by Diana Carter
The annual European Business Summit brings together policymakers, senior business executives, journalists and think tanks to address issues affecting the future of Europe. The 2017 edition included the Sustainable Development Goals (SDGs) Conference organized by CSR Europe, a European network of businesses focused on promoting sustainable practices amongst its members. The conference aimed to give insights into progress, best practices and challenges faced by European business around the SDGs.
Lise Kingo, Executive Director of the UN Global Compact, reminded the audience that there are fewer than 5000 days to go until the deadline for meeting the goals set in the 2030 SDG agenda. Time is short given the ambitious objectives on the table which include ending poverty ‘in all its forms everywhere’, gender equality and ensuring availability of clean water for all.
The UN Global Compact has tried to provide a practical framework for businesses in which to operate. It has connected the 17 goals with existing frameworks, such as ISO 4000 for environmental standards and those set by the Global Reporting Initiative. In April 2017 it launched the Global Opportunity Explorer, a library of case studies aimed at inspiring business to explore new models. Examples include insect oil as a sustainable alternative to palm oil, BMW’s re-use of batteries for renewable energy storage, and Thread, a company that has made fabrics from 38.9m plastic bottles collected from streets, canals and marine ecosystems in Haiti and Honduras.
But, by Ms Kingo’s own admission, “Who actually knows the 17 SDGs by heart?”. A study conducted by Globe Scan and CSR Europe in April 2017 found that in almost half (47%) of the companies surveyed, SDGs were not well known by top management. Amongst middle management, this fell to 11%. Yet it is middle management who will ultimately be responsible for translating an ambitious corporate vision into day-to-day business operations.
The Vattenfall example
However, whilst businesses may have low awareness of the SDGs, they may be spearheading sustainability efforts using a different reference framework. Annika Ramsköld, Executive Sustainability Vice-President of Vattenfall, a Swedish energy producer and retailer, comments: “We don’t do much reporting around the Sustainable Development Goals. We already use other tools, focusing on business and human rights and corporate social responsibility”.
Behind Vattenfall’s mission statement: ‘we exist to power climate smarter living’ lies tangible commitment to its own sustainability transition. The business, whose parent company is 100% owned by the Swedish state, has committed to achieving carbon neutrality in its Nordic markets by 2030 and across its whole business by 2050.
The company reports continued progress towards this objective. According to its own assessment, in 2015 Vattenfall produced 426 g/kWh compared with an average of 300 g/kWh amongst its peers, which included RWE, Enel, E.ON, EDF, EnBW, Statkraft, DONG, Fortum, Iberdrola, Centrica and EDP. By 2016, Vattenfall’s carbon dioxide production fell to 126 g/kWh, representing a decrease of 71% in its overall carbon dioxide production.
Vattenfall’s drive to carbon neutrality involves initiatives with short and long term impact. Its research and development collaboration with Swedish mining and mineral group LKAB and steel manufacturer SSAB on hydrogen-based carbon alternatives to power the steel industry is only likely to have real impact over the next 25 years. In contrast, Vattenfall’s work with GE Healthcare on recycling heating and cooling has brought immediate benefits in terms of reduced energy demand.
Vattenfall does not engage only with other businesses. It has established partnerships with the cities of Uppsala, Amsterdam, Berlin and Hamburg to assist them with sustainable consumption. The company pursues initiatives to enable consumers to shift to more sustainable energy usage. In 2016, it launched its fast-charging electric vehicle infrastructure inCharge in Sweden, Germany and the Netherlands and aspires to become a leading mobility infrastructure developer in Northern Europe. It also works with households to modernize heating technologies at lower cost. “You need to focus on multiple initiatives to make systemic change”, comments Ms. Ramsköld.
The incentives challenge
She acknowledges that finding new sustainable business models is not always straightforward. For example, persuading Vattenfall’s profitable gas business to find alternative revenues from biogas or heat pumps is not an easy sell. Businesses have long been confronted with the challenge of balancing short and long term revenue streams. Finding the appropriate governance model to support new revenue generating initiatives that are not immediately profitable is key. Vijay Govindarajan and Chris Trimble recount how General Electric developed a low-cost hand held ultrasound scanning device for doctors visiting patients in rural China. To achieve the portability and cost objectives imperative to penetrating the market, GE set up a new Chinese business entity with its own profit and loss account and hired local engineers and marketers. With the support of a senior executive sponsor, the team was able access the necessary software development expertise from GE Israel to design a portable device instead of the large immovable ultrasound machines costing thousands of dollars that GE produced at the time. In this way, GE was able to develop a new product that neither its existing technologies nor managerial incentive structures would have allowed.
Investors may be willing to support corporate sustainability initiatives, provided they are convinced that a company will not sacrifice profitability. This can be a fine line to tread. Unilever CEO Paul Polman established a reputation as a sustainability advocate, by launching the Unilever Sustainable Living Plan and discontinuing quarterly financial reporting to discourage investment from shareholders looking for short-term returns. For the first seven years of his tenure as CEO, he delivered total shareholder returns of 203%, outperforming peers Nestlé and P&G. In 2017 however, he was obliged to fend off a takeover bid by Kraft Heinz who sought to take advantage of Unilever’s underperforming share price. Unilever was then at pains to show that the company valued shareholder loyalty and renewed its commitment to increasing returns.
Greens MEP and Vice-Chairman Philippe Lamberts, who led the introduction of EU rules to cap bank bonuses in 2014, is more direct. In his opinion, there is no question that business needs to be regulated if the SDGs are to become a reality since most companies are too focused on the pursuit of quarterly returns to take a long-term view. He observes that there is a fundamental contradiction between SDG number 8, focused on sustaining per capita economic growth, and environmental protection. “To achieve all these goals would require uncoupling economic growth from ecological footprint”, Mr Lamberts says. “We’ve never seen this”.
A growing role for business in global sustainability governance
There may be cause for optimism. The upcoming round of UN-led COP23 climate talks taking place in Bonn in December 2017 is expected to include non-state actors, including businesses, civil society and municipal governments within the formal climate negotiations – a first for the COP process. Formal recognition of business as a key stakeholder to the climate negotiations brings two advantages. It gives business the opportunity to articulate the risks they will have to manage whilst transitioning to sustainable practices, and explore solutions that require collective industry commitment and government support. And, by showcasing the successes of sustainable business, the dialogue can help mobilise more businesses to embrace the opportunities of new business and industry models.
Diana Carter is Secretary General of Young European Leadership. Diana Carter works in cloud computing at the nexus of business and technology, enabling companies of all sizes to use CRM to achieve their business goals. She is keen to combine her professional activity with initiatives by business and policymakers to drive sustainability, with a special focus on the contribution of young people.