Sustainable Development Goals. What you need to know about the Sustainable Development Goals and how EY can help

Transcription

1 Sustainable Development Goals What you need to know about the Sustainable Development Goals and how EY can help

2 2 Sustainable Development Goals

3 Contents 1. Sustainable Development Goals an introduction Setting the scene Defining the Sustainable Development Goals (SDGs) Aligning the SDGs with your company s strategy 7 2 SDGs and materiality Why do (or should) the SDGs link with the identified material topics of a company? Establishing strategic SDG linkages 9 3 SDGs and developing relevant KPIs and targets 10 4 Measuring your results 14 5 Reporting on the SDGs The reporting landscape Communicating on the SDGs Linking the SDGs and GRI 17 6 Obtaining assurance 18 7 How EY can help 19 Sustainable Development Goals 3

4 1. Sustainable Development Goals an introduction 4 Sustainable Development Goals

5 1.1 Setting the scene Companies have long been involved in exercising their citizenship in society, including sustainability, corporate philanthropy, corporate governance and corporate social responsibility. These approaches, although significant, have difficulties in reaching a global scale and impact. As our planet continues to face massive economic, social and environmental challenges, there is a clear need for a universal language to proactively act, inspire and solve tomorrow s global challenges. The Sustainable Development Goals (SDGs), developed by the United Nations, could create this common language by setting the global development agenda and redirect investment flows (both public and private) towards the global developmental challenges. This will allow and trigger companies to advance sustainable development, both by minimizing possible negative impacts and maximizing positive impacts on society and planet. The SDGs and its associated targets, frame the 2030 Agenda with the vision and ambition to both achieve a balance among the three dimensions of sustainable development environmental, social and economic - and integrate them into a universal and visionary framework for global cooperation and action. We believe, and so it is echoed by the World Resources Institute, The World Business Council for Sustainable Development, The World Economic Forum and others, that the 17 SDGs will have a very important impact on the purpose of many enterprises all over the world. Contributing to these SDGs will be recognized by the international community as contributing to creating shared value for all stakeholders and therefore it will be a strong driving force for purpose and being future proof. When companies focus on a purpose that is rooted in creating value for others, improving the world we live in and inspiring the organization at all levels, they increase their ability to drive profits and create sustainable value. Franc van den Berg Partner EY Climate Change and Sustainability Services Sustainable Development Goals 5

6 1.2 Defining the Sustainable Development Goals (SDGs) The SDGs are a set of 17 global goals and have been agreed upon by all governments. The SDGs were developed through an intensive inclusive process (including more than companies through the UN Global Compact) and as a result call for the key role that companies must play in achieving them. The SDGs succeed the Millennium Development Goals (MDGs), expanding the challenges that must be solved to eliminate poverty and embracing a wide range of inter-connected topics across sustainable development. The goals are universally applicable and create a common language for all actors (governments, international organizations and companies) involved in both developed as well as developing countries. Although the United Nations primarily target governments, the SDGs are designed to rally a wide range of actors to shape priorities for sustainable development efforts around the world in a common framework. With the presentation of the SDGs, the UN has again made a valuable contribution to the debate regarding sustainability reporting and taken a substantial step towards a global equal level playing field on sustainable development for all organizations. The SDGs can give direction to define the purpose of a company. Purpose is like the derivative of license to operate, it is not whether you deliver enough to compensate for what you take, it is whether you tackle the problems that humanity and our earth faces in a way that makes business sense. Jan Peter Balkenende Partner EY, Professor Erasmus University, and former Prime Minister of The Netherlands 6 Sustainable Development Goals

7 1.3 Aligning the SDGs with your company s strategy So why should companies act on the SDGs? Does it make business sense? We believe that companies that turn societal challenges into opportunities that enhance business growth and long-term competitiveness, will be positioned for success. By aligning your strategy with the SDGs, companies are able to use the SDGs as a framework to steer, communicate and report their vision, strategy, goals and activities and as a result yield the benefit of a range of advantages related to: Identification future business opportunities related to specific SDGs (the SDGs aim to redirect global investment flows towards the challenges); Anticipation stakeholder expectations and future policy direction at the international, national and regional level. In order to internalize the SDGs and align the SDGs with your strategy we have developed a 5 step approach: 1. Identifying and linking materiality: companies are encouraged to link the SDGs to the identified material topics and strategy of the company. Based on this mapping exercise a company can act on the SDGs on which it has the most material impact (both positive and negative). 2. Setting clear targets: After having identified the most relevant SDGs, this step will support companies in finding the right targets to steer sustainable development performance. 3. Measuring your results: In order to manage your progress related to the SDGs it is key to measure performance. This third step will provide insights into this process. 4. Communicating your message: we encourage companies to report and communicate on their sustainable development performance to increase transparency and in the light of multi-stakeholder engagement. 5. Obtaining assurance: this step will assure the claims done with regard to the performance on the SDGs. Measurement systems as well as reporting standards need to be of a significant level in order to obtain assurance on such claims. Identifying and linking materiality Obtaining assurance 1. Awareness 5. Assurance 2. Strategy Setting clear targets 4. Reporting Communicating your message 3. Embedding Measuring your results Sustainable Development Goals 7

8 2. SDGs and materiality To benefit from the opportunities and challenges presented by the SDGs, it is of great importance to connect your business strategy with the SDGs and focus your efforts. Not surprisingly, not all 17 SDGs are equally important to your company; your business might have a large (positive or negative) impact on some goals and an insignificant impact on others. Consequently, it makes business sense to take a strategic approach and align your corporate priorities with the relevant SDGs to better engage with customers, employees and stakeholders and optimize your impact. EY suggests to link your most material topics with relevant SDGs to focus your efforts and yield the most impact. 2.1 Why do (or should) the SDGs link with the identified material topics of a company? Companies are already addressing relevant strategic economic, social and environmental topics through sustainability or corporate (social) responsibility. Over the years companies have adopted so-called materiality assessments to determine the most important topics for relevant stakeholders. Materiality can be referred to as the threshold at which topics become sufficiently important and thus should be addressed within the overall strategic planning of a company. Companies view a materiality assessment as a fundamental component of the strategic sustainability journey it enables them to focus on those topics that have the largest positive or negative impact. Addressing the SDGs through identified material topics, helps a company to integrate sustainability in their business strategy and as a result strengthen the economic incentives for companies to use resources more efficiently. By doing so companies can pursue a win-win situation thereby creating shared value for society at large. 8 Sustainable Development Goals

9 2.2 Establishing strategic SDG linkages The results of a company s materiality assessment will indicate which strategic (sustainability) topics are most relevant to the business and stakeholders. It is valuable to connect these topics with the SDGs. Since companies have limited resources available, it is suggested to benefit from the opportunities provided by the SDGs to scale and develop solutions and technologies to address the world s largest developmental and sustainability related challenges. In order to yield the most benefit from the established strategic SDG linkages, it is suggested to start by performing a materiality analysis with firm specific strategic topics. Using the SDGs as a starting point for your materiality assessment is not recommended since it may result in dispersed actions rather than focused strategic choices. The figure below provides an example of how company X can link its most material topics and strategy such as life-long learning with SDG goal #4 related to Quality Education. It is important to note that this is just the starting point and helps to get the basics right. Based on the established linkages, companies are encouraged to set more concrete targets and KPIs and manage their performance. Why we re in business Solid financial performance Social and durable products Employer of choice Lead by example Your Company name Life long learning Honest and fostering fairness Diversity and female leadership an example of a random company The way we do business How to stay in business Sustainable Development Goals 9

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11 3. SDGs and developing relevant KPIs and targets In order to successfully steer on the impact on relevant SDGs, it is important to develop the right targets and related KPIs. It is anticipated that companies need time to alter their navigational tools, dashboard and KPIs, in order to incorporate the common language of the SDGs in their business processes. For companies with little experience on sustainability or integrated reporting, the SDGs can be adopted quite easily. One does not need to be concerned with existing processes, topic owners, material aspects and how to square these circles. By starting from scratch, and with a materiality assessment based on the SDGs, the related targets and the KPIs, one does not need to reinvent the wheel. For those companies with a history in sustainability reporting, (good) track records as well as existing KPIs and topics, embracing the SDGs may be a challenging and somewhat disturbing intervention. Material topics may not be attributable to a single SDG and KPIs may not be suitable either. Bridging the gap between current tailor made reporting protocols and the uniformed SDGs (and underlying targets) allows a company to benchmark. Sustainable Development Goals 11

12 Below a few examples that visualize the bridgeable gap between the current reporting practices of company X and a suitable SDG that would match the company s perspective. One can see that the company s lens will fit the SDGs on a target/objective level. However, theunderlying effect of both angles is already less similar, whereas with specific KPIs, significant alterations are demanded. Companies can use the target to connect with the high over SDG and ultimately report on KPIs within the set published by the UN. SDG # 7 clean energy (source: Example of company X (Example EY with energy lense) Targets By 2030, double the global rate of improvement in energy efficiency By 2030, increase substantially the share of renewable energy in the global energy mix Targets Realize 4% energy efficiency for all buildings and 3% for production process on annual base 20% of procured electricity comes from renewable energy sources by 2020 SDG # 7 KPIs Energy consumption outside of the organization Total amount invested in renewable energy Net energy output broken down by primary energy source and by regulatory regime KPIs Consumed energy (in kwh) % of renewable energy from total energy consumption SDG # 8 Good jobs and economic growth (source: Example of company X (Example EY with financial lense) Targets By 2020, substantially reduce the proportion of youth not in employment, education or training Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries SDG # 8 Targets Realize annual revenue growth of 6% Obtain a employee satisfaction rate of at least 73% and 80% by 2020 Invest 2% of revenue in learning and development for employees KPIs Total number and rates of new employee hires and employee turnover by age group, gender, and region Direct economic value generated and distributed KPIs Revenue Employee satisfaction rate Euro s spent on learning and development Hours spent on learning and development 12 Sustainable Development Goals

13 SDG # 13 Climate Action (source: Example of company X (Example EY with environmental lense) Targets Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries. Integrate climate change measures into national policies, strategies and planning Targets Reduce Impact on environment - CO 2 emission by 13% on annual base Contribute to public awareness on climate change Reach green investment portfolio of 30% of total portfolio SDG # 13 KPIs Allocation of CO2e emissions allowances or equivalent, broken down by carbon trading framework Total environmental protection expenditures and investments by type KPIs CO 2 emissions Number of contributions on climate change Green investments (in euro s) SDG # 16 Peace and justice (source: Example of company X (Example EY with juridical lense) Targets Develop effective, accountable and transparent institutions at all levels Promote the rule of law at the national and international levels and ensure equal access to justice for all Targets Reduce number of pressed charges to the organization to less than 10 Spend 3% of juridical funds on development of good governance practices SDG # 16 KPIs Describe the organization s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics. Report whether the Chair of the highest governance body is also an executive officer (and, if so, his or her function within the organization s management and the reasons for this arrangement KPIs Number of pressed charges Euro s spent on the development of good governance practices Sustainable Development Goals 13

14 4. Measuring your results The sustainability performance and contributions of companies to the SDGs are becoming an important value driver for investors. During a single decade, defining the value of a company has shifted from a pure tangible perspective to an integrated approach. Today, 80% of a company s value is determined by looking at intangible aspects 1. Integrating the SDGs in the core business and reporting cycle enables companies to focus on creating visible shared value. This value can be derived using a number of measurement and reporting approaches. One example is the Social Return on Investment approach, in which the social aspects (created wealth, jobs, employee development et cetera) are valued and monetized. This subsequently can be taken into account when making business decisions. Moreover, EY s Total Value approach considers even a broader set of aspects, such as fostered innovation, social welfare inputs (by means of remitted taxes), earning capacity of employees and the value of the needs satisfied for organizations. The results of the Total Value approach enable for well-informed strategic decision making and stakeholder communication. 1 Source: Ocean Tomo LLC 14 Sustainable Development Goals

15 The sustainability performance and contributions of companies to the SDGs are becoming an important financial value driver for investors. One can think of the principle of Social Return on Invest (SROI), but also our recently developed Total Value approach. EY s Total Value analysis can help companies to measure and value their progress and contributions to the SDGs. Results of the Total Value analysis serve as input for well-informed strategic decision making and stakeholder communication. Roel Drost Senior Manager - Climate Change and Sustainability Services Sustainable Development Goals 15

16 5. Reporting on the SDGs 5.1 The reporting landscape Over the past decades, there has been a strong increase in the number of sustainability disclosures, in line with the increased stakeholder demand for non-financial information. More and more companies adopted external reporting standards such as the Global Reporting Initiative and Integrated Reporting, while at the same time improving their internal management accounting systems for non-financial information (NFI). This trend went alongside with the improvements that were made concerning the reliability of these disclosures. It has been years since the first external social and environmental reports were released by pioneers and followed by the development of several standards such as the Global Reporting Initiative in 2000, the Green House Gas protocol in 2001, and the Integrated Reporting framework in After linking business impact with the SDGs, the question arises how organizations can use reporting to communicate their progress on the SDGs, to inform their stakeholders and initiate a dialogue. Developing systems to integrate the management of sustainable development issues into everyday business decision-making is a must in the transition towards more meaningful and effective reporting. Significantly more than simply a piece of communication to key stakeholders, effective reporting creates trust and supports value creation and can be a powerful tool to stimulate internal changes and decision-making through integrated performance management. 16 Sustainable Development Goals

17 5.2 Communicating on the SDGs 5.3 Linking the SDGs and GRI The 17 goals provide a framework for sustainable development and could also be used by companies to prioritize the reporting narrative. Many companies already report and communicate on topics covered by the SDGs, both internally and externally, such as climate change, sustainable water management or employment and decent work. Aligning your organization s reporting and communication with the SDGs means both discussing performance in the context of the expectations set by the SDGs, and also aligning disclosures with the language of the SDGs to ensure a common dialogue among stakeholders. For each SDG identified as relevant, companies can disclose: Why the SDG has been identified as relevant (similar to what is explained in this publication under materiality); What is the relation, positive and negative, with the relevant SDG; The targets for the relevant SDG and the progress made in achieving them; Their strategies and practices to manage impacts (including KPIs) related to the SDGs and achieve goals through integration across the business (for example, a description of policies, systems and monitoring); Performance on the SDG. The SDGs integrate economic, social and environmental aspects to achieve sustainable development in all its dimensions. As such, companies will benefit from acknowledging and articulating the links between these elements in their reports and communications. For example, many issues such as gender equality, health or sustainable consumption and production cut across several SDGs. Your company may find it helpful to explain how the progress made in one area has contributed to progress elsewhere. Disclosure on the SDGs can be done in multiple ways. Companies can use their website or social media in order to disclose their progress on the SDGs, but the most common used method is disclosure within a report The GRI G4 Guidelines are designed to provide a global framework that supports a standardized approach to transparent and consistent sustainability reporting, and to drive organizations to prepare more relevant and credible sustainability reports by focusing on the topics that are material to their business and their key stakeholders. All SDGs can be linked to several GRI indicators, and as GRI G4 focuses on materiality, it can also help by choosing the right SDGs to contribute to and communicate on. By incorporating the SDGs into the GRI G4 framework, companies can report in a way that allows them to be compared with other companies on their progress on the SDGs. In this manner the SDGs provide a framework in which contribution and progress on collectively embraced challenges can be measured globally. For improving the comparability on the progress on SDGs nationally and globally, GRI developed the SDG Target 12.6 tracker. Within this tracker governments and other stakeholders are able to get insights on the progress of sustainability reporting in different countries and sectors. In order to provide insights into the link between the SDGs and GRI, SDGcompass.org has developed an online inventory of business indicators. This inventory maps existing business indicators against the SDGs. It allows companies to explore commonly used indicators and other relevant indicators that are useful when measuring and reporting the organization s contribution to the SDGs. Sustainable Development Goals 17

18 6. Obtaining assurance The WBCSD and GRI also recognize that obtaining external assurance is an important step to enhance credibility and reliability of information within a company s annual report. As obtaining external assurance on non-financial information becomes more important, it is also of great importance for the progress on SDGs to be externally assured. The external auditor verifies the accuracy of the non-financial information in the report, and thereby gives more value to the information reported to the stakeholders. Companies can choose between obtaining a reasonable or limited level of assurance. The business value of a limited assurance engagement is different from a reasonable assurance engagement. The extensive testing procedures of a reasonable assurance engagement provides stronger confidence to stakeholders that the information provided on the progress on SDGs is free of material misstatements. A growing number of companies issue sustainability reports, and the public and investor demand for external assurance on sustainability reports is growing. The percentage of reports that received external assurance has progressed significantly over the past years (from 29% in 2002 to 59% in 2013). The latter underlines that organizations have a strong drive to disclose this information in a reliable manner. Moreover, we have witnessed the trend to move to a higher level of assurance: the number of reports that received reasonable assurance has almost quadrupled over the past years. 18 Sustainable Development Goals

19 7. How EY can help Design and support by defining ambition, vision, policy and objectives with regard to the SDGs; Support organizations in their transition to sustainability or purpose (Purpose Led Transformation); Conducting a materiality assessment and linking the SDGs to the material issues; Drafting your organization s sustainability report; GRI G4 Gap-analysis Which actions are needed to comply to GRI G4? Are SDGs taken into account in the GRI table in an adequate way? Using leading practices to design and implement systems, processes and controls to measure performance on the company s goals and SDGs; Assurance Readiness GRI G4 Is your organization/ G4-report ready for an assurance engagement? Assurance on SDGs indicators. Franc van den Berg franc.van.den.berg@nl.ey.com Carolien Gadella van Wersch carolien.van.wersch@nl.ey.com Sustainable Development Goals 19

20 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate Legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young Accountants LLP. All Rights Reserved. ED None This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global EY organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. ey.com/nl