A business model for sustainability
Business leaders must recognize that in global value chains, there is no way to outsource environmental or social responsibility. On the contrary, multinational companies can and must use their extended supply chains to drive change and improve the quality of life in the markets where they operate.
In a recent report, the Intergovernmental Panel on Climate Change (IPCC) warned that without “rapid and far-reaching” changes to how land, energy, industry, buildings, transport, and cities are managed, the damage to our planet could be irreversible. The message was clear: we need a cooperative effort on a global scale to change our current trajectory. And, given that many of the toughest sustainability challenges the world faces are linked to how it does business, the only prudent way forward is to change how business is done.
This may sound daunting, but we already have a framework to guide the transition: the United Nations Sustainable Development Goals (SDGs). The SDGs, adopted in September 2015 by 193 countries, are designed to achieve a “more sustainable future for all” by 2030, which, by extension, will enable a better business environment. The Business and Sustainable Development Commission has estimated that meeting the SDGs could add some $12 trillion and 380 million jobs to the global economy by the end of the next decade.
With so much to gain – and to lose from inaction – the private sector is beginning to focus on the connection between profits and sustainability. According to the Ethical Corporation’s latest Responsible Business Trends report, 69% of business executives surveyed said they are integrating SDGs into their strategies. At the same time, the number of companies receiving B Corp Certification – which measures a firm’s social and environmental performance – has increased in recent years.
Global finance is also inching toward sustainability. For example, environmental, social, and governance assets under management are estimated to be as high as $22 trillion dollars; $82 trillion is committed to the UN Principles for Responsible Investment; $32 trillion is pegged to carbon pricing; and even the market for “green bonds” is growing exponentially. This momentum matters because financial market support will be essential in achieving the sustainable development agenda.
And yet, to sustain this progress, businesses must recognize that even in a global value chain, it is impossible to outsource corporate responsibility. On the contrary, multinational corporations must use their market power to drive social change. Consider my company, Unilever: 2.5 billion times every day, someone somewhere uses one of our products distributed via a supply chain that includes more than 80,000 suppliers and nearly two million farmers, who in turn support communities of millions of people. Such scale enables Unilever to contribute to and benefit from the SDGs, which is precisely what we try to do.
In 2009, we introduced the Unilever Sustainable Living Plan, a blueprint to bolster our social, environmental, and economic performance. Goals include strengthening the health and wellbeing of over a billion people; reducing the environmental footprint associated with the production and use of our products; and enhancing the livelihoods of millions of workers. This approach has allowed us to be more strategic in identifying the challenges and opportunities that our business faces.
By using our resources and brands, we have also addressed key development challenges like poor nutrition, sanitation, and hygiene; climate change and deforestation; human rights; skills training; and workplace equality. And we have done all of this with nearly a 300% return over ten years and a 19% return on equity, demonstrating that it is possible to employ a development-focused agenda that delivers for shareholders and stakeholders.
I am not suggesting that success has come easily, or that our job is finished. Although I will be retiring from Unilever at the end of 2018, I am confident that the company I have led for more than a decade will continue to improve business processes with an eye toward strengthening sustainability.
The key to addressing the world’s social and environmental challenges is using the power of markets and building coalitions to improve effectiveness. The final SDG, Partnerships for the Goals (SDG 17), recognizes this and urges business leaders to cooperate with governments and civil society to deliver on sustainable-development objectives. A good example of SDG 17 in action is the Food and Land Use Coalition, a global network of business executives, scientists, policymakers, investors, and farmers that is working to transform the world’s fragmented and complex food systems. One key area of focus for this coalition is the disconnect between production and consumption.
We need more of this; the future of the global economy is no longer dependent on whether we act, but on how long we take to do so. Despite some progress on the SDGs over the past three years, we are not moving fast enough. As Winston Churchill once said: “I never worry about action, only inaction.” That wisdom should shape our approach to business and the SDGs today. The world we want for our children will arrive only when we choose action over indifference, courage over comfort, and solidarity over division.
By: Paul Polman