As more investors and stakeholders demand SDG action and are holding organisations to report their impact on the goals, they create governance and accountability challenges. Organisations must, therefore, try to understand and account for their impact on the systems that contribute to the achievement of the goals.
Bodies and stakeholders use your exhaust data to benchmark your organisation’s sustainability performance and test the robustness of your strategy. Exhaust data is simply the digital trail of ‘breadcrumbs’ organisations leave that stakeholders can then hoover up to increase their understanding of an entity’s sustainability performance landscape and long-term viability. One example is the World Benchmarking Alliance. It has assessed 2,000 of the world’s companies, measuring contributions to the SDGs and ranked the most influential.33 The reality is, if you are not measuring and reporting on your organisation’s SDGs impact, somebody else is. Time to tell your organisation’s SDGs value story, that speaks to multiple stakeholders.
It is important to remember that the goals are deliberately aspirational. They provide a framework for reasonable or responsible practice that governments, businesses and other organisations use. However, the goals can be difficult to translate from things designed for international treaties, ateinternational governments into different contexts, institutions, businesses, communities and regions.34
The goals should not be thought of as a list of KPIs or a business scorecard. They do not stand in isolation: they represent underlying systems and grand challenges that require the engagement of a diverse range of organisations and stakeholders across the world. Therefore, organisations, finance functions and finance professionals need to think about the goals in a systemic light.
A Mindset for the goals: Systems and Integrated Thinking
A ‘systems thinking’ approach will help organisations when tackling the goals. Systems thinking is not a new approach and can be traced back to the work of Professor Jay Forrester at the Sloan School of Management, MIT in the 1950s.
It is an approach to problem-solving that views issues as part of a wider, dynamic system. In terms of the goals, it is the process of understanding how things influence goals individually and also one another as part of a whole. Take poverty as an example. It is connected to a whole range of other systems to do with welfare and economic development.
Dave Goulson, in his book, Silent Earth: Averting the Insect Apocalypse, demonstrates the complete lack of systems thinking when understanding the complexity of issues leading to biodiversity loss.
The lesson for working with the SDGs is to view the whole 17 goals as subtly interconnected, rather than purely focus on them individually and independent of each other. It is also important to be able to see the patterns of change and feedback loops between goals that together give the system of a sustainable economy its unique character.
The systems thinking approach helps in the breaking down of information silos within an organisation, and embedding interdisciplinary conversations externally with supply chains, scientists, policymakers and local communities.
In the accounting discipline, finance professionals might be more familiar with the concept of ‘integrated thinking’. Its roots are in systems thinking, and, in the early 2000s, the establishment of the International Integrated Reporting Council (IIRC) championed the concept. The Value Reporting Foundation (established in 2021 with the merger of the IIRC and SASB) defines integrated thinking as, 'the active consideration by an organisation of the relationship between its various operating and functional units and the capitals that the organisation uses or affects — inputs, outputs and outcomes'.37
‘The capitals that the organisation uses,’ refers to the six capitals of integrated reporting that help organisations explain to stakeholders how they create value.
Financial — The pool of funds that is available to an organisation for use in the production of goods, the provision of services or obtained through financing
Manufactured — manufactured physical objects (as distinct from natural physical objects) that are available to an organisation for use in the production of goods or the provision of services
Intellectual — Organisational, knowledge-based intangibles
Human — People’s competencies, capabilities and experience, and their motivations to innovate
Social and relationship — The institutions and the relationships within and between communities, groups of stakeholders and other networks, and the ability to share information to enhance individual and collective well-being
Natural — All renewable and non-renewable environmental resources and processes that provide goods or services that support the past, current or future prosperity of an organisation38
Once there is an understanding on how the goals behave and relate in a system, it is important not to consider it a one-time activity. As the world continues to rapidly change, the choices and opportunities of an organisation to affect the goals evolve. The Value Reporting Foundation emphasises, ‘Integrated thinking should be seen as a continuous journey, one that evolves and one that continues to promote collaboration across all sections of an organisation.’39
Steps to SDG accounting
To help, Ian Thomson and his colleagues at the Centre for Responsible Business developed a series of exercises and tools to bring the goals to life and to help embed them within an organisation’s governance; strategy; risk management; and metrics and targets.
They are high level and designed to get people thinking about the relationships that an organisation has with the systems underpinning the goals. Without the understanding that the steps bring, an organisation is at risk of cherry-picking specific goals that are easy to support, rather than prioritising the goals where it is most important to focus.
Step 1 — Purpose mapping
The purpose map is a way to understand the relevance of each of the goals and the relationship between an organisation and its wider ecosystem.
Start by categorising the goals by those:
That are part of the CORE organisation activity
That are IMPORTANT to the organisation
Over which the organisation has INFLUENCE
Next, place each of the 17 goals onto a map, based on this analysis.
Finally, draw links between the goals to highlight any impact pathways (e.g., inputs, activities, outputs, outcomes and impacts).40 For example, an organisation in the health and beauty industry might put goal 6 (clean water and sanitation) at its core, if part of the business is about providing sanitation products. Goal 14 (life below water) might seem less vital to the organisation, so it will be placed in one of the outer rings. But these two goals are linked and link to other goals, such as goal 13 (climate action).
Creating an SDG Purpose Map highlights the links between the goals and forces an organisation to ask the questions,
Do we do this?
Could we do this?
Should we do this?
Step 2 — Dependency, control and impact-mapping
This involves considering dependencies and impact. Organisations are dependent on a whole range of systems that link to each of the goals, such as health care, biodiversity and economic systems.
There is often a tendency to assume that systems will always continue as they are now. However, the COVID-19 pandemic has highlighted the dependencies an organisation has on wider systems, and how when something changes it affects the ability to continue with business as usual.
Start by creating a table with four quadrants for goals:
Where the organisation has a dependency on
The organisation has some control over
The organisation positively affects
The organisation affects negatively
The goals should then be placed on the table. It is possible some goals might appear in multiple quadrants. This indicates a particularly complex goal/organisation relationship.
When doing this step, watch out for zones of ignorance or blind spots. These normally fall in the dependency and positively affected quadrants. Organisations tend to bias their decision-making to what they have control over, and, where there are negative affects.
However, this focus often leads to dependencies and positive affects being missed from the information systems. Consequences include missed opportunities in terms of where an organisation has the potential to have a positive impact and risks associated with blind spots to dependency cause and effect chains.
Step 3 — Lifecycle assessment
The lifecycle assessment helps an organisation understand the greatest impacts on a product and its relationship with the goals. Lifecycle assessment focuses on the three value-chain boundaries of an organisation,
Own operations — All activities within operations that an organisation has direct control.
Upstream — All activities, resources and products that an organisation has purchased from suppliers.
Downstream — All activities linked to direct, product use by end consumers and product end-of-life.43
Start by considering the upstream, downstream and operational elements of the product lifecycle. Then map which goals are positively and negatively affected upon at each stage of the lifecycle.
Creating this matrix identifies whether the greatest product impact comes within,
the supply chain;
the organisation; or
the post-sale.
By adapting this relatively standard way of thinking, an organisation gains a new understanding of the relationships between operations and the systems underpinning the goals.
Step 4 — SDG KPIs Matrix
This matrix helps to highlight the zones of ignorance for an organisation within its key performance indicators (KPIs) and targets. These functional blind spots within an organisation are where future risks and disruptors lie. If only a few SDGs are fully measured, others are partially measured and many are largely ignored, an organisation will have a misleading view of its relationship with society and the planet. Decisions will then be made on partial data.
Start by looking at the organisational key performance indicators from the perspective of the SDGs and consider the extent to which the SDGs are measured or not. Each SDG should be assessed as to whether the organisation’s KPIs.
fully measure it,
partially measure it,
inaccurately measure it, or
miss it completely.
By considering the connectedness and misalignment between organisational KPIs and the SDGs, an organisation can sense-check that their information systems, decision-making processes, performance measures, incentives and sanctions and governance truly link back to their stated purpose.
Step 5 — SDG Impact Evaluation Matrix
The SDG Impact Evaluation Matrix is a dashboard that helps an organisation see and understand the links between different potential scenarios and the SDGs. It creates a nuanced and rich understanding of the dynamics at play and the consequences of actions in these scenarios. In addition to identifying risks, it can also uncover many positive impacts that an organisation has or could potentially have.
Begin by sorting the goals. Start with the most relevant goals to the organisation, as identified in step 1 — purpose mapping.
Next consider the impact of a scenario on each of the goals. Rate whether the scenario’s impact on the goal is,
positive (green upward arrow),
less certain (amber arrow),
negative (red downward arrow) or
of no impact (remains blank).
Example scenario 1: If an organisation decides to pay a living wage to all employees. This is likely to have a positive impact on,
Goal 8 (decent work and economic growth): indicated with a green upwards arrow.
Its impact is less certain on,
Goal 15 (Life on land): indicated with an amber upwards arrow.
This is likely to have no impact on,
Goal 14 (Life below water): remains blank.
Example scenario 2: If an organisation switches to electric delivery vehicles: This is likely to have a positive impact on,
Goal 3 (Good health and well-being) — reduced air pollution.
Goal 13 (Climate action) — reduced greenhouse gas (GHG) emissions.
This is likely to have a negative impact on
Goal 15 (Life on Land) — possible biodiversity loss because the extraction of some of the resources used in manufacturing electric batteries can be highly damaging.
It is important to consider every goal for each action, as there may be connections that do not seem immediately obvious. Focusing on just four SDGs, for example, creates 13 zones of ignorance which are essentially future risks and potential disruptors. That ignorance is then built it an organisation’s evaluation systems and performance measurements creating areas of SDG unknowns.
Step 6 — A SDGs Tube Map
This approach, based on the concept of the famous map of London’s underground transport network, is a way of considering how elements of a system are connected. The map displays the route connecting the SDGs to the Unsustainable Development Goals (explored in the Why? section).
Routes connecting the two versions of each goal show the key elements that will ensure the world ends up with a positive version. The map concept helps identify the critical ‘stations’ or factors, such as education or purposeful leadership, which are necessary to achieve several goals and without which progress will be hindered. For example, to avoid climate chaos, key elements are education, leadership at every level, purposeful leadership and healthy ecosystems.
Organisations can use this concept and create their map to understand the elements that will be needed to achieve each SDG. It can help highlight which policies might be needed to meet certain goals, and which departments and teams need to be included in the conversation. For example, ensuring responsible consumption would require input from procurement to ensure that supply chains are ethical and sustainable. While gender equality would need to involve HR as well as leadership to ensure that messaging is consistent throughout the organisation.
The tube map example below is one Thomson with Business in the Community (BITC) developed. It shows routes through the different parts of the Responsible Business Tracker and highlights the types of policies and procedures that an organisation should have in place to ensure the goals are met. (More details on the Responsible Business Tracker are in the practical tools and resources section). The tube map concept can be changed to have departments, products, services or even regulations as ‘stations’. It quite literally creates a route map to achieving the goals.
These approaches and steps remind us that rather than attempting to make every goal relevant to every business, it is more powerful to consider the impacts of the business on the resilience of the underlying systems and feedback loops within which they operate.
