Gender Equality and Sustainable Development Goals

The UN Sustainable Development Goals are a useful high-level framework for understanding the breadth of issues facing our planet. The deadline for the goals is 2030, so the next decade is time for both the private and public sector to make changes to their operating models to support the outcomes of these goals.  

Board members and senior leaders are likely to have gender equality or diversity & inclusion policies already in place. They may even have taken decisive action to ensure a gender-balanced board of directors or senior management team is employed.

Both developed and developing countries still have great lengths to go in achieving gender equality with some of the appalling statistics noted by the UN when it comes to how women and girls are treated poorly around the world.

When it comes to reviewing a firm’s purpose and strategy, building a more diverse and inclusive organisation is one of a minimum expectation of any organisation wanting to make a positive social impact and help support the UN Sustainable Development Goal outcomes in 2030.

Goal 5: Achieve gender equality and empower all women and girls

  • 5.1 End all forms of discrimination against all women and girls everywhere
  • 5.2 Eliminate all forms of violence against all women and girls in public and private spheres, including trafficking and sexual and other types of exploitation
  • 5.3 Eliminate all harmful practices, such as child, early and forced marriage and female genital mutilation
  • 5.4 Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies and the promotion of shared responsibility within the household and the family as nationally appropriate
  • 5.5 Ensure women’s full and active participation and equal opportunities for leadership at all levels of decisionmaking in political, economic and public life
  • 5.6 Ensure universal access to sexual and reproductive health and reproductive rights as agreed following the Programme of Action of the International Conference on Population and Development and the Beijing Platform for Action and the outcome documents of their review conferences
  • 5. A Undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, following national laws
  • 5.B Enhance the use of enabling technology, in particular information and communications technology, to promote the empowerment of women
  • 5.C Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all women and girls at all levels

Source: https://www.un.org/sustainabledevelopment/gender-equality/

Board and senior executive considerations

When a business wants to assess how its current operating model either helps or hinders the achievement of the UN Sustainable Development Goals, having female directors and female senior executives driving or heavily involved in the process would be an obvious consideration.

If there are no women currently on the board of directors or on the senior leadership team, this will be a significant problem with almost any stakeholders. Institutional investors who care deeply about the firm’s reducing ESG risk will undoubtedly call it out.

It’s no longer credible to argue that there isn’t a “pipeline” or “suitably qualified” available. There are large numbers of highly qualified women willing and able to work in these roles, and there’s no reason why they can’t be working for your organisation.

When it comes to assessing the organisation’s social impact, ensuring that there is a balanced consideration of potential sustainability initiatives is critical. For example, some organisations that have pay equity issues may need to radically rethink their operating model to be able to deliver a better outcome for their people.

Asset managers who currently work on ESG issues need to assess their operating models too: what is the compensation profile at their organisation? How is the bonus pool distributed? Are gender-diverse people treated fairly? Are there any red flags around hiring processes such as previous salary disclosure?

When it comes to supporting Goal 5, the organisation can consider how it can make a positive impact on women and girls in developing countries. There may be scholarship initiatives, knowledge-sharing programmes, or supply chain diversification initiatives that could help improve the wellbeing of women entrepreneurs.

Some organisations may revisit their purpose and find that because their target markets or primary labour pools are predominantly female, they may want to pivot their operating model to support women-owned businesses and redesign their entire value chain to promote greater gender equality.

Several specialist consulting firms can assist in this area to develop a policy, supporting processes and frameworks and provide assurance that positive gender equality outcomes are in the operating model of the business.

Increasingly, ethical considerations during tender processes mean that firms that are not living what they claim to in their marketing materials when it comes to gender equality may lose out on substantial new revenue. They may not make it past the first round of submissions, or the tenderer may not even invite them to tender for new business.

The business case for incorporating gender equality outcomes into your business’s operating model is quite straightforward. Revenue protection, cost reduction, cost avoidance, and new revenue opportunities are all categories of financial benefit that accrue to firms who take this issue seriously.

The development of policies that enable people to bring themselves to work and attain a reasonable work-life balance further enhance these goals. During reporting on these initiatives, there is no excuse for firms in developed countries not to be able to make a sizeable impact on many of these UN Sustainable Development Goals when many of the actions required on their part are merely becoming the minimum level that the community expects from them as corporate citizens.

Through thinking critically about the entire operating model of a business, and exploring in-depth how the strategy of a firm can be executed creatively, there are many avenues for a firm to adjust its operating model at the implementation layer that changes how its people, processes and systems work to make a positive social impact and deliver value to a broad group of stakeholders around the world, not just its shareholders.

Quality Education And Lifelong Learning

The UN Sustainable Development Goals are a useful high-level framework for thinking about your organisation’s ability to make a positive social impact. The 17 goals cover a broad range of environmental, social, health, wellbeing, education and climate change-related areas.

Your business may be able to make a change to its operating model that could help at least one of these goals. In an environment of ever-increasing stakeholder expectations, particularly for financial services companies, revisiting your purpose and strategy to build a new target operating model that incorporates sustainability outcomes as a critical success marker is vital.

Boards and senior executives should be actively considering how their risk management framework accommodates the identification and management of environmental, social and governance risks. The focus on financial risks has moved towards a focus on operational risks in recent years, however many organisational-level risks still struggle to make appearances in the strategy documents and annual reports of some companies.

Many major global and local companies have gone back to basics and reviewed their purpose – why they exist, and which stakeholder communities they are delivering outcomes for. They want to make a difference for their customers, stakeholders, shareholders, employees, and countries where they operate. Some are clear in their aspiration to make a positive difference for the world as a whole.

A decade ago, these ESG issues were on the radar of boards and senior executives but typically dealt with by way of a press release or modest amounts of spending on a few sustainability projects. This approach will no longer satisfy rising community expectations around corporate behaviour. Their very license to operate in society is at risk if they don’t make changes to their operating model that reflect a higher level of community expectations.

Goal 4: Ensure inclusive and quality education for all and promote lifelong learning

Goal 4 of the UN Sustainable Development Goals is about quality education and lifelong learning for all. Education is an integral part of building a country’s human capital and productivity.

In developed countries, lifelong learning is supported by many employers. In developing countries, rates of literacy and numeracy are still well below where they should be.

Getting a quality education is a vital part of sustainable development. Over 265 million children globally are currently not in school – 22% of them are primary school age.

The sub-goals include targets for raising technical and vocational skills as well as tertiary education. It won’t be cheap to increase investment in education facilities globally. But it’s an investment in the planet’s future.

Some board members and senior executives may believe that these social problems are for politicians and non-governmental organisations to resolve. This way of thinking is increasingly outdated and risks surprising the board and shareholders when a clear communication around increased community expectations is received.

An example of how this could manifest is through the employees of your business. The younger employees no longer want to come to work to be told what to do, receive their pay, and go home. They want to be supporting a clear purpose and strategy that not only helps them self-actualise but helps society.

In developed countries, there are still issues with education and vocational training. To support the Goal 4 objectives, considering how the organisation’s training and people policies support the lifelong learning of employees is one area of potential focus.

Another area of focus could be the provision of scholarships and vocational training support in your industry. Creating supportive pathways from education to valued work is essential to reduce the negative social consequences of people studying for qualifications that don’t land them an entry-level job.

As an example of how individual businesses can make significant impacts on some of the UN Sustainable Development Goals, consider an engineering consultancy. They could partner with a developing country education provider and provide pro bono or heavily discounted consulting services to support the development of educational facilities.  They could offer employees the opportunity to do a 3-month secondment without having to volunteer and incur financial impact.

If an engineering consultancy was to consider this, it communicates how it is making a difference through its actions. When it produces sustainability outcomes reports for stakeholders or needs to respond to questions in a tender response situation, having clear examples of projects its people do for others will increasingly become a vital procurement benchmark to reach.

Board Director And Senior Executive Considerations

From an operating model perspective, through sharing knowledge and undertaking projects in its niche in a developing country would build its employees skills and enable them to share knowledge with host country staff. While there are issues to work through, it should be clear to board members and senior leaders that using unconstrained thinking to decide how your business chooses to make a positive social impact can lead to credible, adjacent opportunities that are genuine win-wins.

 Small projects that are in line with your operating model can mean that helping improve sustainability outcomes is efficient for your business because its in line with the people, process and technology platforms that you have in place already. If your current operating model could support small adjustments to support part of the UN Sustainable Development Goals, then that could be reported on as part of your overall impact.

The business case for many of these sustainability projects is reasonable. Enterprise value in 2020 and beyond will change based on the external perception of how board directors and senior executives identify and manage ESG risks.

If a business is clear about its purpose, value creation and the strategy it has designed accommodates for sustainability outcomes, then creating the right target operating model that ensures sustainability outcomes are delivered from Day 1 should be achievable.

One consequence of going back to basics and incorporating sustainability outcomes into the overall operating model design is that some clear decisions – like eliminating paper-based processes – obviously have a positive impact through reducing paper consumption and waste, but also lead to lower operating costs.

Boards and senior executives should ensure realistic cost-benefit analysis calculations are incorporated into business cases. The clear message from the community is that many groups of stakeholders are highlighting the financial risks to not actively considering ESG risks and adjusting your operating model to ensure that part of the value your business delivers to society is a positive social impact.

Health, Wellbeing And Sustainability Reporting

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The 17 Goals are all interconnected, and in order to leave no one behind, it is important that we achieve them all by 2030. 

https://www.un.org/sustainabledevelopment/sustainable-development-goals/

Is supporting health and wellbeing solely the preserve of companies in the healthcare industry? Goal 3 of the UN Sustainable Development Goals is a complex and detailed one that highlights how far developing countries have come, but also how far they still have to travel to catch up to developed country data on health and wellbeing outcomes.

Increasing life expectancy and reducing infant mortality includes a target of fewer than 70 deaths per 100,000 live births by 2030.

Improving the financing of healthcare systems, boosting economic growth so that countries can afford better healthcare, increasing the number of medical professionals available in developing countries and improving sanitation and hygiene are all ways to improve global health and wellbeing outcomes.

The maternal mortality ratio is still 14 times higher in developing countries, which is a shocking statistic. The specific goals here highlight the enormous gap in health outcomes between developed and developing countries and the importance of taking action to reduce these gaps.

Goal 3: Ensure healthy lives and promote well-being for all at all ages

3.1 By 2030, reduce the global maternal mortality ratio to less than 70 per 100,000 live births.

3.2 By 2030, end preventable deaths of newborns and children under five years of age, with all countries aiming to reduce neonatal mortality to at least as low as 12 per 1,000 live births and under-5 mortality to at least as low as 25 per 1,000 live births.

3.3 By 2030, end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other infectious diseases.

3.4 By 2030, reduce by one-third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being.

3.5 Strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol.

3.6 By 2020, halve the number of global deaths and injuries from road traffic accidents.

3.7 By 2030, ensure universal access to sexual and reproductive health-care services, including for family planning, information and education, and the integration of reproductive health into national strategies and programmes.

3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all.

3.9 By 2030, substantially reduce the number of deaths and illnesses from hazardous chemicals and air, water and soil pollution and contamination.

3. A Strengthen the implementation of the World Health Organization Framework Convention on Tobacco Control in all countries, as appropriate.

3.B Support the research and development of vaccines and medicines for the communicable and noncommunicable diseases that primarily affect developing countries, provide access to affordable essential medicines and vaccines, following the Doha Declaration on the TRIPS Agreement and Public Health, which affirms the right of developing countries to use to the full the provisions in the Agreement on Trade-Related Aspects of Intellectual Property Rights regarding flexibilities to protect public health, and, in particular, provide access to medicines for all.

3.C Substantially increase health financing and the recruitment, development, training and retention of the health workforce in developing countries, especially in the least developed countries and small island developing States.

3.D Strengthen the capacity of all nations, in particular developing countries, for early warning, risk reduction and management of national and global health risks.

https://www.un.org/sustainabledevelopment/health/

Board And Senior Leader Considerations

The specificity of the goals above might make you wonder how your firm can make a positive impact on these goals. What is the business case for a healthcare company giving away services for free, for example? That would be an incorrect take on the situation.

The business case for using the UN Sustainable Development Goals as a framework to understand how your operating model supports or hinders the achievement of the goals is compelling – enterprise value decreases through actions or activities that harm society.

In the current low-interest-rate environment, the discount rate to be used when assessing projects has fallen for many organisations. Higher spending on investment projects to deliver sustainability initiatives can make sense if the payoff to the firm is ongoing and has a long time horizon.

Lower cost financing of these projects is possible through the use of sustainable finance strategies such as the issue of green bonds. Alternatively, borrowing from a bank that focuses on supporting businesses wanting to invest in improving the sustainability of their operating model.

When it comes to reporting on the UN Sustainable Development Goals, an example of how an infrastructure firm that owns toll roads could make an impact on goal 3.6 – reducing global deaths and injuries from road traffic incidents – would be to highlight investments in safety on the toll roads they operate.

What is their safety goal? Zero harm on their toll roads? If so, thinking about how to centre their operation around zero damage to their staff, their road users and other stakeholders could lead to innovations in their operating model and capabilities they have around safety.

Infrastructure funds could use the health and wellbeing goals as part of their operational due diligence on prospective investments – at the business-as-usual level of a target company, are they helping or hindering the achievement of these goals?

The additional sunlight on some companies will highlight how their operations either do not help society outside of the shareholders who earn a return on their capital. These processes may lead to divestment or even shutdown of business units or operations that do not meet new community expectations around social performance.

Every business should at least consider thinking through the totality of the UN Sustainable Development goals and then focusing on those it can impact the most. The board should deliberate on whether the company’s purpose, strategy, and operating model are sufficient to maintain a social license to operate with ever-increasing expectations on the private sector.

The initial assessment of a business to identify its current operating model and how it either helps or hinders each of the 17 goals is a process achieved through workshops and interviews with the board and senior leaders.

The report prepared for senior leaders should drive further examination of the strategy and the portfolio of initiatives underway to realise that strategy help or hinder each of the 17 goals. This way, reporting in the management reports and annual reports can include these factors to be monitored by the board.

A business may find that considering a positive global social impact means that significant changes to parts of its operating model are required. Engaging with external support through this process, including setting up appropriate gateways and monitoring of portfolio, programme and project activity and outputs that take sustainability outcomes as crucial success criteria are essential.

In this series of posts, as I work through each of the UN Sustainable Development goals, it is clear that the ability of a business to positively impact the achievement of these goals is in one of the 2nd level goals or through considering an alternative way of supporting the achievement of the outcome through clever use of scarce resources.

Focusing on the outcomes desired and creatively exploring ways to support them if applicable to your business or industry gives boards and senior leaders freedom to act boldly in a manner increasingly expected by stakeholders and an increasing proportion of shareholders, particularly institutional investors for whom ESG considerations are now standard due diligence for new or continued investment in any asset class.

Zero Hunger, Your Business And Sustainable Development

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The 17 Goals are all interconnected, and in order to leave no one behind, it is important that we achieve them all by 2030. 

https://www.un.org/sustainabledevelopment/sustainable-development-goals/

The UN Sustainable Development Goals are a useful high-level group of global sustainable development goals that can be used as a framework to assess how your business makes a positive social impact.

This series of posts explores each of the goals and proposes some considerations for boards and senior leaders. The rising pressure on business leaders to make genuine changes in their operating model to ensure that their people, processes and systems work together to make a positive social impact means that trade-offs must be made with scarce resources.

Considering how to benefit all stakeholders means that careful consideration of your firm’s purpose business strategy and target operating model to realise that strategy is a crucial part of building a sustainable enterprise.

Traditionally, value creation for shareholders was achieved by delivering value to customers and earning a reasonable profit. Today, value creation for stakeholders is the more popular terminology.

What does this mean? It means keeping customers happy, shareholders happy, regulators happy, politicians happy, industry partners happy, suppliers happy, employees happy, and certification authorities happy.

This mixed group of actors is outside the traditional boundaries of the firm, meaning that when it comes to approaching ESG issues, a press release won’t cut it.

Environmental, social and governance risks have to be identified, triaged, managed, mitigated or eliminated through the risk management process. A board should set clear expectations around how the operating model of the business ensures that the capabilities developed to deliver value to stakeholders actively consider these risks both during project phases and in a business-as-usual environment.

Goal 2: Zero Hunger

Goal 2 of the UN Sustainable Development Goals is Zero Hunger. In 2017, over 821 million people were under-nourished. Over the past few decades, enormous reductions in this number have occurred, but there is still work to do.

Differences in markets and institutions between developed and developing countries can explain much of the problem with hunger. Many states don’t have the infrastructure or even electricity to take advantage of agricultural productivity-enhancing technology at an appropriate scale.

One of the most disturbing statistics concerning hunger is the number of children who die every year from poor nutrition – 3.1 million each year. But merely sending more donations doesn’t solve the societal problems in these developing countries.

Businesses in developed countries can make a positive impact on the goal to reduce hunger in the world. An example of how technology positively impacts developing countries would be the spread of mobile phones, enabling farmers to trade more easily with neighbouring towns and villages to sell their produce or livestock, raising incomes and encouraging more trade inside countries.

One way the private sector can assist developing countries is helping the internal free movement of goods and services. Mobile phone networks, education, infrastructure investment in roads, and assistance with agricultural productivity are crucial.

How might a developed country firm help reduce global hunger? Consider pricing frameworks and intellectual property protections for agricultural productivity-enhancing goods and machinery. Is what makes sense in Canada, a wealthy developed country, necessarily appropriate in sub-Saharan Africa if you’re selling into that market?

How about the issue of subsidies and tariffs? Lobbying for tariffs on some goods predominantly produced in developing countries takes money out of the mouths of the global poor. Even more concerning is marketing cooperatives who play on fair trade to pay a fixed price for goods below the world market price and then capture the price premium for those goods in hipster neighbourhoods in developed countries.

One of the themes in the UN Sustainable Development goals is the removal of unfair subsidies and tariffs that disproportionately privilege farmers in developed countries over farmers in developing countries. If we consider global hunger, losing some farms in the West to keep bringing millions out of poverty in developing countries could be regarded as a reasonable tradeoff as long as the West budgets for appropriate transition payments and arrangements for the impacted farmers.

Banks and insurers don’t need to open a branch in a developing country to make an impact. Letting subject matter experts spend a month upskilling their peers or conducting a training course in a developing country is a modest cost but high impact way of sharing knowledge and capability.

If your global supply chain includes agricultural products exported from developing countries, performing due diligence on the supply chain is essential. Ending unfair labour practices and exploitation of small farmers is something any business trading with these countries should incorporate into their operating model.

One example of how adjusting your operating model to ensure that a positive social impact occurs is by physically tracing the entire value chain for a particular product.

  • Who does the work?
  • How is it done?
  • How are they compensated?
  • Is it fair, giving account to local realities and expectations?
  • Where is it done?
  • Who captures the value?
  • Are there any health & safety concerns?
  • Are there opportunities to provide upskilling or coaching to suppliers?

Corporate Governance Considerations

If your business trades with developing countries, you need to make investments in technology so that qualitative information associated with your supply chain can be captured and analysed for insights.

Setting up a framework for supply chain risk management with the right supporting policies and processes is a complex project. Many businesses are already doing a great job at ensuring the integrity of their supply chain, but this is a topical issue and emerging issues when it comes to agriculture must be monitored.

Eliminating global hunger is just one of the many UN Sustainable Development goals. As an exercise, working through the plans may convince you that your business can only make an impact on 1 or 2 of them. But the activity itself is valuable because using a high-level framework for considering social impact will enhance your understanding of your operating model and offer up possibilities for small adjustments that could make a positive impact on others.

The drive to have companies consider a more comprehensive set of stakeholders doesn’t mean that no one can make a profit anymore. Many sustainable business practices can lead to lower operating costs and enhanced shareholder value.

There is only one planet Earth, and using the UN Sustainable Development Goals as an initial broad set of considerations can help refine the purpose of a business. Simplifying your operating model and identifying business units that may no longer be suitable to own and need to be divested or shut down will be a natural outcome of more boards and senior business leaders thinking about these issues deeply.

ESG Issues, Social License To Operate And Your Target Operating Model

The rise of environmental, social and governance (ESG) issues as a priority for business leaders was a theme of the past decade. To ensure that your firm’s social license to operate continues to be renewed by the community, embedding a positive social impact into your operating model is essential.

A firm’s social license to operate has to adapt to changing community expectations of corporate behaviour. In the fallout from the revelations during the Financial Services Royal Commission in Australia, the extent to which community expectations can drastically shift against any industry is evident.

Ever-increasing considerations and requirements of businesses and how they manage ESG risks mean that balancing scarce resources is more complicated than ever before. Firms have to worry about legislation, regulation, environmental concerns, social impact, social risks, governance issues, operational issues, technological disruption, climate change, responsible investment disclosures, and more.

Designing and implementing a target operating model to deliver a firm’s strategy is vital. A firm needs to focus its purpose and concentrate on the core capabilities required to provide value to customers and other stakeholders.

The UN Sustainable Development Goals provide a useful high-level framework for considering a firm’s global social impact. Are you doing anything that could lead to negative headlines? Are there any small changes to your operating model that could support any of these goals and be an example of how your business is delivering above community expectations?

The Sustainable Development Goals are:

  • No Poverty
  • Zero Hunger
  • Good Health and Well-being
  • Quality Education
  • Gender Equality
  • Clean Water and Sanitation
  • Affordable and Clean Energy
  • Decent Work and Economic Growth
  • Industry, Innovation, and Infrastructure
  • Reducing Inequality
  • Sustainable Cities and Communities
  • Responsible Consumption and Production
  • Climate Action
  • Life Below Water
  • Life On Land
  • Peace, Justice, and Strong Institutions
  • Partnerships for the Goals

The UN Sustainable Development Goals certainly aren’t the only framework for thinking about building a sustainable business or considering how to provide comfort to your stakeholders that your operating model is in line with community expectations. Many companies will be able to make a positive social impact on at least 1-2 of the goals.

How Do Companies Deal With This?

There are ever-increasing pressures from the media, from regulators, from industry bodies, from politicians, and from peers in your industry that mean that a few pages in the annual report no longer cut it – a genuine commitment from the board level down to the operating teams of the business has to be “baked in”.

In this new era, can you ever do enough to satisfy your stakeholders? I’m not sure it’s realistic. The level of constant change in the regulation of financial services, for example, has radically shifted how banks and wealth providers need to spend their investment budgets each year.

If the current level of investment on regulatory and compliance change is half of the spend, and investment in digital transformation or operating model change represents the other half, then which projects need to end to finance spending on sustainability projects?

This reality is where the rubber hits the road – the intersection of idealism around sustainable capitalism with tradeoffs in a commercial context. If a business has to be all things to all stakeholders, then radical simplification of the entire operating model is a high-probability method to ensure that the right trade-offs will happen at executive-level and operational-level.

The fascinating thing about the rise of responsible investment or ESG awareness when making investment decisions is that the light is rarely shone back on the operating models of the asset managers and data providers making these decisions themselves.

Public market investors and everyday people with their retirement savings in their 401(k), superannuation, Kiwisaver or pension increasingly tell market research companies and their providers that they care about not investing in companies that could have a negative social impact.

The plethora of filters available to asset managers means that what one asset manager believes is “responsible investing” is not necessarily what another asset manager defines it as unless they are using the same principles, framework and processes in their investment due diligence process.

When companies make disclosures around ESG issues to their investors, many have done a fantastic job in articulating where they see the risks in their businesses and how they are changing their business to reduce, better manage or eliminate those environmental and social risks.

Key Considerations For Boards And Executives

A key consideration for boards and executives here is that while you can compile an initial list of ESG risks and potential mitigations in a half-day workshop, that is only the beginning of the journey. An ongoing programme of work for some businesses – another substantial investment in people, processes and technology in addition to existing regulatory and compliance programmes of work.

Almost all boards and executive teams are aware of this, but balancing the pressures from shareholders and regulators can be a delicate act. There are earnings pressures, regulatory deadline pressures, and interpretation problems when it comes to how your operating model can deliver compliance with some requirements.

Without deeply examining the purpose of the business itself and going line-by-line through each operating division, hidden risks can remain that emerge at the least convenient time and undermine any previous efforts to promote that the business was trying to make a positive social impact.

The sorts of questions that I would be asking include: what is the purpose of our business? How complicated is our current operating model? How do I have confidence in the data and conclusions in the board reports I receive? How do we know we are ready for the “next” ESG issue that emerges in our industry? Who owns ESG risk in our business? If it is the audit and risk committee, are all members actively engaged in professional development on these issues?

One of the saddening things about reading some of the data attached to each of the UN Sustainable Development Goals is the realisation of how fortunate many of us are to live in highly developed countries. In a sense, many of the issues around managing these risks are “first-world problems”. However, that doesn’t mean that taking such a broad view is unhelpful to a business in an OECD country.

The critical consideration for boards and corporate leaders when it comes to social license to operate is recognising the need to be ahead of the curve on these issues. What is currently acceptable commercial practice today in one of your most profitable service lines or products could be completely unacceptable after a poorly served customer explains their poor customer experience.

A real-time feedback loop now exists between customers and businesses. Regulators, the media and politicians are always watching and listening. Empowering front-line people to do the right thing by customers and removing conflicts and any potential negative perceptions around your value chain are now an essential part of running and optimising your operating model.

Ending Global Poverty And Your Operating Model

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The 17 Goals are all interconnected, and in order to leave no one behind, it is important that we achieve them all by 2030. 

https://www.un.org/sustainabledevelopment/sustainable-development-goals/

A decade ago, few business leaders would have accepted that ending global poverty had anything to do with their business. But the recent decade has shown that social license and community expectations are a critical part of the external factors to your operating model.

A decade ago, understanding and taking action as a business on something like the UN Sustainable Development Goals, would be accomplished with a press release. Now, investors and regulators expect full disclosure of environmental, social and governance issues.

Understanding your current operating model – the value proposition, the principles, the people, the processes and the technology – is complicated enough for many firms. If you are embarking on a transformation, defining the new target operating model and building out the supporting processes and frameworks is tricky too.

The growing pressure from more regulation, legislation and industry standards increases the complexity faced by business leaders. There are so many potential frameworks that you could use to assess where your business stands, that going back to basics is a helpful approach.

Because of the rise of globalised firms, it makes sense to take a global approach to assess the social impact of the components of your operating model. Helpfully, the UN Sustainable Development Goals can provide businesses with an extensive set of considerations to incorporate into an operating model review and target operating model development.

If you aren’t a global business, there is still value in considering how your business can make a positive social impact. If there is a lesson from the past decade, it’s that whatever you previously thought was the boundary of social, regulatory or legislative pressure on business, it is now far more demanding on business than it has ever been.

Many businesses may only be able to impact 1 or 2 of the sustainable development goals, but there is still value in considering all 17 to see if there are areas of your operating model that could change to make a difference.

Goal 1: End poverty in all its forms everywhere

The structure of the UN Sustainable Development Goals is useful for an assessment exercise. Each goal is high-level, there is a set of accompanying statistics describing the extent of the societal issue, and there are a series of detailed sub-goals.

The goal to end global poverty in all its forms everywhere is aspirational. It would be fantastic if achieved, and an initial impression could be that this is wholly unrealistic.

However, there are small things that businesses can do to help reduce the incidence and severity of global poverty. More than 700 million people worldwide still live on less than US$1.90 per day. Having a job doesn’t guarantee a proper standard of living as 8% of employed workers and their families lived in extreme poverty in 2018.

Poverty has many dimensions, but its causes include unemployment, social exclusion, and high vulnerability of certain populations to disasters, diseases and other phenomena which prevent them from being productive. Growing inequality is detrimental to economic growth and undermines social cohesion, increasing political and social tensions and, in some circumstances, driving instability and conflicts.

https://www.un.org/sustainabledevelopment/poverty/

Assessing Your Strategy And Operating Model

Every business has strategic goals it wants to achieve. The operating model is how it structures its capabilities to deliver on the strategy. These capabilities are groupings of people, processes and technology that create value or support value creation.

For example, your operating model is a crucial driver of decisions to insource or outsource capabilities. When you choose to outsource, your supply chain becomes part of your social impact. Enhanced due diligence on your suppliers and their supply chain is required. You need confidence that your business isn’t inadvertently generating a negative social impact through your supply chain.

The UN Sustainable Development Goals provide an additional set of considerations for business leaders when they are reviewing their overall operating model. There are two areas of questioning – business strategy and operating model.

What is your business strategy? What are your strategic goals? When you are thinking about how to create value, are there aspects of this value creation process that do not align with the UN Sustainable Development Goals?

What is your operating model? What are the key capabilities that you have assembled to deliver value? How do these capabilities create a positive social impact? Can they even contribute to making a positive social impact? Are there negative social impacts from some capabilities that your business has?

How is ending global poverty linked to your strategy and operating model? One helpful mental model is to think about the frontpage rule – is your business doing anything inside its operating model globally that could lead to a headline that accuses your company of perpetuating global poverty?

The location of your physical operations is a crucial consideration when it comes to helping end global poverty. Do you have factories, mines or offices in developing countries? If so, do you have a policy framework for ensuring that you are generating a positive social impact in these countries? Have your risk and compliance teams embarked on enhanced due diligence of your supply chain and recruitment processes in these countries to identify any areas of risk or potential exploitation?

The great news is that almost all global businesses already have robust frameworks in place to ensure that these environmental and social risks are identified and well managed. You can read about these efforts in their annual reports. They regularly engage consultants to benchmark their approach against global standards and identify further remediation required.

The change in thinking for businesses wanting to make a positive social impact is that when making a low level operating model choice, there are multiple competing priorities. Having a principles-based target operating model that gives business leaders the ability to choose different components is essential.

I think that businesses who do not currently use a broad framework like the UN Sustainable Development Goals to explore how they could make a positive social impact are missing something. There is an opportunity to use these goals as a differentiator and to identify how each key capability of your business not only creates value for customers and shareholders but aligns to these goals.

The goals and expectations of your employees matter too. Most millennials care more about the purpose of the work they are doing than the commercial drivers. They understand that a business has to make a profit, but if the operating model that delivers that profit helps create a positive social impact and supports the goal of ending global poverty by 2030, then that is another compelling reason for them to come to work.

Next Steps

  • Take a look at https://www.un.org/sustainabledevelopment/poverty/
  • Think about how your business could help reduce global poverty
  • Think about what your employees expect your social impact to be
  • Think about how your current operating model helps or hinders these goals

What are the UN Sustainable Development goals?

The UN Sustainable Development Goals are a collection of 17 high-level goals that serve as a blueprint for “a better and more sustainable future for all”. The United Nations General Assembly set them in 2015, and the goal is to achieve them by 2030.

ESG or “environmental, social and governance” issues are top of mind for regulators, legislators, and corporate leaders. The UN Sustainable Development Goals serve as a useful framework for thinking about how your enterprise currently operates and how it could change to enhance its impact on society.

Over the next few weeks, I will outline some considerations for corporate leaders for each of the goals. I will pose many of them as questions around the relevant components of your operating model.

The Hierarchy of Leadership Capability

The Hierarchy of Leadership Capability 2020

This diagram is a very simplified way of representing something I’ve been working on recently – a framework around leadership capability and how every organisation requires capability at each level of the pyramid.

The main idea is that you can’t be tactical unless your operational execution is optimised, you can’t be strategic unless any tactical plays are optimised inside the boundaries of the chosen strategy and you can’t be visionary unless each of these capabilities is aligned and operating at peak efficiency.

Visionary – a person of unusually keen foresight. 

Dictionary

An example of a visionary leader would be Steve Jobs, Charlie Munger or Bill Gates. A visionary doesn’t just have a vision. They are able to communicate the vision clearly and concisely and convince people to believe in helping them realise it.

There are very few visionary leaders. Many leaders believe they are visionary leaders but engage in behaviour that is counterproductive to getting the best out of their people. Many are attempting to be strategic, but actually leading tactical moves informed by their experience in operational level roles.

The hierarchy of leadership capability is one of those mental models I find helpful. For your own organisation, you could probably work through your organisation chart and categorise key people in each layer and identify under-utilised strategic leaders to help drive your strategy forward.