UNDP SDG Impact Standards – Decision Making for Sustainability

The Agenda 2030 for Sustainable Development aims to achieve the SDGs by 2030. However, despite social, environmental and economic outcomes being increasingly interdependent, current systems and practices are not serving the long-term interests of humanity well, and are not enough to reach the goal by 2030. Moreover, we observe movements leading to constant planet regression. Therefore, most of the main sustainable indicators are moving in the wrong direction. Worse still, Covid-19 has exposed and exacerbated existing inequities and issues, including the widening wealth gap, gender inequality, and the challenges of climate change.

In this regard, the SDG Impact has been established in order to contribute to the solution. It seeks a world where all capital flows and investments advance sustainable development goals and do not distract from them. A set of standards have been developed to strengthen and authenticate whether or not we are contributing to sustainability and SDGs.

What is SDG Impact?

The SDG Impact is a flagship of the United Nations Development Programme (UNDP), working to mobilize private capital for the SDGs. As the SDGs provided a framework for building forward better, the vision of the SDG Impact is to catalyze investments to achieve the SDGs by 2030. The SDG Impact provides investors and businesses the clarity, insights, and tools required to strengthen and authenticate their contribution to achieving the SDGs.

What is the nature of SDG Impact?

The SDG Impact is an internal decision-making framework – not a reporting standard. Very often, sustainability has been seen merely as an add-on to a business. The solution would be that sustainability should become the lens through which all businesses are conducted. Therefore, the SDG Impact has been established to help businesses and investors embed sustainability and SDGs into their stewardship practices and decision-making processes. The vision is to put sustainability at the heart of the business model, subject to the need to make financial returns.

What are the SDG Impact tools? Who can use them?

The SDG Impact tools involve two core streams of work: SDG Impact Standards and SDG Investor Maps. These are the means to better decisions that drive investment capital to where it is needed. 

So far, a family of four SDG Impact Standards have been developed for Enterprises; Private Equity and Fund Managers; Bond Issuers; and the OECD-UNDP SDG Impact Standards for Financing Sustainable Development respectively. We believe these are accessible because they focus on decision-making for all sizes of businesses, including medium-sized enterprises, family-owned businesses, on stock exchanges, or on local exchanges. Sometimes these are the businesses where the standards can be embedded more easily than the larger or multinational organizations. The standards can also be used by investors to frame their investment guidelines and to start thinking about, “are we getting the money to the right place?” They can be used by analysts and advisors, or by government and policymakers in framing the policy spectrum which sets where and how business is operated. 

It is getting unfair to continually expect more of business communities of what can be achieved within the existing regulatory regimes. Only if we change the regulative regimes can businesses shift to drive what is possible. So shift the regimes — so that business people can continue to be entrepreneurial, innovative, and creative. They can shift, or we as a society can shift all our energy and passion towards sustainability outcomes, not just financial returns.

What are SDG Impact Standards?

The SDG Impact Standards, initiated in 2018, are about shifting mindsets and changing behaviors. They focus on the decision-making that drives the impact. The SDG Impact Standards help organizations integrate sustainability into their management and investment frameworks by offering a common language and shared approach. Practically, they help shift private sector engagement with the SDGs from alignment to decisions and actions; from measurement to management; from operational to strategic, and ultimately, from unsustainability to long-term sustainability. Adopting the standards is a proxy and leading indicator for future impact performance. The SDG Impact Standards would pave the way to achieving a new way of doing business and investing that puts impact at its core and are realized through effective impact management and decision making. SDG Impact Standards also focus on risk. Not only the risk of financial returns but also the risk to other people’s lives if we get things wrong.

In practice, the SDG Impact Standards would help organizations blend the principles into their day-to-day culture through four particular areas: strategy, management, transparency, and governance. These are the four areas that could drive an organization’s performance towards sustainability. The SDG Impact does not imply picking only one SDG and doing slightly better than last year. We need a more holistic picture to think about the positive and negative consequences of our businesses toward SDGs. These standards require organizations to start to recognize that making decisions involves trade-offs and that motivates them to make the right choices. This will be a cultural change program to shift from reporting on your contribution towards SDGs to putting SDGs at the heart of your business.

How can we help reduce Impact/Rainbow washing?

In the financial market, a financial audit is required by the law to protect investors. The auditor acts in the interest of the investors instead of the company, while the responsibility of a company would be to present financial statements and have them audited so that they comply with international accounting standards. However, we do not yet have that in place on impact or sustainability. We still live in a world where mainly organizations produce impact statements. Some of them are being audited, but the majority of which are for the management of a company, but not for any third party or investors. So what we really need here is to help effective impact management and decision-making, which is not only in the interest of the company but also in the interest of the people who experience the consequences of business operations. Good practice and internal decision-making will lead to transparent reporting of trade-offs being made and improved performance against ambitious targets. That is what will be necessary to drive the change we need to see.  

In light of the situation, the SDG Impact has been developing an open-source Impact assurance framework to complement the SDG Impact Standards that will: set minimum thresholds to encourage organizations onto the assurance journey; require periodic updates – i.e., not a once-off; and last but not least, embed continuous improvement into the design. It will be an assurance framework that shows organizations how well they behave, and they will get an SDG Impact Seal. The audience of the assurance would be the people who are experiencing the impact.

We believe that if we get all these things in place, with trust and integrity and better information, we will be able to drive the levels of performance that we have taken for granted in finance. Sustainable development is complex, so we need to build assurance capacity and analytical capability. We have worked extremely hard to make sure that we achieve levels of financial performance that are commensurate with investors’ expectations. Now, it is time we built a world where we achieve levels of sustainability performance that are commensurate with the expectations of everybody who lives on this planet, and for our future generations.

A suite of guidance, education, and assurance

To support all these, in addition to the resources we have on the website, there are training courses coming along where we hope to work with other organizations. Social Value International (SVI), for example, has also been negotiating a joint training agreement with UNDP for a co-delivery of training around these issues. At the moment, the New Coursera online training courses in impact measurement and management, which have been co-developed with Duke University, are available for free, for everyone.