Sustainability. Investment. Development.
These are but some of the popular buzzwords we have heard in recent years as we begin to reckon with the numerous ecological and social dilemmas facing our species and our planet. Treaties are signed, jobs are created, and novel inventions are created to help us face the problems of tomorrow.
Yet, what do these words actually mean? What outcomes are we working towards? How do we measure success when it comes to sustainability?
One of the most notable attempts to formalize this process has been the United Nations’ (UN) Sustainable Development Goals (SDGs), introduced in 2015. These 17 SDGs aim to steer all nations towards addressing a variety of inequalities and injustices, including hunger, poverty, climate change, and access to adequate water and education. As the UN describes it, these SDGs “provide a shared blueprint for peace and prosperity for people and the planet, now and into the future”.
When it comes to private corporations and their commitment to these SDGs though, how effective has the UN’s program been? As a new study from researchers at the University of Waterloo demonstrates, there may be some nefarious “SDG-washing” going on.
Sham development goals?
As the authors of the study highlight, there has been a gap between corporations’ pledges to invest in sustainable development and their actual investments in the field, therefore raising calls for further scrutiny of corporate actions “to ensure that the ambitious targets set by the SDGs are not merely aspirational, but attainable”.
The researchers measure corporate commitment to SDGs by assessing the community investment (CI) — or corporate philanthropy — levels of Canadian corporations as a percentage of their net profit (after tax). These are examined in relation to corporations’ SDG commitments and their membership status in the UN Global Compact (UNGC), a voluntary and non-binding association of corporations that have committed to a further 10 “corporate responsibility principles”.
The authors focus on three primary questions: 1) was the introduction of the SDGs associated with a change in corporate CI? 2) do corporations that have committed to SDGs have a different level of CI compared to corporations that have not? and 3) do corporations that belong to the UNGC have a different level of CI compared to corporations that do not?
To gain greater insight into the questions, the researchers used a mixed-methods design, analyzing the annual reports UNGC membership status of 58 Canadian corporations featured in the Forbes Global 2000. Notable corporations included BMO, CIBC, Barrick Gold, Lululemon, RBC, Rogers Communications, Shopify, and Teck Resources.
Say it ain’t so!
In addition to contributing to the survival of the Earth, and therefore future consumers of their products and services, the authors also outline various self-serving motivations for corporations to commit to CI, such as tax advantages, improved brand reputation, reduced risk of social conflict, and increased consumer loyalty. Therefore, there should be numerous reasons for the authors to find that corporations involved with the SDGs and UNGC demonstrate higher levels of CI.
However, this was not the case. After the introduction of the SDGs in 2015, the CI levels of the corporations relative to their net profit actually decreased! Likewise, corporations that committed to the SDGs actually displayed a lower rate of CI relative to corporations that had not committed. Corporations with UNGC memberships also demonstrated a lower rate of CI relative to those who were not UNGC members.
As the authors conclude, this creates “warranted skepticism” of the effectiveness of such global sustainability efforts. They suggest that future research focuses on firms that are excelling at their SDG commitments — and those that are particularly behind — to better understand what distinguishes the two.