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Development Co-operation Report 2016
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branch 1. Overview: Putting sustainable development at the core of business models

by

Christine Graves

Hildegard Lingnau

Development Co-operation Directorate, OECD

Achieving the Sustainable Development Goals will require funding and co-operation on an unprecedented scale, with the private sector holding a pivotal position. This chapter asks how international co-operation can help to put sustainable development at the core of business models. It looks at why these efforts must focus on the quality as well as the quantity of private sector contributions, responding to the challenges laid out at the beginning of the chapter: making sustainability “business as usual” ; creating conditions for good investment; building global change from the bottom up; ensuring credibility, accountability and transparency; and creating new multi-stakeholder partnerships. The chapter concludes with a set of key recommendations.

Challenge piece by Amina Mohammed, former Special Advisor to the UN Secretary-General on Post-2015 Development Planning. Opinion pieces by Jim Balsillie, Centre for International Governance Innovation; Olivier De Schutter, International Panel of Experts on Sustainable Food Systems; Louise Kantrow, International Chamber of Commerce.

The authors would like to thank Valentin Lang for his contributions to early drafts of this chapter, and Friederike Rühmann for her valuable background research.

The challenge: How can international co-operation help to put sustainable development at the core of business models?

Amina J. Mohammed, Minister of Environment, Federal Republic of Nigeria and former Special Advisor to the UN Secretary-General on Post-2015 Development Planning

The private sector has always been an essential actor in development, credited with fostering wealth, innovation and jobs – and many a time blamed for negative externalities. So in this new era, what is different about the role and the responsibilities of the private sector in achieving the Sustainable Development Goals (SDGs)?

It is different because sustainable development cannot be achieved without the active involvement of responsible businesses. The private sector will be essential in creating sustainable, productive and decent employment, economic prosperity, resilient infrastructure that underpins sustainable development, and innovations that create green growth and opportunities for all, especially the poor.

Also, it is different because the business community has been involved from the beginning in defining the new agenda for sustainable development. Their voice was heard loud and clear. A recent study reveals that 71% of businesses say they are already planning how they will engage with the SDGs and 41% say they will embed the SDGs in their strategies within five years (PwC, 2015). So they are part owners of the new framework for development.

Finally, it is different because the drivers of change within the business community are evolving. Of course, there is the moral case, which Pope Francis (2015) so persuasively put forward in his Laudato Si' encyclical in May 2015: respect for universal principles of human rights, dignified work, the environment and good governance. But there is also a strong business case for the SDGs. Investing in sustainable development is not charity; it is smart investment. Business thrives when the people thrive and our earth is protected for future investments.

The 17 SDGs represent a pipeline of opportunities for responsible business that will mobilise trillions in investment opportunities for “people and planet” . With the right incentives, policies, regulations and monitoring, great opportunities abound for responsible businesses to make profits while at the same time protecting the environment, promoting equality and lifting people out of poverty.

It is worth noting that the business community is already transitioning from the old “do-no-harm” agenda to a drive to “do good” for people, the planet, prosperity and peace, aligning with the 2030 Agenda (SDG 16). This is where business can make the most relevant contribution to the SDGs: by transforming their strategies, procedures, standards and metrics to integrate sustainable development within the core of their missions and business models.

For this transformation to take place, however, we need to overcome a number of core challenges.

First, the challenge of scaling up. Progressive businesses are already demonstrating that companies that introduce sustainability into their business models are profitable and successful. Shareholders and consumers want and value sustainable development. But, we need to get to a tipping point where sustainability becomes “business as usual” in all markets around the globe.

Second, we need enabling regulatory frameworks to incentivise and unlock private investments for sustainable development. This is a responsibility of governments and the 2030 Agenda serves as a useful reference for their actions.

Third, global change must be built from the bottom up. Companies engage with people – workers, unions, consumers, suppliers – at the local and country levels; this is where they interact with institutions and with natural resources. It is at the local and national levels where stakeholders have the space for aligning private action with public policies, and for ensuring people are at the centre. These transformations must begin at this level if we are to sustain the gains. We need to ensure that businesses treat all workers fairly and equitably while striving to improve and incorporate technology; collaborate with and empower micro, small and medium enterprises, small agricultural producers and the informal sector – especially women.

Fourth, we need to put in place mechanisms that will ensure credibility, accountability and transparency. We need international standards for reporting that set up clear, balanced and coherent rules and incentives. Businesses will need to align their key performance indicators with sustainable development outcomes. Their social and environmental impact will need to be included in their staff's performance evaluations.

Finally, we need a new generation of young and experienced multi-stakeholder partnerships at all levels, going far beyond the traditional public-private partnerships. We need partnerships that are principled, accountable, people and planet-centred. Integrating social values, economic empowerment and environmental stewardship that is truly universal will be key to achieving the global goals for sustainable development.

These are the challenges I believe we can overcome. We have an amazing road map to address them. Let's take action and get to work!

 

In September 2015, the international community agreed on the most ambitious, diverse and universal development agenda that has ever been adopted: “Transforming our world: The 2030 Agenda for Sustainable Development” (UN, 2015a). The agenda sets out 17 Sustainable Development Goals (SDGs) addressing the world's most pressing economic, social and environmental challenges (Box 1.1). Their achievement will require the engagement and contribution not only of the United Nations (UN) member states, but also of a wide variety of non-state actors.

Box 1.1. The Sustainable Development Goals

Goal 1. End poverty in all its forms everywhere.

Goal 2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture.

Goal 3. Ensure healthy lives and promote well-being for all at all ages.

Goal 4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.

Goal 5. Achieve gender equality and empower all women and girls.

Goal 6. Ensure availability and sustainable management of water and sanitation for all.

Goal 7. Ensure access to affordable, reliable, sustainable and modern energy for all.

Goal 8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Goal 9. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation.

Goal 10. Reduce inequality within and among countries.

Goal 11. Make cities and human settlements inclusive, safe, resilient and sustainable.

Goal 12. Ensure sustainable consumption and production patterns.

Goal 13. Take urgent action to combat climate change and its impacts.

Goal 14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development.

Goal 15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.

Goal 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.

Goal 17. Strengthen the means of implementation and revitalise the global partnership for sustainable development.

Source: UN (2015a), “Transforming our world: The 2030 Agenda for Sustainable Development” , United Nations, New York, https://sustainabledevelopment.un.org/content/documents/21252030%20Agenda%20for%20Sustainable%20Development%20web.pdf.

 

With the goals in place, discussions have turned to the means of implementing the SDGs. Private sector investment holds a pivotal place in current projections and analyses. Sachs and Schmidt-Traub highlight, in particular, the importance of private investment for agriculture and nutrition (SDG 2), health (SDG 3), education (SDG 4), water supply and sanitation (SDG 6), climate and energy (SDG 7), infrastructure (SDG 9), biodiversity and ecosystem services (SDGs 14 and 15), and technology, including a data revolution (Sachs and Schmidt-Traub, 2014). For each and every one of the goals, in fact, success hinges on private sector involvement: how can poverty be ended without inclusive economic growth? How can gender equality be achieved without fair and equal conditions in the workplace? How can cities and societies be made safe and secure without decent jobs that provide gainful employment? How can we respond to climate change without green infrastructure and technologies? How can excessive consumption and over-fishing be resolved if the private sector does not come on board? And how can there be a true global partnership without the participation of all actors?

Nonetheless, more investment will only help if it meets standards that ensure that it is responsible, that it combats corruption and that it empowers vulnerable populations. At the same time, innovations need to be brought to scale – in other words, applied and adopted widely enough to have a broad and sustained impact. In short, the ultimate goal is to generate not only more, but better investment for sustainable development.

The new, global agenda moves the development discourse from a “North-South” perspective to one of shared, global responsibility and concern. It calls for urgent, effective and inclusive measures to address climate change, inequality, insecurity and other global realities that threaten the very existence of people and the planet. It also makes it clear that without increased co-operation between the public sector – the traditional provider of social services and of development co-operation – and the private sector, sustainable development cannot be achieved. Yet, while there are numerous precedents for determining the roles of governments in development efforts, the parameters for private sector involvement are much less clear.

This report explores the enormous potential of the private sector as a partner for delivering on the SDGs. It demonstrates why, to fully exploit the potential, the focus must be on the quantity as well as the quality of private sector contributions. It illustrates how the OECD works to stimulate dialogue between the public and private sectors; to create opportunities for co-operation; and to develop standards and guidelines that can help to make the most of the potential. It provides practical examples of ways in which businesses are already working to promote sustainable development and inclusive growth in developing countries. Finally, it makes recommendations to guide private sector contributions to achieving the SDGs in five key areas: foreign direct investment, blended finance, measurement of private finance mobilisation, social impact investment and responsible business conduct.

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