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.