Social responsibility in today’s world

High impact risks

The world is changing rapidly. Increasing globalization, rapid urbanization, competition for resources and increasing inequality affect the quality of life. At the same time, climate change is throwing nature off-balance in ways we cannot predict – resulting in extreme weather events which cause unwanted abundances or shortages in water availability. The World Economic Forum’s (WEF) latest global risks assessment lists extreme weather events and natural disasters among the top 3 most likely risks. These two risks, along with water crises, failure of climate change mitigation and adaptation, and food crises are also in the top 7 risks with the largest impact. 

Impact on traditional business

The above-mentioned trends will impact businesses or their supply chains, and are likely to challenge traditional business models across many sectors. Businesses must take this into account while setting their strategies. Subjects like availability of resources, increasing inequality and climate change adaptation and mitigation must become an integral part of the planning cycle of companies and are best served by an integral approach to sustainable business planning, incorporating environmental and social considerations in addition to financial ones.

Treating sustainability as ‘business as usual’ instead of as an add-on is underpinned by a number of recent developments, be they legislative such as the European Non-Financial Reporting Directive or voluntary – but not to be missed if you want to differentiate yourself as a business.

Lowering carbon emissions – Paris Agreement

In December 2015 governments, businesses, and NGO’s signed up to the Paris Agreement, endeavouring to keep global warming within 2°C. On 5 October 2016, at least 55 Parties of the Convention, accounting in total for at least 55% of the global greenhouse gas emissions, had ratified the agreement and it entered into force on 4 November 2016. Countries now have to set their so-called Nationally Determined Contributions (NDCs) to be translated into legislation, which will lead to restrictions on carbon emissions or possibly to carbon taxes.

The Paris Agreement should not just be considered a burden. A study already released by non-profit CDP in 2014 indicated that corporations that actively manage and plan for climate change secure an 18% higher return on investment (ROI) than companies that do not – and generate a 67% higher ROI than companies who refuse to disclose their emissions. Apart from continued access to financing, reduction of carbon emissions also brings the opportunity to reduce production costs and ensure future access to resources either directly or through the supply chain – for example, businesses are increasingly requesting their suppliers to comply with their strengthened supplier codes. Meanwhile consumers are becoming more aware of the impact their purchasing behaviour is having.

Sustainable Development Goals

On 25 September 2015, the United Nations launched the Sustainable Development Goals (SDG’s), a set of 17 goals and 169 associated targets directed at sustainable development around the world. The goals were developed and agreed upon by all governments in an inclusive process to which 1,500 companies from around the world and non-governmental organizations contributed. The SDGs address the most pressing global issues, such as hunger, health and climate change. They are universal, applying to all countries and all people.

Companies are requested to contribute to the SDGs by linking their business targets to align with the SDGs or to come up with new growth strategies and/or business models. The SDGs are looking ahead towards 2030, so a long-term focus is needed, working towards adding value to society.

In consequence, businesses will become more purpose-led, rather than just financially-driven. Integrating the SDGs into the core of corporate strategy is the way for business to contribute towards them. The next step is to move from words to deeds. Concentrating on a selection of SDGs increases effectiveness.

PwC have researched   how businesses report on the SDGs, indicating that in 44% of the reports they assessed the SDGs were explicitly mentioned. SDG-related indicators and corresponding targets were only mentioned in 13% of the reports, whereas a qualitative statement related to the indicators assessed by them was found in 64%, indicating businesses report on SDGs but do not necessarily make the link. SDGs relevant to a business are the ones closely linked to a company’s core activities. The SDG Compass   launched by GRI, UNGC and WBCSD provides guidance and an inventory of business-specific SDG indicators. Additionally, the PwC report on navigating the SDGs can provide some guidance. 

For the pet industry, for example, the challenges faced in the food and agricultural system are of relevance when setting up short and long-term business activities. A change in the system as envisaged by the Business and Sustainable Development Commission will impact food availability for the pet industry. Based on the countries in which a company has its operations, it makes sense to take into account the national SDG priorities adopted by the governments. The Netherlands have made a first attempt in measuring where it stands with regard to the SDGs. Other countries have done the same.

Increased social and environmental consciousness

Businesses generate revenues. The belief is rising that economic growth cannot be sustained if it depletes the underlying natural and environmental capital upon which wealth creation depends. To gain more insight into how a business impacts the environment, people and society at large, so-called environmental and social profit and loss accounts are created. 2016 saw the publication of the Natural Capital Protocol (NCP; 13 July 2016) and Social Capital Protocol (SCP; pilot test version September 2016). Not realizing the impacts they can have on your business will increase the risk of running out of business. Both Protocols are voluntary but not to be missed.