Photo: / shutterstock

The COVID-19 crisis has caused immense and unimaginable hardships, exacerbating pre-existing fault lines of inequality and magnifying a lack of resilience in our social and economic systems and governance structures. However, although the pandemic is causing profound and lasting consequences, it is also providing opportunities to ensure the world that comes out of it is better than the one that went in.

Einstein once defined insanity as doing the same thing over and over again while expecting different results.  We cannot return to business as usual and expect different results. We must not. The human and planetary costs are too high.

Could the Covid-19 crisis accelerate the adoption of an inclusive, equitable, and regenerative model for development? Yes, we believe it is possible, but it is not an easy task. We need to create the conditions that transform possibility into reality. We need a new compass to navigate through the uncertainty ahead and to guide our collective actions towards a different economic foundation while building on strong social principles. We certainly need a whole-of-society approach to ensure that not only build back better, but we also bounce back more resilient, more conscious of our capacities and resources, and more importantly recover in a greener and more sustainable manner. So what is missing to make this formula a successful one? Are the governments plans enough? Can the international development assistance make an impact? What more can be done?

Seizing the opportunity.  Balancing profit and purpose. Benefiting people and planet. 

UNDP in Ukraine recently launched an initiative to work with the private sector on a just, resilient and green economic recovery. While this initiative aims at building back better and fast recovering from the COVID-19 pandemic, it also contributes to the achievement of the Sustainable Development Goals (SDGs) in Ukraine.

The private sector, from small and medium size enterprises (SMEs) to large companies, are important partners to ensure sustained and inclusive economic growth that can drive progress, create decent jobs for all and improve living standards. SMEs are particularly important because they dominate the economy and are particularly important for local economic development – where the opportunities for achieving the SDGs are greatest.  According to the State Statistics Service of Ukraine, more than 90 percent of operating enterprises are SMEs (These statistics, from 2018, do not include data from Crimea and non-governmental controlled areas of Donetsk and Luhansk oblasts). The SME sector accounts for about 80 percent of employment and generates about 20 percent of the country’s GDP.

This is why we at UNDP in Ukraine have always worked closely with and have supported local economic development through partnerships with the private sector.  Our latest initiative, Private Sector for SDGs, builds on this approach and is distinctive in three ways:

1.      It seeks sustainable systems change.

Rather than seeking to create change at the level of individual businesses, or focusing on businesses at a specific stage of development, or targeting one element of the SME ecosystem such as finance, this initiative adopts a systems-approach to promoting SDG entrepreneurship and supporting SMEs, from pre-seed to ‘bankable’ growth stage impact ventures.

2.     It offers four related requirements for SMEs to thrive: the 4Cs.

i.     Competitive advantage. Starting and running a business is not easy at the best of times. The socio-economic impact of the COVID-19 pandemic has deepened many challenges faced by entrepreneurs. The initiative offers entrepreneurs a suite of tools and learning experiences on how to use the SDGs for strategic business development, business innovation, risk management, and to deliver social, environmental, and economic value for their customers.

ii.    Capital. Investing in the SDGs makes economic sense. Research has estimated that achieving the SDGs could open up US$ 12 trillion of market opportunities and create 380 million new jobs and the impact on climate change would result in savings of about US$26 trillion by 2030 (Business and Sustainable Development Commission, 2017; Better Business Better World; Report of the Global Commission on the Economy and Climate, 2018) UNDP in Ukraine will collaborate with key actors in the impact investment ecosystem to mobilise private finance for SDG-aligned SMEs and the development of differentiated SDG impact investment products. Impact investment optimizes risk, return and impact to benefit people and the planet. It does so by setting specific social and environmental objectives alongside financial ones, and measuring their achievement.

iii.  Connections. Networks and connections matter. Building networks can open up access to new and high value markets. Reliable market access increases incomes, generates employment opportunities and strengthens the long-term viability of SMEs. This project aims to increase business opportunities for SMEs that adopt SDG business practices by collaborating with Business Membership Organizations to advance SDG entrepreneurship - promoting their goods and services, growing a network of SDG impact SMEs, and tapping into value chains where SMEs can act as subcontractors or suppliers.

iv.  Catalytic conditions. The right environment is essential. UNDP in Ukraine will engage with decision-makers at all levels to proactively create strategies and policies that incentivize private sector actors to catalyze innovative breakthroughs for accelerating the achievement of the SDGs. It is a case for designing policies to harness the best of the private sector for the national public good over a medium to long-term horizon.

Private sector for the SDGs: four requirements for SMEs to thrive

3.     It is tailored to the needs of the Ukrainian SMEs

Ukrainian businesses operate in a globally challenging, yet uniquely complicated market. Approaching them with the four offerings requires adjusting internationally successful programmes not only to the national context, but also design a regional breakdown. During the initial user-experience research in different parts of the country, we found both: commonalities and differences that are crucial in order to make an engaging initiative.

We plan to apply trending UX research tools and partner with the experienced local stakeholders to provide an adaptive service offering that will organically fit into the companies’ strategic vision and help them to achieve a broad range of goals that benefit all.

Progress so far

UNDP in Ukraine is collaborating with the Istanbul International Centre for Private Sector Development (IICPSD) to map and analyse the impact investment ecosystem in Ukraine. This assessment will identify the opportunities and gaps in the impact investment market and showcase successful impact investment deals and business models for impact investment.

As part of this work to unlock private finance for the SDGs, UNDP is seeking mature growth stage businesses that are serving low-income people to access quality health, affordable and clean energy, and by reducing and recovering waste in Ukraine. The selected businesses will participate in UNDP’s SDG Finance Geneva Summit in early 2021 to meet with impact investors and development finance actors.

Business can be profitable and purposeful

The SDGs provide a compass and a roadmap to a sustainable recovery that is stronger, fairer and greener in Ukraine. The Private Sector for the SDGs initiative debunks the common view that profit and purpose are incompatible paths. Working toward the SDGs can provide growth opportunities and the chance to create new social value through business. Inclusive and sustainable development takes care of people and the planet, and in doing so, safeguards our future.