ASX 20 Disclosures on the Sustainable Development Goals

Transcription

1 RESEARCH REPORT, NOVEMBER 2017 ASX 20 Disclosures on the Sustainable Development Goals Commitment, structure, action and measurement

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3 Contents About Think Impact... 5 About this research project... 6 The United Nations... 7 Research method... 9 The elements... 9 The criteria Scope of analysis Findings and discussion Scores by element Scores for top Element: Commitment Element: Structure Element: Action and participation Element: Measuring and reporting Recommendations Aligning SDGs, materiality and business strategies Partnerships SDG targets and indicators Measuring and reporting Conclusions PREPARED BY Renzo Mori Junior, Ross Wyatt and Amanda Nuttall, Think Impact Cover Photo: Zahed Ahmad page 3

4 List of Tables Table 1 - Assessment criteria Table 2 - ASX Top 20 companies as at 1 July List of Figures Figure 1 - SDG maturity and the assessment... 9 Figure 2 - Overall score of ASX 20 companies Figure 3 - Average overall score of ASX 20 for each element Figure 4 - Overall score of Top 10 performing companies Figure 5 - Companies reporting on the SDGs and GRI Figure 6 - Commitment score Figure 7 - Structure score Figure 8 - Action and participation score Figure 9 - Participation in groups or initiatives supporting the SDGs Figure 10 - Measuring and reporting score Figure 11 - Measuring against the SDGs CONTACT For further details please contact: Think Impact Level 1, Somerset Place Melbourne, VIC 3000, Australia renzo@thinkimpact.com.au ABN DISCLAIMER Although every effort has been made to ensure the accuracy of the material and the integrity of the analysis presented herein, Think Impact accepts no liability for any actions taken on the basis of the contents of this report. page 4

5 About Think Impact Think Impact supports organisations to understand the greatest impact they can make to positive change. We seek to move society towards a new prosperity that combines wealth and wellbeing. We provide strategic advice, consultancy and training services to support organisations from all sectors to improve their future readiness, solve complex problems and develop new solutions towards sustainable development. We work with partners across business, government, philanthropy and the for-purpose sector to understand, communicate and transform the sustainability impact of their work. Think Impact is committed to promoting and supporting action to advance the SDG agenda. We recognise that companies have a key role to play in supporting governments to achieve the SDGs through sustainable business operations, investment, innovation and collaboration. Think Impact is a certified BCorp (Benefit Corporation) committed to making a positive difference in the world. page 5

6 About this research project This research project has been undertaken by Think Impact on a pro bono basis to provide transparency on the current level of disclosure of information by Australian businesses in relation to the United Nations (UN) Sustainable Development Goals (SDGs). The purpose of this research is to contribute to the conversation about how Australian companies can make meaningful progress towards achievement of the UN SDGs. This is the first report of a research series produced by Think Impact. It assesses the extent to which the top 20 Australian Securities Exchange companies (ASX 20) by market capitalisation are incorporating the SDGs into their business strategies and reporting processes. This report analyses companies public disclosures on the SDGs, highlights the strengths and weakness of the ASX 20 reporting on this issue, and makes recommendations to support improvement in performance and disclosure. The public disclosures of the ASX 20 provide a vital window into the accountability, transparency and action of companies contributing to sustainable development through their alignment with the SDGs. This research looks into the disclosures of Australia s 20 largest organisations and examines their reporting in relation to: Commitment to the SDGs. Management of board and executive structures for the SDGs. Actions and participation in the SDG movement. Measurement and reporting of progress towards the SDGs. Our research is intended to provide a framework to help businesses improve disclosure of their sustainability performance against the SDGs. It provides recommendations to support continuous improvement in, and foster discussion around, the future business opportunities and challenges that will enhance the value of corporate sustainability. Also, this research project aims to increase awareness and stimulate debate among companies, civil society actors, government representatives and other stakeholders around sustainable development and the SDGs. This report should not be seen as the final results of the research project, but as a first step to highlight the key findings and discussions arising from the research. The content of this report could also be further explored through discussions with participants of the Global Compact Network Australia. page 6

7 The United Nations Sustainable Development Goals On 25 September 2015, the 193 UN Members adopted the 2030 Agenda for Sustainable Development and its The SDGs came into effect 1 January In adopting the Agenda and the SDGs, the UN Members committed to work together to address major world issues by 2030, such as: promote sustainable economic growth and decent work for all, end poverty, combat climate change and its impacts, achieve gender equality, promote inclusive and sustainable industrialisation and ensure sustainable consumption and production patterns. International commitment to the SDG agenda has been strong, with 193 governments having agreed and adopted it. Governments are now facing significant challenges in dealing with the complex nature of the SDGs and how to best align policies and practices towards these goals. Progress on the goals requires governments to address different governance challenges, as well as to engage and work across policy areas involving various stakeholders, such as: tiers of governments, civil society actors and businesses 2. National governments have developed their own priorities and action plans to achieve their commitments and report on their achievements. In 2016, 22 countries submitted their VNRs, and 43 countries intend to submit in The Australian Government announced in July 2017 that its first Voluntary National Review 3 (VNR) on SDGs will be presented in Due to the importance and magnitude of this global commitment, different actors are pushing companies to support the sustainable agenda and be accountable about their contributions to the SDGs. In order to respond this new demand for accountability, a number of companies are now thinking of incorporating the SDGs into their business strategies and reports. A recent survey 4 of more than 1,000 CEOs of UN Global Compact member companies around the world found that: 88% understand that the SDGs are relevant to their business. 87% agree the SDGs provide an essential opportunity for business to rethink approaches to sustainable value creation. 86% believe that standardised impact metrics will be important in unlocking the potential of business to contribute to the SDGs. 1 More information available at: < 2 The Organization for Economic Cooperation and Development (OECD), 2017, OECD Survey on Planning and Co-ordinating the Implementation of the SDGs: First results and key issues, accessed 04 September 2017, < 3 Voluntary National Reviews (VNR) is an initiative of the United Nations to encourage governments to conduct regular and inclusive reviews of progress at the national and sub-national levels. These VNRs are expected to serve as a basis for the regular reviews of the United Nations and facilitate the sharing of experiences. A list of the VNRs already submitted is available at: < 4 Accenture, 2016, The UN Global Compact-Accenture Strategy CEO Study 2016, Agenda 2030: A window of Opportunity, accessed 04 September 2017, < w /au-en/_acnmedia/accenture/next-gen-2/insight-ungc-ceo-study-page/accenture-un-global-compact- Accenture-Strategy-CEO-Study-2016.pdf#zoom=50>. page 7

8 In Australia, the Australian Council of Superannuation Investors Limited (ACSI) has undertaken an annual review to evaluate the sustainability reporting practices of the ASX200 since For the first time, in 2016 the ACSI review considered whether companies are using the SDGs as a framework for sustainability disclosure. The ACSI review identified that a significant number of companies used or referred to the SDGs in their corporate reporting in Corporate action therefore has an important role to play to support governments to achieve the SDGs through responsible business operations, investment, innovation and collaboration. Further, corporate action on the SDGs also presents an opportunity for business to increase the value it is creating for stakeholders. The SDG Compass 6 outlines a strong business case for companies to understand and engage with the SDGs, and lists the following five key elements of this business case 7 : Identifying future business opportunities. The SDGs aim to redirect public and private investment flows towards the challenges they represent. ln doing so, they define growing markets for companies that can deliver innovative solutions and transformative change. Enhancing the value of corporate sustainability. The SDGs can drive economic incentives for sustainability as externalities becoming increasingly internalised. Strengthening stakeholder relations and keeping pace with policy developments. The SDGs reflect stakeholder expectations and future policies. In doing so, companies that align their business strategies with the SDGs are able to better manage and minimise legal and reputational risks. Stabilising societies and markets. The SDGs support pillars of business success, such as: business ethics, rules-based markets, transparent financial systems, anti-corruption and well-governed institutions. Using a common language and shared purpose. The SDGs provide a common framework that helps companies to be more accountable about their impacts and performance to their stakeholders, as well as to improve partnership and collaboration opportunities to address sustainable challenges. Different companies have been employing different approaches to identify and report on their contributions to the SDGs, as well as to identify opportunities to align their business strategies with the SDGs. The leading sustainability reporters are using the SDGs to communicate, through an integrated approach, how their activities and resources are creating value and generating positive outcomes for both business and society. The next phase of integration with the SDGs will hinge on how companies are aligning their strategies with the SDGs, how companies are assessing and measuring their impacts on the SDGs, and how accountable these companies are in communicating this performance to their stakeholders. 5 ACSI, 2017, Corporate Sustainability Reporting in Australia: An analysis of ASX200 disclosure, accessed 04 September 2017, < stories/acsidocuments/generalresearchpublic/2017-sustainability-report-final.pdf>. 6 The SDG Compass is a guide developed by the Global Reporting Initiative (GRI), the United Nations Global Compact (UNGC) and the World Business Council for Sustainable Development (WBCSD). It aims to provide guidance for companies on how they can align their strategies with, and measure their contributions to the SDGs. 7 GRI, UNCG and WBCSD, 2016, SDG Compass: The guide for business action on the SDGs, accessed 04 September 2017, < uploads/2015/12/019104_sdg_compass_guide_2015.pdf>. page 8

9 Research method This research assesses the disclosures in relation to the SDGs of the 20 largest Australian companies. This has been undertaken by analysing only publicly available disclosures made by the largest 20 Australian publicly listed companies (by market capitalisation), as recognised by the ASX 20 as at 1 July The criteria used were based on the SDG Business Compass Guide 8 and the Global Reporting Initiative (GRI) Standards 9. Consideration was also given to the Dow Jones Sustainability Index (DJSI) criteria 10 and the United Nations Conference on Trade and Development (UNCTAD) Good Practices in Corporate Governance Disclosure 11. The elements The 13 criteria by which each organisation s disclosures were assessed were broken down into four elements. Figure 1 describes the four elements. They reflect the maturity of organisations commitments and actions in relation to the SDGs: Commitment to SDGs Structuring for SDGs Action towards the SDGs Measuring the SDGs These criteria consider corporations statements supporting a commitment to the SDGs and their recognition of the importance of the SDGs for the sustainability and success of businesses. These criteria consider aspects of governance and organisational structures to address the SDGs such as sustainability committees, board engagement and the evaluation and compensation of executives based on sustainability objectives. These criteria consider active engagement and partnership with stakeholders to support and adopt the SDG agenda. It also considers linkages to the SDGs with corporations material sustainability issues and programs, as well as the participation in industry groups supporting the SDGs. These criteria consider frameworks and management systems in place to measure and evidence contributions to the SDGs, and the extent to which progress has been communicated. This reflects a commitment to external disclosure and transparency to shareholders regarding the business impact on the SDGs. Maturity of company s commitment to SDGs Figure 1 - SDG maturity and the assessment 8 GRI, UNCG and WBCSD, 2016, SDG Compass: The guide for business action on the SDGs, accessed 04 September 2017, < uploads/2015/12/019104_sdg_compass_guide_2015.pdf>. 9 GRI, 2016, Consolidated set of GRI Standards, accessed 05 September 2017, < 10 RobecoSAM and DJSI, 2017, Sample questionnaires, accessed 04 August 2017, < and < 11 UNCTAD, 2006, Guidance on Good Practices in Corporate Governance Disclosure, accessed 03 August 2017, < page 9

10 The criteria of scoring Thirteen criteria were developed to support the four elements. Table 1 presents the criteria developed for each element, as well as the respective scoring structure. Criteria Scoring Structure 1.1 Public statement supporting SDGs (0 - no disclosure, 1- general statement supporting SDGs, 2 - public commitment supporting SDGs from a senior executive) Commitment 1.2 Recognition of importance of SDGs for the sustainability and success of the business (0 - no disclosure, 1- recognition of importance of SDGs to sustainability and success of the business, 2 - recognition of importance of an integrated approach to SDGs for the sustainability of the business) 1.3 SDGs applied to business and its stakeholders (0 - no disclosure, 1- statement that SDGs apply to its business, 2 - statement that SDGs also apply to key stakeholders (e.g. agent, customers, suppliers or contractors)) 2.1 Sustainability and/or SDGs managed by either a dedicated committee or board member(s) (0 - no disclosure, 1- sustainability and/or SDG issues are addressed by a committee or a board member(s), 2 - sustainability and/or SDG issues are managed by a dedicated sustainability committee) Structure 2.2 An organisational stucture to address SDGs (0 - no existence or evidence of SDG structure, 1 - evidence of structure) 2.3 Evaluating and compensating the performance of senior executives in relation to agreed sustainability and SDGs objectives (0 - no disclosure, 1- senior executives are evaluated against sustainability KPIs, 2 - compensation of senior executives is linked to achievements of sustainability KPIs) Action and Participation 3.1 Participation in groups supporting the SDGs (e.g. UN Global Compact) 3.2 Actively building capacity and increasing awareness of SDGs 3.3 SDGs linked with internal programs and material issues (0 - no disclosure, 1- participation in any group, 2 - Global Compact member, 3 - Global Compact Australian Network member) (0 - no disclosure, 1- policies or training in place to improve awareness of internal stakeholders on SDGs, 2 - policies or training in place to improve awareness of internal and external stakeholders on SDGs) (0 - no disclosure, 1- SDGs linked with internal programs, 2 - SDGs linked with programs and aligned with material issues (e.g. materiality assessment)) Measuring and Reporting 4.1 Alignment of impacts with SDGs (0 - no disclosure, 1- alignment of potential impact(s) with SDGs goals, 2 - alignment of potential impact(s) with SDGs targets and indicators) 4.2 Sustainability targets set and aligned with SDGs (0 - no disclosure, 1- targets set and aligned with SDGs goals, 2 - targets set and aligned with SDG targets and indicators) 4.3 Evidencing contributions (0 - no disclosure, 1- qualitatively demonstrating contributions to the SDGs goal(s), 2 - quantitatively demonstrating contributions to the SDGs goal(s), 3 - quantitatively demonstrating contributions to the SDGs targets and indicators) 4.4 Communicating contributions to the SDGs (0 - no disclosure, 1- general comment on progress made, 2 - detailed disclosure on progress made considering previous performance or baselines) Table 1 Assessment criteria The assessment against the four elements is based on a maturity scale approach. Whilst there is not always a linear progression, this approach builds on an evolution model that progresses from making a commitment to demonstrating real accountability. page 10

11 Scope of analysis The desktop review accessed publically available disclosures made by the largest 20 Australian publicly listed companies by market capitalisation on 1 July 2017 that make up the ASX 20. This index accounts for 47% of the Australian equity market as of March 2017 and contains 8 of the 11 Global Industry Classification Standard (GICS) that categorises constituents according to their principal business activity. The companies, and their GICS sector are listed in Table 2 below. Company AMP Limited Australia and New Zealand Banking Group Limited BHP Billiton Limited Brambles Limited Commonwealth Bank of Australia CSL Limited Insurance Australia Group Limited Macquarie Group Limited National Australia Bank Limited QBE Insurance Group Limited Rio Tinto Limited Scentre Group Stapled Suncorp Group Limited Telstra Corporation Limited Transurban Group Stapled Wesfarmers Limited Westfield Corporation Stapled Westpac Banking Corporation Woodside Petroleum Limited Woolworths Limited Sector Financials Financials Materials Industrials Financials Health Care Financials Financials Financials Financials Materials Real Estate Financials Telecomunication Services Industrials Consumer Staples Real Estate Financial Energy Consumer Staples Table 2 - ASX Top 20 companies as at 1 July 2017 page 11

12 Findings and discussion Note: No assumption is being made regarding the sustainability performance of these companies. The scores relate only to the public disclosure of these companies in relation to the SDGs. Results indicate that there is a large variation in the level of disclosure of information of the companies included in this research project relating to the SDGs. The overall scores by company across all criteria ranged from a highest score of 65% for the top ranking company, to three companies that received 0% (see Figure 2). ASX 20 overall score 65% 62% 62% 62% 58% 58% 58% 50% 50% 46% 46% 46% 15% 8% 8% 8% 4% 0% 0% 0% Company Figure 2 - Overall score of ASX 20 companies Figure 2 demonstrates that the ASX 20 can be categorised into three main groups based on their engagement with the SDGs. The top 12 (60% of the sample) were identified as having provided some level of disclosure on the SDGs and started aligning the SDGs with their business strategies. This group scored from 46% up to 65% which perhaps indicates that Australian companies are recognising the importance of the SDGs, not only as an instrument to improve accountability to stakeholders, but also as an important mechanism to embed sustainability in business strategies and processes to create long-term value and identify new opportunities. The second group comprised five companies (25% of the sample) that do not clearly address the SDGs but have some sustainability governance initiatives and/or partnerships in place, scoring 4% up to 15%. The third group comprised three companies (15%) that do not address the SDGs and do not provide publicly available information on their sustainability governance initiatives and/or partnerships. page 12

13 Scores by element The average rating by element across all 20 companies was 38% as reflected in Figure 3. Commitment was the element that obtained the highest score (49%), followed by Structure 44%, Action and Participation 39% and Measuring and Reporting 19%. ASX 20 overall score for each element 49% 44% 39% Overall average 38% 19% Commitment Structure Action and participation Measuring and reporting Figure 3 - Average overall score of ASX 20 for each element Different companies have adopted different levels of disclosure and commitment to the SDGs, but what reflects real maturity is meaningful and credible disclosure on achievement. The low score relating to the Measuring and Reporting element represents an important improvement opportunity for companies. Implementing measurement systems and communicating results to evidence progress towards the achievement of the SDGs is important to support decision making processes and guide future improvements. It will also enhance transparency. Although measuring and communicating achievements are an essential part of business management, our analysis identified that this is not yet a common practice for SDG related disclosure among the ASX 20 companies. For instance, only one company has provided detailed disclosure on the progress made towards the SDGs that considered previous performance or baselines, and only two companies have quantitatively demonstrated their contributions to the SDGs at the goals level. page 13

14 Scores for top 10 The top 10 overall scoring companies were from five industry sectors. Four were from the financial sector, two were from the industrials sector, two from the consumer staples sector, one from the telecommunication sector and one from materials. This could indicate certain sectors have more appetite to link their operations and impacts with international frameworks and initiatives. Some sectors may face more exposure to public attention, stakeholder scrutiny or regulation which might affect the level of interest in addressing and responding to expectations about sustainability performance and impacts. The overall average score of the top 10 performing companies was 57% against 38% of the overall average score of all ASX 20 companies analysed (see Figure 4). ASX 20 overall score 65% 62% 62% 62% 58% 58% 58% 50% 50% 46% 57% Overall average top 10 38% BHP Biliton Brambles ANZ Banking Woolworths Westpac Banking NAB Transurban Wesfarmers Commonwealth Bank Telstra Overall average all ASX 20 Figure 4 - Overall score of Top 10 performing companies It was also identified that all 12 companies (100%) currently reporting on the SDGs are also developing sustainability reports in accordance with, or influenced by the Global Reporting Initiative (GRI) sustainability reporting guidance. Among the remaining 8 companies that are not reporting on the SDGs, 75% of these companies are still producing a sustainability report in accordance with, or influenced by GRI (see Figure 5). Companies reporting on SDGs and GRI 60% Reporting on the SDGs 40% Not reporting on the SDGs 100% Reporting in accordance with GRI 75% Reporting in accordance with GRI 25% Not reporting in accordance with GRI Figure 5 - Companies reporting on the SDGs and GRI page 14

15 GRI has been proactive in establishing partnerships and initiatives to encourage companies to integrate their sustainability reporting processes and sustainability data with the SDGs. For instance, the Reporting on the SDGs Action Platform 12, the report Linking the SDGs and GRI 13 and the database Inventory of Business Indicators 14 have been developed in partnership with the GRI, the UN Global Compact and the World Business Council for Sustainable Development (WBCSD). The research results may indicate that the use of the GRI framework influences companies to address the SDGs in their reporting processes. It is clear that the SDGs provide guidance on how companies can contribute to solving the world s biggest sustainable development challenges. The SDGs present an opportunity to mobilise companies to re-imagine the alignment between sustainability and their business strategies to increase shared value and positive outcomes, for both business and society. Beyond that, the SDGs represent an integrated business approach around common sustainable development goals. Element: Commitment This element examined companies level of support and commitment to the SDGs. The extent to which companies recognise the importance of the SDGs to the success of their business and the community was also examined. Figure 6 shows that overall companies scored higher in relation to public statements supporting the SDGs (55%) and recognising the importance of the SDGs for the success of their business (58%), than recognising the applicability of the SDGs for their business partners, such as: agents, suppliers and contractors (35%). Eleven out of the 12 (92%) companies that have publicly recognised the importance of the SDGs adopted an integrated approach to the sustainability of their business, which means that the SDGs were recognised in the context of a more comprehensive management approach to value creation in the short, medium and long term. This commitment to integrated thinking could indicate that these companies are taking the first steps to better identify future business opportunities and challenges, as well as manage risks associated with sustainability issues. Only 35% of companies are disclosing information about how the SDGs apply to their key stakeholders as well as to their own operations. This might indicate that companies are not yet considering the potential of the SDGs to deliver positive outcomes either for or through their key stakeholders. Alternatively, it may mean that companies do understand the capacity of the SDGs to affect key stakeholders but do not have the means or capability to apply the SDGs outside of their direct operating environment. Finally, it may indicate that companies are not disclosing information of this nature. 12 More information available at: < 13 More information available at: < 14 More information available at: < page 15

16 Commitment score 55% 58% 35% Statement supporting SDGs Recognition of importance of SDGs SDGs apply to business and business partners Figure 6 - Commitment score No Yes Element: Structure Aspects of governance such as disclosure of the existence of sustainability committees and evaluation and compensation of executives based on sustainability objectives were assessed by the Structure Element. This element also assessed whether companies have publicly declared responsibility for addressing the SDGs as part of their organisational structure. A dedicated sustainability committee, a board member or a committee responsible for overseeing sustainability scored 55%. Evaluating Key Performance Indicators (KPIs) and compensating executives based on sustainability goals is another example of good governance practice that scored 33%, as reflected in Figure 7. The existence of board members or committees addressing sustainability could be viewed as an important instrument to direct, accelerate and encourage companies to guarantee that sustainability is fully embedded into business strategies and practices. Such a mechanism could be useful to drive accountability, identify sustainability risks and opportunities, identify sustainable alternatives for existing operations, develop solutions to future demands from different stakeholders and support decision making processes. Best practice in governance, such as the existence of sustainability committees and evaluation and compensation of executives based on sustainability objectives, are also important to support and encourage innovation. Innovation is important to align business strategies with relevant sustainability issues to achieve long-term goals and create value. The research also found that none of the companies assessed publicly declared responsibility for addressing the SDGs as part of their organisational structure by assigning accountability to a person or division within the organisation. page 16

17 Structure score 55% 0% 33% Sustainability/SDGs managed by a committee or board member Organisational structure to address SDGs Evaluation and compensation for sustainability/sdg objectives No Yes Figure 7 - Structure score Element: Action and participation This element examined whether companies are disclosing on programs and initiatives developed and implemented by companies to support and contribute to the SDGs. In other words, this element examines whether businesses are taking the next steps to move from commitments to actions. This examination considered companies participation in groups supporting the SDGs, companies activities to improve awareness of different stakeholders on the SDGs, and whether the SDGs were linked with internal programs and the assessment of material issues. The research found that 57% of the ASX 20 disclosed participation in groups or initiatives supporting the SDGs (see Figure 8). Action and participation score 57% 0% 53% Participation in group supporting the SGDs Policies and training in place No Yes SDGs linked with program and material issues Figure 8 - Action and participation score page 17

18 Of the companies that have disclosed they are participating in groups supporting the SDGs, 35% are members of the Global Compact and Global Compact Australia Network 15, 25% disclosed participation in groups or initiatives supporting the SDGs, such as the Shared Value Project or the Principles for Responsible Investment, and 20% are only members of the Global Compact 16 (see Figure 9). Participation in groups supporting the SGDs 35% 20% 20% 25% No disclosure on participation Participation in other initiatives Participation as a UN Global Compact member Participation as a UN Global Compact and Global Compact Australia member Figure 9 - Participation in groups supporting the SDGs Policies or training programs in place to improve the awareness of different stakeholders (e.g. suppliers and employees) of the SDGs was the second aspect assessed by this element. None of the companies assessed have provided information on the existence of policies and/or training programs to internal or external stakeholders addressing the SDGs. The research also looked at the extent to which companies were linking the SDGs with internal programs and/or material issues. The alignment of relevant SDGs with identified material issues was found to be a common practice among some of the companies assessed in this research. Another common practice identified was the connection of the SDGs with companies sustainability programs (see Figure 8). According to GRI 17, material issues are those that may reasonably be considered important for reflecting companies economic, environmental and social impacts, or influencing the decisions of stakeholders. In this context, companies conduct materiality assessments to identify relevant environmental, social and economic issues and determine the most important topics for relevant stakeholders. Bringing the SDGs to the materiality assessment process and strategic planning allows companies to think about how their activities impact the SDGs and redefine business and program priorities. It also helps companies to link their priorities with SDGs to better engage with stakeholders. 15 The Global Compact Network Australia is the Australian, business-led network of the United Nations Global compact. More information available at: < 16 The United Nations Global Compact is a voluntary initiative based on CEO commitments to implement universal sustainability principles and to take steps to support UN goals. More information available at: < 17 GRI G4, Reporting Principles and Standard Disclosures, More information available at: < page 18

19 Element: Measuring and reporting This element considered disclosure on frameworks and management systems in place to measure and evidence contributions to the SDGs, as well as the extent to which progress has been communicated. This reflects a commitment to external disclosure and transparency to different stakeholders regarding the business impact and contribution to the SDGs. Figure 10 demonstrates that only a small number of companies scored against the criteria. Alignment of companies potential impacts with SDGs, targets and indicators scored 30%, sustainability targets set and aligned with SDGs, targets and indicators scored 13%, evidencing contributions using qualitative and quantitative approaches scored 18%, and communicating progress 18%. Measuring and reporting score 30% 13% 18% 18% Impacts on SGDs Sustainability targets set and aligned with SDGs Evidencing contributions Communicating progress of relevant SDGs No Yes Figure 10 - Measuring and reporting score Measuring and reporting is an important component of any process, initiative, program or system. Implementing measurement systems and evidencing impacts is important to measure achievements, support decision making processes and guide future improvements, but also to provide accountability about performance and share achievements with stakeholders. Without an effective measuring system companies cannot back up claims, which reduces the credibility and reliability of information provided for stakeholders. Measuring achievements and impacts is a fundamental practice and should be the basis for any type of disclosure and reporting, our analysis found that this is not yet common practice among the companies analysed in relation to the SDGs (see Figure 11). For instance, it was identified: None of the companies have provided information of potential impacts at the SDG targets and indicators levels 18. Potential impacts have been provided by the vast majority only at the goals level. The vast majority have set and aligned targets only at the goals level. None of the companies have aligned their targets with SDG targets and indicators. 18 The Inter-Agency and Expert Group on SDG Indicators (IAEG-SDGs) developed and agreed upon a list of 232 indicators in March The total number of indicators is 244, but nine indicators are repeated under two or three different targets. Currently, there are 17 SDG Goals, 169 SDG targets and 232 SDG indicators. page 19

20 None of the companies have quantitatively demonstrated their contributions to the SDG targets and indicators. Only two companies have quantitatively demonstrated their contributions to the SDGs at the goals level. Only one company has provided detailed disclosure on progress made against the SDGs considering previous performance or baselines. Measuring against the SDGs Potential Impact Targets Aligned 11% 0% 25% 0% Contributions Demonstration 10% 0% Companies measuring against the SDG goals Companies measuring against the SDG targets and indicators Figure 11 - Measuring against the SDGs Figure 11 demonstrates that although some companies are identifying impacts, setting targets and demonstrating contributions to the SDG goals, none of the companies assessed in our sample have yet provided public information aligned with the SDG targets and indicators. page 20

21 Recommendations The following recommendations are offered towards supporting continuous improvement for the companies interested in committing to, adopting and reporting on the SDGs. Aligning SDGs, materiality and business strategies It is important to recognise the importance of an integrated approach to embed sustainability into business strategies. The SDGs provide a good platform for companies to explore the linkages between sustainability and relevant topics reflecting companies economic, social and environmental impacts or the value the organisation is creating. It is recommended that companies align their material issues with SDG goals, targets and indicators. Linking materiality assessments with SDGs allows companies to better understand and communicate where their business is having the greatest positive impact, considering both internal and external factors. Such a process will also help companies to revalidate their priorities and strategies to maximise positive impacts and value creation. Finally, this integrated approach will allow companies to improve accountability and strengthen stakeholder relations. Partnerships The SDGs can only be realised with a strong commitment to partnership and cooperation. It is recommended that companies engage and participate in groups or initiatives supporting the SDGs. Such engagement would allow companies to build networks, explore new partnerships, share experiences, obtain guidance, discuss common challenges and identify new opportunities to innovate and maximise positive outcomes. We recommend companies use their capacity to influence stakeholders to promote sustainable development and encourage adoption of more sustainable practices. Encouraging suppliers and other business partners to report on the SDGs and fostering discussions around the SDGs with peers, industry sectors and governments, are some examples of actions to build capacity and improve the awareness of stakeholders of the SDGs that could be developed and implemented by companies. It is important to link these actions to companies material issues and provide clear information in relation to the contributions of these actions to the SDG goals, targets and indicators. The United Nations developed the Partnership for SDGs Platform 19 to drive voluntary partnerships and commitments in support of the SDGs. This online platform aims to foster global engagement around multi-stakeholder partnerships and voluntary commitments in support of the SDGs. We recommend companies consider the use of this platform. 19 The Partnership for SDGs Platform is an online platform managed by the Division for Sustainable Development of the United Nations Department of Economic and Social Affairs. More information available at: < page 21

22 SDG targets and indicators It is recommended that companies align their impacts not only with the SDGs, but also with the SDG targets and indicators. Measuring impacts against the SDG targets and indicators allows companies to be more accountable and transparent about their real contributions to the SDGs. Companies with experience in sustainability or integrated reporting can utilise the processes already in place to align their impacts with the SDG targets and indicators. A report published by GRI in 2017 identified that although the SDG indicators have been designed for governments to measure impacts and progress across all areas of society, and not only the impacts from individual business, 40% of the SDG indicators are directly and/or indirectly linked to GRI disclosures 20. Referencing the SDGs is important to demonstrate commitment. However, to play a measurable and meaningful role in achieving the SDGs, it is important to demonstrate impacts and be accountable about contributions to the SDG targets and indicators. Such level of transparency is also important to avoid confusing or misleading stakeholders. Additionally, setting clear objectives and aligning them with SDG targets and indicators allows companies to better monitor their sustainability strategies over time. It will help companies to assess the effectiveness of their sustainability programs and revalidate priorities against the SDGs. It is recommended that targets should be specific, tangible, measurable, relevant and timely. Measuring and reporting There s a difference between a company having a commitment to managing its sustainability impacts and actually being able to demonstrate progress against its goals. That difference is measurement. Companies that are collecting data on the accomplishments of sustainability efforts are able to set targets and monitor progress against those targets. If it looks like the target is not on track for achievement, the company can modify its approach to maximise positive outcomes through improvement or redesign. Measuring impacts and contributions also allows companies to improve the effectiveness of their sustainability activities and programs. It helps to streamline processes, influence long term management, improve reputation, demonstrate leadership, make more informed decisions and maximise positive outcomes. The approach to measurement is also crucial. Many measurement systems focus on output measures such as resources, activities and number of beneficiaries rather than the change that was created for those beneficiaries, such as improved local economic development or increased wellbeing. Limiting measurement to outputs communicates just a fraction of the impacts and often misses the mark in addressing stakeholder interests. Corporate sustainability strategies should be focused on measuring how change is being created by measuring the social, environmental and economic outcomes experienced by the people or organisations that experience or contribute to it. The obvious reasons for conducting impact assessments are to assess whether programs and strategies are working, and to guide future decisions. However the broader value of impact measurement is that it can also assess the benefits that fostering strong sustainable communities have on a company s long term business success and to identify the initiatives that maximise both private and social value. 20 GRI, 2017, Measuring progress on the SDGs: A mapping of the SDG Indicators and the GRI Standards. More information available at: < page 22

23 The existence of effective and timely measurement systems is often what demonstrates the difference between rhetoric and evidence-based change. It is therefore recommended that companies develop and implement measurement systems to demonstrate performance against their sustainability strategy, including contributions to the SDGs, targets and indicators. Effective measurement enables meaningful communication of performance. Reporting and communicating progress against the SDGs allow companies to inform their stakeholders of achievements, challenges and opportunities, which improves accountability and transparency. This allows different stakeholders to make informed decisions about companies contributions to the SDGs. In addition, effective measurement mechanisms and transparent reporting processes will form the backbone of monitoring progress towards achieving the SDGs at the local, national, regional and global levels. In adopting such an approach, Australian companies will be better equipped to support the Australian Government to meet its SDG commitments, better understand the challenges and opportunities it faces, and help in implementing strategies and ensuring accountability. page 23

24 Conclusions It is clear that the SDGs provide guidance on how business can contribute to solving the world s biggest sustainable development challenges. Beyond that, the SDGs represent an integrated business approach around common global sustainability challenges. The SDGs mobilise companies to re-imagine the alignment between sustainability and their business strategies to increase shared value and positive outcomes, for both businesses and society. Our analysis indicates that some Australian companies are recognising the importance of the SDGs. A proportion of the ASX 20 are using the SDG framework as an instrument to improve accountability to stakeholders, but also as an important mechanism to embed sustainability in business strategies and processes to create long-term value and outline new opportunities. However, our research found that meaningful disclosure on measurement and transparent reporting of any contribution made to the SDGs is not yet common practice among the companies assessed. The low score relating to the Measuring and reporting element represents an important improvement opportunity for companies. Implementing measurement and reporting systems to evidence progress towards the achievement of the SDGs is important to demonstrate how business strategies are aligned with global sustainable goals. Reporting on the SDGs should not simply be a tick box exercise for business. Acknowledgement of and alignment with the SDGs must be supported by robust sustainability measurement systems in order to achieve evidencebased change. The adoption of the SDGs should be recognised as a clear opportunity for companies to create and share value by embedding sustainability principles into business strategies, practices and decision-making processes. Companies can demonstrate leadership by also using measurement and reporting mechanisms to disclose performance against their sustainability strategy, including contributions to the SDGs, targets and indicators. This will enable them to concentrate efforts and resources on managing the material issues that influence shared value creation and impact stakeholders. As an international agenda adopted by all the UN countries, the question is not about whether the SDGs will be adopted or not, but whether the SDGs are effective in changing companies behaviour towards a more sustainable business model. We believe they can be, but this will require measurement and reporting of performance to become a mainstream practice for business. In this research, we aim to provide recommendations to support continuous improvement and foster discussion around the future business opportunities and challenges. It is hoped that this report provides useful support for dialogue regarding the implementation of the SDGs. The authors welcome the opportunity to engage further on these findings to support long-term improvements in companies disclosure against their sustainability performance and strategies, and thus contribute to the achievement of the United Nations. page 24

25 Notes

26 Each time a person acts to improve the lot of others [...] they send forth a tiny ripple of hope [...] and those ripples build a current which can sweep down the mightiest walls of oppression and resistance. ROBERT KENNEDY, 1966 (PARAPHRASED) page 26