SDGs increasingly present in companies but socio-economic scenario jeopardizes the drive towards sustainability

The incorporation of sustainability into business practices is here to stay and SDGs are increasingly present. However, the post-pandemic socio-economic scenario and the stormy landscape caused by the war in Ukraine add new risks to the ability to re-focus current development models and respond to the climate and environmental crises, inequality and definitively dealing with the pandemic. This is the main finding of the SDG Observatory’s 5th report, Obstacles in the shift towards sustainability, drafted by the Esade Chair of LeadershipS and Sustainability in conjunction with the Social Observatory of “la Caixa” Foundation, which highlights the main obstacles that companies face when incorporating sustainability including particularly – in the present-day scenario of the recovery and economic transformation strategies implemented after the pandemic with NextGenerationEU funds – the new regulations and the upsurge in ESG criteria.

According to Àngel Castiñeira, director of the Esade Chair of LeadershipS and Sustainability and co-author of the report, “more efforts and resources must be earmarked for mitigating the fallout of the pandemic and the energy shift upon society, particularly amongst its more vulnerable members. In this uncertain scenario, it is more important than ever for leaders to be acutely aware of the seriousness of the challenges and decidedly committed to finding and implementing effective, long-lasting solutions.”

Obstacles and progress towards sustainability

The report presented today at the Macaya CaixaForum indicates that the pandemic has heightened the importance of social, environmental and governance issues. Increasing numbers of companies are committed to sustainability and adopting net zero strategies for 2050, taking part in public-private alliances and driving initiatives to lead change. But it also warns that, despite the progress in adopting this common framework, economic factors are still prioritized over other aspects of sustainability, and short-term needs clash with the development of long-term sustainable strategies.

In this respect, the authors of the report point out certain difficulties that companies must bear in mind. On the one hand, the wide range of strategic obstacles facing companies in their every-day operations: obstacles not always contemplated in legislative frameworks or the funding mechanisms of sustainability policies. On the other hand, social customs and corporate practices regarding sustainability advance at different speeds. Likewise, the risks inherent in the application and use of technology will climb as digitalization and the use of AI increase, possibly causing ethical dilemmas about privacy.

Anna M. González, head of projects at the Esade Chair of LeadershipS and Sustainability and co-author of the report, emphasized that “the commitments to sustainability undertaken by states and companies must be accompanied by actions that help society understand the paradigm shift and thus mitigate the negative impact they may have upon certain activities and more vulnerable members of society.”

The study also reflects the great progress made in the corporate governance of sustainability. Boards of directors play an increasingly important role in decision-taking about business sustainability through their committees. In addition, the companies interviewed during the analysis emphasize that the commitment and involvement of their CEO makes a big difference when incorporating sustainability into the company. Ferran Curtó, associate director of the Esade LeadershipS and Sustainability Chair and co-author of the report, says that “CEOs and those responsible for sustainability must move towards systemic leadership models. These models regard organizations as systems that are completely permeable and interdependent with their social and environmental surroundings. Leaders must increasingly act as catalysts for collective change through alliances and processes of reflection involving different stakeholders”.

Increase in SDGs and contribution to 2030 Agenda

Companies are increasingly involved in sustainable development. According to the SDG Observatory’s 5th report, which measures the contribution of 101 Spanish listed companies to the 2030 Agenda, the percentage of companies providing non-financial reporting has increased by 14% in just one year, up from 72% to 86%. In 2021, 77% of companies that disclosed non-financial information mentioned SDGs in their annual reports, an increase of 4 points over the previous edition of the report (73%), thereby confirming that this has continued to move in the right direction since 2017 when just over half of these organizations mentioned SDGs in their reports. In addition, the presence of SDGs has become widespread in all sectors. Since the first edition of the report, companies in the energy and technology sectors have led the way in this respect. The field of real estate services, despite their mentions having increased from 27% to 55% in a single year, continues to lag behind in last place.

The SDGs mentioned most often in company reports are SDG 8 (Decent work and economic growth), mentioned by 70% of companies; SDG 13 (Climate action), mentioned by 66%; followed by SDG 9 (Industry, innovation and infrastructure), SDG 12 (Responsible consumption and production) and SDG 17 (Partnerships for the goals), mentioned by 6 out of 10 companies. SDG 2 (Zero hunger) and SDG 14 (Life below water), however, continue to be sidelined and are mentioned by less than 20% of companies.

Greater accountability

The report by the Esade SDG Observatory and “la Caixa” Foundation analyzes the reports published by Spanish listed companies and defines five large areas deemed to be priorities in the field of sustainability by certain organizations such as the United Nations (UN), i.e. governance, prosperity (economy), people (society), the planet (environment) and materiality in the sense of the analytical processes enabling companies to reorient their strategy on sustainability.

ESG criteria are buzzwords in companies’ sustainability reporting. According to the analysis, Spanish listed companies are more likely to be accountable and transparent to their stakeholders, an essential condition for pinpointing important issues that enable the strategic integration of sustainability into the company. In this respect, 86% of companies in almost all sectors have already incorporated the materiality process into their reporting as a basic concept.

More circular economy but less gender equality in the report

The report also examines prosperity, a sphere that includes non-financial, economic aspects linked to the company’s impact on its environment, such as the creation of value as a driver for growth, innovation, digitization and the circular economy. In keeping with this, the study highlights that two of every three companies include the circular economy in their reports. To be precise, this is the case of all companies in the energy market, followed by those in technology (86%), industry and construction (80%), consumer goods (43%) and consumer services (36%).

As for considerations involving people, the percentage of companies that mention gender equality policies has fallen somewhat. Although there have been some improvements in the reporting of equal opportunities and diversity in the workforce, the number of companies mentioning discrimination in staff recruitment has worsened slightly. In 2021, 43% of companies reported on it generally and only 4% in detail (in both instances, 2 points below 2020). Reporting about wage discrimination has also worsened. In 2021, 39% of companies mentioned this type of policy, 10 points less than in 2020. Reporting about work-life balance, on the other hand, has risen from 16% to 25%. The situation is similar as regards protocols to prevent abuse in the workplace, the reporting of which has increased by two thirds compared to the previous year.

Consumption of renewable energy is stalling

In the area concerning the planet, the percentage of listed companies that say they consume renewable energy has stalled and fallen one point compared to the previous year (from 67% to 66%). According to the report, the progress made by companies reporting the scope of their CO2 emissions varies. As regards scope 1 (own emissions), a decline from 74% to 70% was observed from 2020 to 2021. The reporting of scope 2 emissions (purchased energy emissions) increased by six points to 69%. Finally, the report underlines the urgent need for measures to combat climate change and drastically reduce emissions, and warns that at present, only a very low percentage of companies have policies for dealing with hazardous waste: 77% of companies have none, 20% mention it superficially, and just 3% describe what they do in detail.