Risk and opportunities come with ESG commitments, which include advancing the SDGs.
In a recent article, Latham lawyers highlighted the increasing importance of environmental, social, and governance (ESG) issues in corporate decision-making and how companies are linking ESG issues to the United Nations’ 2030 Sustainable Development Goals (SDGs). As investors, community members, and other stakeholders increasingly prioritize ESG issues, a number of entities have publicly committed to advancing the SDGs. In the corporate sphere, ESG issues form a thread that runs through many key organizational activities, including public disclosures, mergers and acquisitions, project finance, supply chain management, regulatory compliance, capital raising, human capital management, environmental compliance, and public disclosures. The SDGs can provide a unifying structure by which to establish ESG-related performance goals, and to prioritize and implement ESG initiatives.
The 2030 UN Agenda for Sustainable Development
The UN SDGs were adopted in September 2015, with the aim of accomplishing targets by 2030. The SDGs aim to combat and reverse the world’s systemic global economic, social, and environmental challenges through collective action by the world community. In particular, the SDGs focus on addressing global issues defined according to 17 goals, including good health and well-being, eradication of poverty, gender equality, and environmental sustainability. They provide a framework within which participants can set their own specific targets in the areas material to their operations.
Integration of the SDGs
Corporate commitments to advancing the SDGs are currently on the rise. In 2017, the UN Global Sustainability Index Institute found that 75% of the world’s 400 largest blue chip companies have publicly highlighted such commitments. This is unsurprising given global sustainability trends, including increased global pressure on corporations to disclose information on their ESG performance.
Organizations may use the SDGs as a guideline by which to set internal goals, implement strategies to achieve those goals, measure ESG performance, and craft communications to stakeholders on ESG issues. How targeted and specific those goals are varies by organization.
Focus on ESG and sustainability issues is growing at a rapid pace, with constantly evolving regulations, policies, and industry practices. Companies are increasingly paying attention to ESG risks and performance across the board. Legal counsel can play an important role in helping companies use the SDGs to manage corporate governance and ESG issues while creating value.
This blog was prepared with the assistance of Sumner Hanula in the Washington, D.C. office of Latham & Watkins