GRI and the UN Global Compact have partnered on a project: The Reporting on the SDGs Action Platform

In September 2015, all 193 Member States of the United Nations set a very ambitious and necessary agenda for achieving a better future for us all by adopting a set of 17 global goals: the Sustainable Development Goals (SDGs). The SDGs aim to end poverty and hunger, fight inequalities and injustice, and protect our planet.

And, if we want to realize these goals, it’s essential that we get “buy in” from investors around the world.

Achieving the SDGs will require a massive shift of capital towards products, services and projects that create progress towards their achievement. The 2016 UN Environment Program Inquiry into how to better align the financial system with sustainable development found that about $90 trillion US dollars must be mobilized over the next 15 years in order to achieve the targets set out in the SDGs.

SDG Opportunity Business Case, Global Opportunity Report 2017, DNV GL AS

So when it comes to financing the sea change needed to help create the conditions for sustainable development we’ve got our work cut out. Corporations and investors are eager to contribute to achieving the SDGs but, as it stands now, they don’t have the information and tools they need to make smart investments in a more sustainable future.

Corporations and investors are eager to contribute to achieving the SDGs but, as it stands now, they don’t have the information and tools they need to make smart investments in a more sustainable future.

Questions, questions…

In my first six months as GRI’s Chief Executive, I have received a great number of questions from investors, who are unsure how corporate reporting can really help lead to the kind of change required for the SDGs. Some of the skeptics say that there are not enough sustainable financial products and projects in which to invest, and that sustainability reporting won’t fix this. Others suggest that the data disclosed in sustainability reports is not standardized and comparable, so it isn’t very useful for making investment decisions.

The truth is that there’s merit in these concerns. Corporate sustainability reporting, in its current form, is difficult for investors to use. And without commitment from investors, it is impossible to shift capital towards more sustainable businesses.

The architects of the SDGs believed that transparency plays an essential role in driving action by businesses and stakeholders. That’s why SDG target 12.6 explicitly calls upon UN member states to “encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.”

Only by shining a light on how businesses are actually using resources like water, energy, or treating their employees and others, can we hope to create a world free of poverty, hunger, environmental degradation and gender inequality.

Corporate sustainability reporting, in its current form, is difficult for investors to use. And without commitment from investors, it is impossible to shift capital towards more sustainable businesses.

SDG targets related to food systems, The Economics of Ecosystems and Biodiversity (TEEB)

Where to invest in sustainability?

The investment community has considerable power to determine the success of the SDGs. The goals provide an opportunity for responsible investors to establish how to incorporate sustainability issues into their investment approaches, to foster improvements as well as make a profit.

But the only way investors can know where best to invest in sustainability is when there is sufficient transparency around the businesses in the market and the sustainability impacts of their products, services and projects.

GRI and the UN Global Compact have partnered on a project, The Reporting on the SDGs Action Platform, to create a mechanism for businesses to report on their impacts and contributions to the SDGs. Later this year, the two organizations will jointly release a guide, with a breakdown of all of the targets under each of the 17 SDGs and the metrics based on established or new indicators that businesses can use to report on their actions and measure progress against these targets.

Outcomes of SDGs Action Platform

This is a first step in creating the transparency investors need to direct their capital towards companies that are making the achievement of the goals more likely.

A significant and helpful step in this same direction is the recently released recommendations of the TCFD. The recommendations have captured the attention of mainstream investors and placed the focus on the importance of decision-useful climate disclosures.

This will help us achieve SDG 13, which calls for urgent action to be taken to address the negative impacts of climate change.

Making sustainability reporting more useful for investors

On its own, a dramatic increase in the amount of sustainability reporting will not be enough to stimulate more responsible investing in furtherance of the SDGs.

On the one hand, investors want sustainability information boiled down to a set of data points that are easy to process and analyze. On the other hand, companies (and also a subset of investors) recognize the value of placing a narrative around the sustainability data that a business collects.

The tension between these two approaches is the root of the disconnect, between investors and many of the companies that disclose environmental, social and governance (ESG) information.

These two positions need not be at odds. Investors use both summary-level data as well as more in-depth engagements with corporate sustainability efforts. This is why, at GRI, we are increasing our efforts to bring investors and representatives from stock exchanges together with companies that disclose ESG information.

SDG Compass, Linking the SDGs and GRI, SDG 6 disclosure excerpt

Our aim is to foster a better understanding of how ESG reporting can be made more effective in light of the demand among capital market players for investor-relevant reporting and legitimate concerns among businesses about the increasing burden of disclosure. Reporting needs to become concise, consistent, current, and comparable. And, as demonstrated by the TCFD recommendations, it should also be forward looking.

Ramping up engagement

With more streamlined reporting, information disclosed once can be used in several ways to comply with different frameworks or communicate with different audiences.

At GRI, our aim is to empower businesses to provide high-quality, widely-trusted disclosures using the GRI Standards, which will not only reduce their reporting burden but also ensure that their ESG information can be meaningfully incorporated into investment decisions.

As the developer of the world’s most widely used sustainability reporting framework, GRI is committed to bridging this gap and further enabling investor-relevant ESG reporting. Back in June, GRI and the World Federation of Exchanges held a joint roundtable discussion, in London, which brought together companies, investors and representatives from stock exchanges from around the world.

The meeting was a good first step in ramping up engagement between these groups, with an eye to streamline the information reported by companies so that it is more useful for investors but still responsive to the needs of companies’ other stakeholders.

 

Tim Mohin is Chief Executive at the Global Reporting Initiative


Originally posted on ESG Magazine