Companies are having to do a difficult balancing act with their sustainability plans. On one hand, they must focus on environmental goals such as improving the efficiency of their water use and reduce their waste and emissions. On the other, they must engage with a growing set of social pressures that undermine their license to operate: unequal access to water and land, food insecurity, and youth unemployment surrounding them in the developing countries in which they operate.
The challenge with this is that business leaders tend to be more comfortable with the environmental goals, which require technical, engineering and managerial acumen, than the social pressures, which call for more complex political engagement. However technology alone cannot solve the problem of social inequality, which is increasingly testing the credibility of even the most sophisticated corporate sustainability plans.
Pivotal to these issues are the Sustainable Development Goals (SDGs), the new universal framework that captures the scope of these issues, providing a vision for positive change. Much has been made of the role that business should play in advancing the SDGs, as most of the issues advocated by the SDGs - from decent work to taxation or pollution - are directly material to business operations and growth. However, only a small handful of companies have so far managed to develop credible and meaningful approaches that don't feel superficial or tokenistic.
Business diplomacy for sustainable development
In the absence of clear signals from national governments on which SDGs the private sector should focus on in their country, companies have to hone their 'business diplomacy' skills for sustainable development. This idea recognizes that business will have to work with local actors on real solutions that improve the social and environmental conditions where they operate. For companies, it means seeing the SDGs as a 'materiality framework'; identifying the local development challenges that pose material risks to their business and becoming proactive agents of change.
For example, food and agriculture companies sourcing commodities from countries like Indonesia or Paraguay, are unequivocally exposed to illegal deforestation and land tenure conflicts in their supply chains. This is a product of weak local governance; and it undermines credibility when companies commit publicly to 'zero-deforestation' or 'zero land-grabbing' targets for their value chains. The only way companies can overcome these risks is by partnering with governments to strengthen land tenure and forest governance in countries that are vital to their operations.
Only a very small number of multinationals have taken the bold step of managing land tenure risks by helping communities secure their land titles. However this is the right strategic choice for companies making long-term investments in regions where social inequality and poor governance undermine sustainable land-use.
Similarly, in much of the African continent, high unemployment rates are pushing governments to impose high 'local content' requirements on companies in export-oriented sectors like extractives. This means companies must hire a majority of local people - a demand businesses see as a risk to projects and a short sighted way to promote jobs in the country. Helping governments to create employment on a greater scale, for example by supporting SME development and using their procurement channels to support local enterprises, must be a priority for these companies. They must aim to rally, individually and collectively, around the SDGs on decent work and implement partnerships with governments that visibly strengthen local economies.
Assimilating local priorities
Social inequality and poor governance are real obstacles to the growth of organisations in emerging markets. Adopting a 'business diplomacy' position means involving corporate functions beyond sustainability, for example including strategists and government affairs departments to maximize the role of corporate lobbying as a force for positive change.
Strengthening decision-making through 'business diplomacy' goes way beyond a linear problem/solution approach. It requires companies to develop a holistic view of interdependent development factors that are shaping their local reality. It requires public-private partnerships to consider how to build the capacity of governments to address inequality.
With tremendous stress factors at play, the private sector has no choice but to engage with sustainable development agenda. The SDGs provide a useful framework to identify material business risks; and companies must use that framework to align their direction of travel for their growth to be sustainable too.