The private sector has taken on the United Nations SDGs with wild enthusiasm. Compared to the MDGs, the previous global goals pertaining to 2000-2015 which were primarily known to multilateral, governmental and social sector actors, the SDGs offer a way for the private sector to publicly signal their commitment to improving the well-being and sustainability of people and planet.
In order to live into the wild enthusiasm, mitigate the risk of impact washing by simply “SDG tagging,” and to establish an authentic commitment to measuring and managing impact of economic activities, UNDP has produced a “best practice” guide for organizations to embed impact considerations into their decision-making and practices that involves an extensive stakeholder feedback process. Featured prominently in that guide is the importance of engaging stakeholders across impact strategy, impact management approach, transparency and accountability, and governance.
|Here’s how it works
The SDG Impact Standards are structured around four interdependent themes that reflect how organizations are run and which are the core of the implementation of the standards: strategy, management approach, transparency and accountability, and governance. Each of these themes include specific, concrete practice standards. The charts below lists indicators for implementing specific stakeholder engagement practice standards within each of the four themes. This chart is geared toward enterprises; however, parallel content has been developed for bond issuers and private equity funds too.
|1. STRATEGY–The Enterprise embeds contributing positively to sustainable development and the SDGs into its purpose and strategy, and sets ambitious impact goals.
|1.1 The Enterprise embeds contributing positively to sustainable development and the SDGs into its purpose and strategy.
1.1.6 The Enterprise has a formal engagement plan to effectively involve Stakeholders on an ongoing basis to understand outcomes that matter to them.
|2. MANAGEMENT APPROACH – The Enterprise integrates impact management into its management approach to optimize its contribution to sustainable development and the SDGs.
|2.1 The Enterprise has effective processes and other mechanisms to deliver on its strategy and impact goals
| Practice Indicators:
2.1.3 The Enterprise implements a formal approach to involve Stakeholders on issues that impact them, including by: (i) supporting Stakeholder involvement with adequate budget and resources (including training and local leadership), and (ii) transparently keeping Stakeholders informed of actions, progress, and lessons.
2.1.6 The Enterprise implements a formal approach to ensure its impact management practices continue to improve over time and remain fit for purpose including by:
220.127.116.11 incorporating lessons from its engagement with partners and Stakeholders and updated research and evidence
2.2 The Enterprise assesses and compares the material positive and negative impacts associated with its products services, and operations and makes choices between options to optimize its contribution to sustainable development and the SDGs in line with its impact goals.
2.2.4 The Enterprise considers which metrics to use and how much data is sufficient to make a decision including:
18.104.22.168 selecting and using decision-useful outcome metrics (i.e., rather than activities or output metrics) that: (i) wherever possible include context by taking into account what matters most to the Stakeholders experiencing the outcomes, (ii) value outcomes consistently using wellbeing as the common measure, and (iii) provide the required level of confidence that the targeted outcome is being achieved
|3. TRANSPARENCY – The Enterprise discloses how it integrates contributing positively to sustainable development and the SDGs into its purpose, strategy, management approach, governance and decision-making, and reports (at least annually) on its performance.
3.3 The Enterprise implements reporting mechanisms to meet the needs of Stakeholders affected by its activities and the civil society organizations that act on their behalf, including considering additional non-public, tailored reporting or changes to existing public reporting to make disclosures more relevant and accessible to a broader range of Stakeholders.
|4. GOVERNANCE – The Enterprise’s commitment to contributing positively to sustainable development and the SDGs is reinforced through its governance practices.
4.1 The Enterprise’s governing body has active oversight of matters relating to:
4.1.1 the Enterprise’s policies concerning respect for human rights in line with the UNGPs, planetary boundaries and other responsible business practices, including its effective grievance and reparation mechanisms with whistleblowing safeguards for affected Stakeholders, and its performance and conformance against those policies and associated practices
4.1.2 Stakeholder complaints and remedial actions taken (ensuring no instances of adverse findings without having adequate remedies in place)
4.1.3 the Enterprise’s process of Stakeholder identification and involvement in decision- making.
4.1.6 the compatibility of the Enterprise’s impact goals, financial return targets, and its and Stakeholders’ impact risk appetite and tolerance.
4.1.7 adequacy of the Enterprise’s budget and resources to manage Stakeholder involvement effectively and to deliver its strategy and impact goals.
4.1.9 a separation between roles of drafting and approving impact goals, where those approving the goals recognize they are acting in both the interests of the Enterprise and Stakeholders likely to be impacted
These practice indicators are NOT mandated or required. Rather they offer actionable approaches to stakeholder engagement that enterprises (or impact investors) can incorporate within their management systems. Further, they signal the rigor needed for impacting sustainable development and the SDGs based on respect for human rights within the realm of responsible business activities.
The most profound benefit of these standards for enterprises, private equity, and bond issuers is clarity. While a number of high level principles and frameworks have been developing to guide enterprises and the investment community about impact measurement and management, the granular level of what to do has been missing from the scene. The same thing is true about solution providers offering bespoke methods for impact measurement and management as well as specific tools and metrics for implementing impact measurement and management practices that engage stakeholders. But there has been a gap in the middle which connects the high level principles and frameworks with the tools and metrics. Let’s call this gap the management system which provides concrete best practices for effective impact management and decision-making.
For enterprises, the benefits are clearly-stated practice standards for how to effectively engage stakeholders in for determining what matters, measurement activities and contributions to decision-making for both positive impact and mitigating risks of negative impact.
The SDG Impact standards also directly benefit impact investors (both asset owners and asset managers) through the specific practice standards for private equity investors and bond issuers that have been developed, and apply to an extensive set of activities including developing impact theses, creating investment mandates, conducting due diligence, constructing deal terms, reporting expectations, and post-investment impact management.
The clarity of these standards also inform the way other organizations operating in the Social and Solidarity Economy determine their stakeholders as well as their approach and management of engaging stakeholders. While initially the standards may resonate most with impact aware organizations and investors, UNDP’s ultimate aim with the standards is the integration of impact management and contributing to the SDGs across the mainstream. SDG Impact’s vision is a future where impact is at the core of every consumption, employment, business and investment decision – no longer an add-on to what business gets done but how all business gets done.
Additionally, UNDP has been working with training organizations to support capacity development. They also are developing a certification process to signal that the certified organization has a robust impact measurement and management process and stakeholder engagement is embedded throughout it.
Prepared by Jane Reisman, Social Impact Advisor, with input and source documents provided by Belissa Rojas and Fabienne Michaux.