1. Introduction

In 2015, the member states of the United Nations (UN) adopted 17 Sustainable Development Goals (SDGs). Devised as an agenda for global sustainable development, they reflect the commitment of stakeholders to eradicate poverty, respect human rights, empower women and girls, and bring prosperity and peace, while tackling climate change and working to preserve oceans and forests.

However, in its 2020 SDG report, five years after the adoption of the SDGs, the UN warned that the global response has not been sufficiently ambitious, despite progress in some key areas. There is an urgent need to increase the pace of action from all stakeholders if the goal of achieving the SDGs by 2030 is to be met.

This urgency is amplified by the COVID-19 crisis, which highlights not only the need for sustainability and resilience, but also the importance of health. However, its effects may compromise our ability to reach the SDGs by 2030 (Ranjbari et al., 2021[1]). The impact of the crisis is likely to be particularly acute on sustainability investments in the business sector, which has seen its financial capacity significantly affected by liquidity constraints and increasing debt burdens.

This crisis is also triggering a new wave of policies and recovery plans, with the objective to “build back better”. Some of these policy packages are clearly connected to the SDG agenda and acknowledge the need to support firms’ investments in sustainability, especially regarding the environment (e.g. European Recovery Fund, Korean New Deal).

This book explores the role of firms in addressing the SDGs, particularly through their core business, and how industrial policies can foster the contribution of business activities to the attainment of SDGs. Through selected business examples and the use of survey data, this book provides evidence that numerous firms consider it to be economically viable to develop sustainable products and services. In addition, it addresses the measurement of firms’ SDG orientation both by offering several methodological contributions and providing new insights. In particular, it proposes a methodology to identify SDG-related economic activities with the help of a machine learning (ML) algorithm trained to detect SDGs, and uses ICIO tables to uncover the cross-border and cross-sectoral impacts of SDG-related activities. Finally, this book examines how industrial policies (including innovation and general business framework policies) can foster the contribution of firms to the SDGs through their core business, thanks to a benchmark analysis of the existing policy landscape in a sample of seven countries plus the European Union, and a detailed analysis of the policy instruments.

Developments in the areas of corporate social responsibility (CSR) and responsible business conduct (RBC) show that firms are increasingly aware of their impact on SDGs. More recently, the rise of environment, social and governance (ESG) investing demonstrates the appetite of consumers, savers and financial intermediaries for more responsible firms and the need for increased transparency on corporate sustainability actions (Box 1.1).

Demand for social and environmental accountability of firms has been increasing over the last 30 years. Many stakeholders consider that the societal role of private companies is not only to maximise value for their shareholders, but also to contribute actively – along with governments, non-governmental organisations (NGOs), households and international organisations – to global social goods, such as the environment and societal outcomes. This engagement can take several forms; the activities of some firms are inherently and directly linked to SDGs (via the goods produced and/or services provided), while others focus on the mitigation of the negative impact of their daily operations on SDGs, or use the resources of the company to fund philanthropic organisations that contribute to the achievement of SDGs.

In line with this demand of increased accountability, previous works have focused on either promoting principles, standards and guidelines to help businesses manage their social and environmental risks or measuring the distance to the SDG targets at the country level (e.g. Box 1.2). However, the measurement of a firm’s impact remains challenging. Whereas SDGs provide common goals, commonly agreed business indicators of sustainability remain a distant objective. At the firm level, measures are not only required by the firm’s management to objectivise the impact and efficiency of the firm’s actions, but also to provide indicators on which to index public policies (for instance, carbon dioxide emissions for climate change mitigation policies). Moreover, such indicators would also be required at the aggregate level to assess the achievements of the private sector and to build sound SDG policies.

This book contributes to bridging this gap by highlighting how firms can positively contribute to the SDGs, and by paving the way for measurement of the private sector’s involvement in, or contribution to, the SDGs. It takes a transversal approach to the SDGs, although it sometimes focuses on some Goals or targets, as an illustration. Moreover, the analysis identifies the SDGs that firms prioritise or have an impact on. In addition, it distinguishes between core business-related SDGs and those that are pervasive in non-core business activities.

The recent literature emphasises the role of industrial policies (including innovation and general business framework policies), which often take the form of mission-oriented industrial strategies (Criscuolo et al., forthcoming[2]; Larrue, 2021[3]; Mazzucato, 2018[4]), directly target innovation and growth for overcoming societal challenges. This literature has often focused on green industrial strategies (Altenburg and Rodrik, 2017[5]; Tagliapietra and Veugelers, 2020[6]).

This book builds on this literature, which mostly focuses on climate change, and extends it to the SDGs, using evidence gathered on the firms’ contributions to the SDGs and a benchmark analysis of the existing policy landscape in a sample of seven countries plus the European Union. It shows that governments are already using a diverse set of policy instruments to promote firms’ sustainability, and emphasises the need for a comprehensive toolkit, as well as its adequate articulation and governance through mission-oriented industrial strategies.

Chapter 2 reviews the available information on the engagement of firms, relying on existing literature, examples of firms’ actions, and survey data from the United Nations Global Compact (UNGC). The difficulty in measuring contributions to the SDGs at the firm level is evident, despite several frameworks in development by international initiatives (which are also summarised). Acknowledging the need for further work and harmonisation from the relevant standard-setting bodies regarding the contribution to SDGs at the firm level, Chapters 3 and 4 propose three methodological contributions regarding the measurement of SDG orientation in a cross-country setting: 1) the construction of an ML algorithm that automatically identifies the SDGs in a short text; 2) an experimentation with the identification of sectors and products inherently linked to SDGs using the aforementioned algorithm; and 3) the use of the OECD Trade in Value Added (TiVA)/ICIO infrastructure to measure the cross-border impact of SDG-related activities on selected SDG indicators. Chapter 5 reviews the policies implemented in a sample of seven countries plus the European Union. Finally, building on the previous chapters, Chapter 6 examines how industrial policies can foster the contribution of firms to the SDGs through their core business.


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[1] Ranjbari, M. et al. (2021), “Three pillars of sustainability in the wake of COVID-19: A systematic review and future research agenda for sustainable development”, Journal of Cleaner Production, Vol. 297, https://doi.org/10.1016/j.jclepro.2021.126660.

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