December 8, 2016
One year after the adoption of the United Nations Sustainable Development Goals (UN SDGs) the European Commission unveiled its Communication on the next steps for a sustainable European future: European action for sustainability. It maps EU’s policies that contribute to the UN’s 2030 Agenda for Sustainable Development and launches a reference indicator framework to measure progress from 2017 onwards. Together with the 230 global indicators that are already in place to track progress against the 17 Goals and 169 targets, this Communication provides more clarity to business about opportunities to engage in sustainable development initiatives. Work towards achieving the 2030 Agenda can now start in earnest with the eager participation of the private sector.
The SDGs are the successors of the UN Millennium Development Goals (MDGs). According to the UN report on the progress on the MDGs, extreme poverty has declined significantly since 1990, the working middle class has almost tripled, and the proportion of undernourished people in developing regions has fallen by almost half. Considerable progress was achieved also in a number of other goals such as child mortality rates, education and communicable diseases. Despite these statistics, the MDGs were far from a success story, especially in some of the most vulnerable regions across the world. Much of the progress was made thanks to the economic growth in China and India and the deepening of international trade and the global supply chain. Furthermore, some of the goals relating to environmental sustainability and partnerships for development were somewhat overlooked: while the consumption of ozone layer depleting substances has decreased by over 98% since the adoption of the Montreal Protocol, global CO2 emissions increased by 50% since 1990 and remain a high concern in view of the increasing impact of climate change. The world has also missed the MDG aiming to protect biodiversity and loss of biodiversity has even accelerated. While the amount of Official Development Aid (ODA) has grown exponentially, private investment and technology transfer in some of the least developed countries has remained a risky and unrewarding venture for business.
At the time of the MDGs, the private sector was seen as a co-financing vehicle and its contribution was mainly limited to corporate philanthropy. Some civil society groups and NGOs opposed the use of public-private partnerships (PPPs) in development projects for the fear that companies would use these to greenwash their way into developing markets. A structured framework for engaging private sector with the MDGs was not on the agenda. Consequently companies were reluctant to spearhead such efforts and implementation of the MDGs was driven mostly by governments.
While the MDGs targeted mainly developing countries, the SDGs encompass all countries and provide for a strong role of the private sector in achieving the global agenda. The new goals are universally inclusive, ensuring that “no one will be left behind”. They go beyond the basic needs sought by the MDGs and provide a common framework for addressing the most urgent economic, social and environmental challenges today. They touch upon all three aspects of sustainability: from zero poverty, zero hunger and good health, to clean water, climate action, and responsible production and consumption. All this is enabled by economic growth, equality, peace and justice, infrastructure, education and partnerships. The universality and ambition of the goals require participation by all stakeholders, including the private sector.
Already towards the second half of the MDGs’ deadline, discussions started about involving the private sector better to accelerate progress. With ever-deepening globalisation and an increasing number of multinational companies with sales larger than some national GDPs, the key role of business in development cannot be ignored. The Commission realised the potential of blending ODA with private sector investment and promoted partnerships beyond the traditional channels of cooperation in its 2015 Communication “A Global Partnership for Poverty Eradication and Sustainable Development after 2015”. It considered the private sector’s role in development as an engine for innovation, sustainable growth, job creation, trade, and poverty reduction as well as resource efficiency and infrastructure, provided that companies adhere to social, environmental and fiscal standards. A follow-up European Parliament Resolution (April 2016) called on the Commission to ensure better transparency and accountability in governing partnerships with the private sector in developing countries.
In this new context, the latest Communication by the Commission neatly outlines the EU policies that contribute to the SDGs, as detailed in a Staff Working Document, showing that current and planned policies address all 17 goals. Major ongoing initiatives such as the Circular Economy Package, Energy Union, Capital Markets Union, Innovation Union, Digital Single Market, the Common Agricultural Policy, and the external Agenda for Change aim at targets that fall under most of the goals.
All programmes are supported by funding instruments (e.g. the Investment Plan for Europe, the External Investment Plan, European Structural Investment Funds, and Horizon 2020) which rely both on public and private monies. Even though the content of this newest Communication is hardly ground-breaking, it reiterates that all new policies and policy reviews will be examined through the prism of sustainability. The better regulation agenda, with its impact assessments, ex post evaluations and stakeholder consultations, will be the main guardian of this principle, and first VP Frans Timmermans will coordinate the process.
Many expected that the Commission would propose new initiatives to address the SDGs (in view of the title “Next steps”). Commenting on the Communication, the WWF said, “The European Commission is busy repainting the front door to impress the neighbours while ignoring the fact that much of the house is missing”.
A major immediate step towards implementing the goals is the revised Consensus for Development that was adopted together with the Communication. It outlines the priorities of the EU development policies which are very much aligned with the SDGs for developing countries. They are structured around five main areas: human development, environment, inclusive and sustainable growth and peaceful and inclusive societies. Partnerships are of high priority and the private sector has a very prominent role. It is described as a motor for sustainable development which needs to be engaged through structured dialogues. As a next step, the EU and its Member States will develop Partnership Agreements to support ethical business practices and incentivise investments. Upon a joint position by the Council of the EU and the European Parliament by June 2017, the Commission will presented the consensus at a high level UN event in New York.
Today the EU considers sustainability as a way to foster jobs and growth, highlighting opportunities for the private sector to participate. One of the key tools to deliver the goals is to leverage private sector “sustainable investment” through a blend of EU grants with loans or equity from other public and private financiers, and risk-sharing mechanisms to catalyse PPPs. Commission President Jean-Claude Juncker’s new European External Investment Plan (EIP) aims to unlock investments in Africa and EU neighbourhood countries, contributing to sustainable development. It contains a €3.35bn European fund for sustainable development (EFSD) to address obstacles to private investment, support SMEs and develop social and economic infrastructure , tackle the root cause of migration, and fuel PPPs. Unsurprisingly, development NGOs criticised the EIP, calling on the Commission to de-link the plan from foreign policy objectives.
Still the private sector should not consider the SDGs only as a means for risk-sharing of investment or simply CSR. Research shows that 90% of citizens think it is important for business to sign up to the SDGs. And while 71% of businesses say they are already planning to do so, only 13% have identified the necessary tools (PWS 2015). The new Communication on the SDGs helps in setting the parameters which business operations should follow to contribute to the goals from EU’s point of view.
Good practices do not always make it to the news, but some industries are already leading the way in broadly positioning themselves in that direction. Agricultural companies are investing in digitisation to make agriculture more sustainable; the extractive industry is working with local communities across the developing world; investors are increasingly looking into the rapidly growing green bond market; and the widespread ownership of cell phones in developing countries has allowed telecoms to contribute by providing health advice or reminders to take your medicine via SMS. Many of these initiatives are only possible due to collaboration with the local non-profit sector and investment in social entrepreneurship.
Even the UN, through its children’s agency UNICEF, is mirroring tech companies and using venture capital to fund start-ups that help vulnerable children in conflict zones and poor regions.
The SDGs have the potential to be the new business model for inclusive growth, implemented across all operations and the whole value chain. They are harnessing momentum where society is demanding a business strategy with a societal purpose. In a world where the gains of globalisation are not evenly spread, resulting in frustration and backlash (think Brexit and Trump), international companies have the responsibility to build bridges to the disenfranchised parts of society and show greater commitment to sustainable development. Business models that fail to change or to demonstrate action towards sustainability might become obsolete.
To measure success as of 2017, the Commission has set a reference indicator framework that will track progress vis-à-vis the benchmarks indicated in a Eurostat report and Member States will develop their own indicators. These measures should pave the way for companies to implement their own tracking models. The Commission will also initiate a multi-sectoral consultation with stakeholders to follow-up and exchange best practices, creating an opportunity for companies to engage.
Together, the EIP, Consensus for Development and the sustainable development action plan create the policy infrastructure for the business to contribute to the SDGs in Europe and in developing countries. Companies would need to go beyond peripheral green initiatives such as energy savings, waste disposal, or one-off community projects, and implement sustainability ambitions in their core business. The Commission will seek best practice examples from the business in order to sustain its model of blending investment. Contribution of the private sector in development is not seen as a threat any more but as an opportunity for, business, customers and local communities. Even before the SDGs the CEOs of 9,000 companies have voluntarily committed to universal principles on human rights, labour, environment and anti-corruption as part of the UN Global Compact. The SDGs and EU’s action plan build on this impetus, urging the business to step up and showcase its contribution.