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P4G
From Social to Corporate: Mainstreaming the SDGs in the Business World
Despite the potential for profit, businesses are still asking: what are the rules for sustainability? We understand the opportunity, but how do we tap it?
Luckily, the Partnering for Green Growth and Global Goals 2030 Initiative (P4G)—a network of global leaders that incubates and accelerates sustainable public-private partnerships—has some of the answers. In our matchmaking between investors and breakthrough projects for green economic growth, we’ve seen four methods successful businesses as using to effectively—and profitably—incorporate sustainability in their growth models. These methods represent a spectrum of the evolution of business commitments over the past decades as both the private and public sector learn about how to advance sustainability goals in their mutual best interest. Let’s take a look:
1. Business Innovation—Leading (and Following) the Marketplace:
Innovators are often hailed as drivers of solutions—always seeking improvement or the next big opportunity, innovators have been at the leading the marketplace throughout modern history.
3M, recognized by Harvard Business Review as one of the “longtime role models for managing innovation,” focuses on internal efficiencies to realize big bottom line impacts. Among 3M’s numerous staff-centric sustainability initiatives, the internal Pollution Prevention Pays (3P) program has saved the company more than $1.9 billion since 1975. This program has also positioned them as one of the pioneers in energy and material efficiency.
Meanwhile, external market opportunities have inspired a flurry of high-profile impact and angel investors to look for the next great startup idea. Some of the most exciting players in this area are revolutionizing systems and industries that had seemingly settled into the fabric of everyday life. Consider the sharing economy and big data.
Ride-sharing apps and dockless electric scooters and bikes are shifting entire generations away from using and purchasing personal vehicles. In the United States, only 69 percent of high schoolers are getting driver’s licenses as compared to almost 90 percent in 1983. Bird, an electric scooter startup raised over $400 million and doubled its valuation to $2 billion in its first four months.
Meanwhile, cloud-based data is reducing the costs of running server farms while simultaneously cutting electricity consumption. VMware, a global leader in cloud infrastructure innovation and of which Dell Technologies is a majority shareholder, grew popular with IT departments for exactly this reason. In 2016 alone, virtualization lowered carbon dioxide emissions by roughly 76 million metric tons according to research firm IDC, equal to getting 15 million cars off the road.
More than 500 companies have committed to set science-based targets for reducing their contributions in global greenhouse gas emissions, and an additional 800 have indicated that they plan to do so by the end of this year. This goal-setting marks a significant step in the pursuit for limiting global warming to below 2 degrees C (3.6 degrees F)—but also recognizes the potential for corporate savings.
These voluntary commitments have been yielding big results for companies’ bottom lines.
In 2016, 56 Fortune 100 companies reported saving a combined $2.5 billion from emission-reduction projects, with a typical payback period between one and 10 years.
We are also seeing the world’s emerging economies take the lead. Last year, the Mahindra Group, an Indian multinational conglomerate with $20 billion in annual revenue, committed to total carbon neutrality by 2040. Chairman Anand Mahindra pointed out the generated returns: “In the last five years, we’ve saved 58 million kilowatt hours of energy, which could fire up 15,000 Indian homes. That saved us money.”
3. B Corps to Balance Purpose and Profit:
Certified B Corporations, or B Corps for short, are legally required to consider the impact of their decisions on their workers, customers, suppliers, community and the environment. Since the first cohort of B Corps in 2007, more than 2,600 certified B Corps have emerged across 150 industries in 60 countries. B Lab, the nonprofit organization that started this movement, evaluates companies based on how they create value for their employees, the local community and the environment, emphasizing nontraditional, socially- and environmentally-driven stakeholder values.
Last year, French yogurt-maker Danone e that Danone North America, its $6 billion subsidiary, had become the world’s largest B Corp. It was the latest of Danone’s eight other subsidiaries, covering about 30 percent of the business, to win B Corp certification, and CEO Emmanuel Faber vows it won’t be the last: he aims to make his entire $28 billion enterprise a B Corp by 2030.
B Corp certification goes beyond building trust between consumers and businesses to substantiate corporate claims of social and environmental responsibility, inspiring customers to spend more on brands that align with their vision of a more sustainable, inclusive future.
4. Public-Private Partnerships and Ambition Loops:
One of the greatest challenges for the private sector to move forward in sustainability is unstable government policy. Without confidence in the longevity or strength of policy implementations, companies often find it difficult or risky to innovate beyond conventional. Public-private partnerships— mutually beneficial agreements between public and private sector stakeholders—offer a solution by delivering mechanisms that urge all parties forward.
The Ambition Loop, a recent paper by World Resources Institute, We Mean Business and UN Global Compact, provides powerful examples of how the intersections of business leadership and strong policy measures have spurred profitable climate action. Leading businesses that create a strong voice around the commercial demand and economic possibilities of the SDGs can spur the government to action. In turn, businesses can be pushed to act by long-term, clear and consistent government policies that give companies confidence in new market opportunities.
For instance, in 2017, China announced its intention to sell 5 million EVs by 2020. In the time since China has adopted electric vehicles at a stunning pace and now accounts for more than half of the world’s EV purchases. Bloomberg attributes this growth to generous government subsidies and municipal regulations that make it burdensome for owning an internal combustion vehicle. BYD Co., based in Shenzhen, China, is now the world’s biggest manufacturer of plug-in vehicles, having experienced almost 150 percent growth.
The Zero-Emission Bus Rapid Deployment Accelerator (ZEBRA) partnership, led by ICCT and C40, won P4G scale-up funding of $900,000 in 2018 and aims to provide a similar model for electric bus growth in Latin America. The ZEBRA partnership is working with Mexico City, São Paulo, and Medellín to increase the deployment of city-wide electric bus fleets. The ambition of ZEBRA is to reach between electric and diesel buses. The partnership aims to create demand for 100 percent electric bus procurement by 2030, activate supply through commitments from major bus manufacturers to up their e-bus production levels and create a $1 billion special purpose financial mechanism for enabling the purchase of these vehicles.
The global economy is at a turning point. Economically and environmentally sound business models, when built within these four approaches, lead to huge gains. This is the kind of opportunity that doesn’t come along every day—now is the time to grab it.
