Adoption of the Sustainable Development Goals by South African Companies
Sustainable development is defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (Brundtland, 1987).
In 2015 a suite of 17 international Sustainable Development Goals (SDGs) were developed and agreed upon by 193 countries to form The Agenda 2030 for Sustainable Development and included 169 implementation targets and 231 indicators (see Figure 1).
The SDGs were born on the back of the 8 Millennium Development Goals (MDGs) which spanned a period of fifteen years from 2000 until 2015 in which global leaders came together to shape a broad vision of fighting poverty in its many dimensions.
Figure1: SDG overview.
Aim of the research
The aim of this research was based on the perceived problem facing the successful adoption of the SDGs, in particular the implementation targets and associated indicators by South African companies which lies in the strategic integration, alignment, implementation, and effective reporting. Private sector companies are increasingly becoming a key player in the global achievement of the SDGs and could presumably capitalize on an estimated $12 trillion per annum market that is linked to the SDGs. Therefore, this research set out to answer the following question: “To what degree are South African companies adopting the SDG implementation targets, and what are some of the drivers and/or barriers they face?”
Scope of the research
The scope of this research relied on publicly available information contained within the various companies 2019 Annual Reports, which included Sustainability Reports, ESG Reports, and Other Reports (see Figure 2). The analysis needed to represent an influential sample across South Africa’s private sector economy, and as such, the decision was made to focus on the top 40 companies listed on the Johannesburg Stock Exchange (JSE), also referred to as the JSE Top 40, which represented 10% of the full suite of 400 companies listed on the JSE; as well as representing 80% of the total market value (ZAR) within the full suite of JSE listed companies.
Figure 2: 2019 Annual Report Types
An in-depth literature review was conducted on the SDG implementation targets, their varying degrees of adoption and the role they play in achieving the SDGs within the private sector. This was followed by a document analysis which analysed the degree to which the various companies reported on SDGs, followed by a qualitative online survey, which assessed the drivers and/or barriers that these organizations face with regards to adopting and reporting on the SDG implementation targets.
· Literature Review
· Documents Analysis
· Qualitative Online Survey
1. Degree of SDG adoption
The SDGs include 17 goals that have been in operation since 2015 (a period of five years thus far) and this aspect analyzed whether or not the JSE Top 40 Company’s 2019 Annual Report mentioned the SDGs, and if so – how many did they mention, and which ones did they mention.
1.1. SDG goals:
1.1.1. Question: Does the company mention the SDGs in their 2019 Annual Report?
1.1.2. Question: If so, how many SDGs did they mention, and which ones did they mention?
Figure 3: SDG Goals.
As can be seen from Figure 3 above, 32 out of 40 companies mentioned the SDGs in their Annual Reporting representing 80%, whilst 8 companies did not, representing 20%. This is slightly higher in comparison to the global study conducted by PwC (2019) which indicated that 72% of the 1,141 companies across 31 countries mentioned the SDGs in their annual reporting, leaving 28% who did not.
In another study conducted by Haywood & Wright (2019), the research team identified a total of 25 South African JSE listed companies out of a total of 88 (representing 28%) who broadly mentioned the SDGs in their 2016 annual reporting; whilst Mhlanga, et al. (2018) records that 47 of the 76 global companies analyzed (60%) reported a public commitment to supporting the SDGs.
Figure 3 above also outlines the number of companies who mentioned each SDG across the full suite of 17 SDGs. SDG8 (Decent Work and Economic Growth) recorded the highest number of mentions, totaling 27 out of 40 Companies (67,5%); whilst SDG14 (Life below Water) received the least number of mentions, only reaching a total of 3 out of 40 Companies (7,5%). This data has a direct correlation to the results from the PwC (2019) study which also identified SDG8 as the highest SDG mentioned, and SDG14 as the lowest SDG mentioned.
1.2. SDG implementation targets:
The SDG implementation targets include 169 targets and this aspect analyzed whether or not the Company’s 2019 Annual Report mentioned the SDG implementation targets, and if so – how many did they mention, which ones did they mention, and to what degree were they mentioned.
1.2.1. Question: Does the company mention the SDG implementation targets in their Report?
1.2.2. Question: If so, how many SDG implementation targets did they mention, and which ones did they mention?
1.2.3. Question: To what degree did the company report on their progress against the implementation targets?
Figure 4: SDG Implementation Targets.
These results are similar in comparison to the PwC (2019) global study which concluded that 14% of the 1,141 companies analyzed included specific SDG implementation targets, whereas this study concluded that 10% of the JSE Top 40 companies included specific SDG implementation targets in their Annual Reporting which is 4% lower than the global study. According to Mhlanga, et al. (2018), only one-third of the 76 companies analyzed, reported a commitment to the SDGs which included setting of specific and measurable SDG related targets, whereas only 2% reported against actual SDG implementation targets.
Incorporating the SDG targets alongside business-as-usual targets is most likely a challenging exercise that requires considerable investment, and which was identified in the qualitative online survey as the number one barrier (key challenge) facing adoption of the SDG implementation targets by South Africa’s JSE Top 40 companies. PwC (2019) states “the SDG targets can take a good deal of research, effort and expert analysis. One major challenge is that the targets have been written for governments and so companies need to apply a degree of interpretation to make them apply to their business”.
1.3. SDG indicators:
The SDG list of indicators include 231 indicators and this aspect analyzed whether or not the Company’s 2019 Annual Reports included any of the SDG indicators, and if so – how many did they include, and which ones did they include. Measurements, also referred to as key performance indicators (KPIs) are a key aspect of managing and measuring progress against intended outcomes, and as Peter Drucker first said, “what gets measured gets managed”, so if a company doesn't understand and/or measure its environmental and social impacts, it cannot do very much to improve it (Boynton, 2011).
1.3.1. Question: Did the company include and report on the relevant SDG indicators in their Report?
1.3.2. Question: If so, how many SDG indicators did they mention, and which ones did they mention?
Figure 5: SDG Indicators.
As can be seen from Figure 5 above, only 2.5% of the companies (1 out of 40) did mention SDG indicators in their Annual Reporting, whilst 97.5% companies did not. These results are similar in comparison to the (PwC, 2019) global study which concluded that 1% of the 1,141 companies analyzed included specific SDG indicators which signifies a low degree of SDG indicator adoption across both studies.
2. Drivers and/or barriers facing these companies
To better understand some of the outcomes from the document analysis, a qualitative semi-structured survey was designed and sent out in Survey Monkey as an online survey due to the Covid-19 lockdown restrictions in South Africa over the period of 2020. The survey looked at which sustainability related reporting frameworks were being utilized by the different companies, what were the key drivers (opportunities) and/or barriers (challenges) facing these organizations with regards to SDG adoption and to what degree the organizations would be increasing/improving their adoption of the SDGs in coming years.
2.1. Sustainability reporting frameworks:
As identified in the literature review, companies are faced with the challenge of meeting multiple sustainability related reporting requirements, thus it was important to identify and confirm which sustainability related reporting frameworks were being utilized by the JSE Top 40 Companies during 2019. Figure 6 below outlines which sustainability reporting frameworks were being utilized, from most popular to least popular, as per the survey feedback received.
2.1.1. Question: Which sustainability related reporting framework(s) does your organization subscribe to?
Figure 6: Sustainability Reporting Frameworks.
As can be seen from Figure 6 above, the main reporting frameworks utilized by the responding companies was King IV in which 9 of the 10 respondents included in their response which represents 90%, followed by the Global Reporting Initiative (GRI), in which 7 of the 10 respondents included in their response which represents 70%; the International Integrated Reporting Council (IIRC) at 40%; the Task Force on Climate-Related Financial Disclosures (TCFD) at 30% and then the SDGs at 20%.
2.2. Key drivers:
As identified in the literature review, before companies adopt a new sustainability reporting mechanism, they must understand and buy-in to the business case of why it would be worth investing their time, energy, and resources into adopting the SDG implementation targets. In this section the survey question was designed to understand the reasons behind why each company has chosen to invest in adopting the SDG implementation targets.
Question: What do you understand to be the key drivers facing your organization with regards to adopting and reporting on the SDG implementation targets?
Figure 7: Drivers (Opportunities) facing Companies.
According to the survey feedback received in Figure 7 above, the following aspects were identified as the key drivers (opportunities) facing organizations with regards to adopting and reporting on the SDG implementation targets: meeting investor and/or stakeholder expectations (50%), achieving resilience and long-term success (40%), environmental and social risk mitigation (40%), seizing opportunities linked to the SDGs, integration with existing sustainability strategies, achieving good governance, and enhancing brand reputation.
2.3. Key barriers:
As identified in the literature review, before companies adopt a new sustainability reporting mechanism, they have to understand and buy-in to the business case of why it would be worth investing their time, energy and resources into adopting the SDG implementation targets. In this section the survey question was designed to understand the key barriers (challenges) facing companies with regards to adopting the SDG implementation targets.
Question: What do you understand to be the key barriers (challenges) facing your organization with regards to adopting and reporting on the SDG implementation targets?
Figure 8: Barriers (Challenges) facing Companies.
According to the survey feedback received in Figure 8 above, the following aspects were identified as the barriers (challenges) facing organizations with regards to adopting and reporting on the SDG implementation targets financial constraints with regards to investing in sustainability, lack of leadership understanding, misalignment with corporate strategy, lack of clear SDG framework with which to work with, and lack of the right partnerships with regards to implementing SDGs.
2.4. Way forward for SDG reporting:
Having assessed the 2019 status of SDG implementation target adoption by South Africa’s JSE Top 40 Companies after five years of the SDGs coming into effect, it is useful to gain some insight into what these same companies might be doing moving forward into the year 2020 and beyond.
Question: To what degree will your organization be increasing/improving its adoption of the SDG implementation targets moving forward?
Figure 9: Way forward for SDGs in South African Companies.
While it is good to see in Figure 9 above, that 100% of the respondents mentioned a commitment towards their companies improving their adoption of the SDGs, it is concerning to see only 40% mentioned the SDG implementation targets forming part of their scope of SDG adoption moving forward, and even more concerning is the complete lack of mention of the SDG indicators (0%) which remains the measurement of success for achieving the SDGs. Without the commitment from influential companies such as the JSE Top 40 towards adopting the SDG implementation targets and indicators, little progress is envisaged from the corporate sector in contributing towards achieving the SDGs.
Conclusion and recommendations
In light of the above, and as per Figure 10 below, it can be concluded that the degree (and quality) of SDG implementation target adoption, by South African companies, namely in this case the JSE Top 40, is minimal (10%), and leaves significant room for improvement over the remaining ten years.
Figure 10: Summary - Degree of SDG Adoption.
From the literature review, it is evident that many SDG adoption tools, frameworks and guidelines exist with which to support private sector companies in adopting, achieving and reporting on the SDGs, therefore in order for South African companies to significantly contribute to achieving the SDGs, it is paramount that they do more than just mention the SDGs in their annual reporting, and instead integrate the SDGs into their corporate strategy, include specific SDG implementation targets and indicators into their performance scorecards, implement the required actions and report against the SDG implementation targets and indicators (GRI, UN Global Compact and the WBCSD, 2015).
Further research could be done to understand why South African companies are struggling to achieve the above components of SDG adoption and thereby contributing towards achieving the SDGs.
Whilst global progress in achieving the SDGs was already lagging prior to COVID-19, the global pandemic over the course of 2020 and 2021 has unfortunately halted much of the progress to date, even calling for a post COVID-19 review of the SDGs in their current form (Nature, 2020), however on a positive note, there is still time to achieve the SDGs as humanity is poised on what the United Nations (2020) describes as the start of a ‘Decade of Action’, and while this research primarily focused on the degree of SDG implementation target adoption, the majority of the JSE Top 40 companies have adopted other sustainability frameworks such as the Global Reporting Initiative (GRI) in which they include and report on numerous targets and indicators under the auspices of environmental and social governance.
About the Author
This research was conducted by Philip Dukas (under supervision of Prof. Angus Morris-Saunders) as part of his master's degree in environmental management at the Northwest University, South Africa (2020). Philip is the founder of Adaptera Strategic Support Services, a freelance environmental and social sustainability advisory firm which aims to create sustainable solutions by supporting organizations in Africa to meet their legal compliance and international best practice requirements and achieve their sustainability objectives. He believes that if we all work together - we will collectively achieve the Sustainable Development Goals and create a more sustainable future for all.