ESG is a reporting framework also used for internal strategizing, while the UN SDGs are goals addressing global social justice and climate change. Bringing the two together leads to more relevant and impactful corporate strategies that look both inward and outward.-By Robin Byrd

It is not surprising that forward-thinking corporate leaders are looking at the UN Sustainable Development Goals (SDGs) and the Environmental, Social, and Governance (ESG) framework. Why? Because they are intersecting approaches to addressing the organization’s role in global and local human rights in the global workforce and supply chain, environmental sustainability, community development, poverty, and social and justice. ESG is a reporting framework that organizations and investors use to assess corporate efforts to address the critical issues impacting people, communities, and operations through the environmental and social lens. The SDGs are included in the 2030 Agenda for Sustainable Development and are comprised of 17 goals and 169 targets that intersect with ESG reporting elements. Aligning SDGs with ESG not only makes sense. The alignment is value-creating, leading to faster progress and more significant impacts in addressing social and environmental sustainability and justice, while strengthening an organization’s attractiveness to investors and customers and creating new opportunities.

Intersection of ESG and SDGs

Using the UN Sustainable Development Goals (SDGs) strategically with ESG reflects an increasing investor commitment to support companies that implement strategies that address SDG goals. Investors believe businesses that build SDG goals into their decision-making and operations have a competitive advantage and will deliver better returns. The corporate decision-makers building corporate models incorporating ESG and SDGs believe this approach will support long-term business sustainability and create new opportunities, in addition to exercising corporate social responsibility. Thus, there is a business case for aligning ESG and SDGs.

The five pillars of the Sustainable Development Goals are People, Planet, Prosperity, Partnership, and Peace. The People pillar focuses on ensuring dignity and equality for all people and ending poverty and hunger. Planet addresses the need to protect natural resources and the climate for future generations. Prosperity focuses on ensuring that all people can enjoy prosperous lives, and that economic, social, and technological progress takes place in harmony with nature. Partnership considers how government, organizations, and society can work together toward achieving goals. Peace asks for the fostering of an inclusive and just society.

The ESG reporting framework allows organizations to identify specific activities and progress in environmental sustainability and social justice through good governance. It serves several purposes. One is to increase transparency for investors, customers, and the marketplace. A second purpose is to identify successes and gaps in efforts, driving better management decision-making. A third purpose is to inspire other organizations, because ensuring people thrive and that environmental resources are sustained in the future requires a unified effort. By aligning ESG with SDGs, companies can develop strategies to achieve similar goals and targets.

Putting the Alignment Into Practice

How does an organization achieve ESG and SDG alignment? One way is strategically using the SDGs with ESG as a framework for setting goals and measuring progress. Aligning sustainability goals with the SDGs enables tracking progress and communicating the organization’s impact to stakeholders clearly and meaningfully.

One approach is strategically using the SDGs with ESG to align the company's sustainability efforts with the SDGs most relevant to the organization’s industry and business model. For example, if the industry is the renewable energy industry, focus on SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action). Similarly, a consumer goods company prioritizes SDG 12 (Responsible Consumption and Production) and SDG 14 (Life Below Water), among others.

Integrate the targets into organizational goals to drive strategizing. All organizational elements are included. They include sourcing, procurement, supply chains, operations, benefits, decision-making processes, workforce planning and management, technology utilization, project planning, and current programs and initiatives. The alignment process will involve matching each element to SDG targets and finding where there is existing alignment or integration - and where integration is needed. For example, the business has a gender equality initiative aligning with SDG 5 (Gender Equality). It does not have a strategy for elevating the good health and well-being of employees in underdeveloped countries who are working mothers, one target of SDG 3 (Good Health and Well-Being).

All 17 SDG goals can be aligned with ESG elements, but each company's specific alignments are unique. Prioritizing the SDGs to drive strategies and actions requires considering the organization’s industry, mission, location(s), and operational activities. Reading through the SDG 17 goals and 169 targets enables each organization to establish priorities. Organizational priorities and targets are used to set specific goals and targets, and strategy development focuses on achieving them. Using SDGs as the framework for ESG makes it easier for organizations to develop, implement, and measure corporate behavior, all within the context of environmental and social goals. One of the organizational leaders' challenges is designing a strategic approach in which goals and actions across the many environmental and social factors work together, not independently. Integrating SDG and ESG should also lead to better integration of internal decisions and actions. For example, the supply chain director and organizational buyers across divisions should be making decisions with organizational-level goals and targets in mind. Supply chain leaders still find they must convince dispersed buyers to consider supply chain diversity in decision-making, or to change to suppliers who support corporate environmental goals. In many instances, it has taken holding leaders accountable through metrics and reporting to develop commitment.

Aligning SDG goals and ESG is not always easy, but it forces looking inward to ensure everyone is working towards achieving broader environmental and social objectives through internal decision-making. The alignment process is a value-creation process.

Supporting SDGs, ESG, and Organizational Success at the Same Time

Ultimately, using the SDGs strategically with ESG is about leveraging these frameworks to create a more sustainable future for all. By aligning efforts with the SDGs and using them to guide sustainability and social strategies, it is possible to make a positive impact on the world and create long-term value for any organization. Both SDGs and ESG address environmental and social challenges, but they have different approaches to achieving goals. ESG is focused on the specific organization and its community of consumers, suppliers, partners and investors. SDGs have a global perspective, focusing on countries and people in general. Ultimately, they are both striving to reach goals that intersect.