The private sector’s role in promoting sustainable development


29 November, 2016


Insights from the CEO



Peter Bakker

Peter Bakker, President and CEO of the World Business Council for Sustainable Development (WBCSD), outlines the private sector’s role in the sustainability and climate agenda.

The ratified Paris Agreement makes the transition to a low-carbon economy inevitable. The Sustainable Development Goals (SDGs) add to that a framework for developing our societies and economies. They turn all countries in the world into developing nations. As businesses around the world find their focus in the implications of this new framework, one thing has become crystal clear: the Paris Agreement and the SDGs will not be realised without the involvement of all state and non-state parties alike, especially the private sector.

The substantial economic opportunity

With an annual US$5-7 trillion needed to finance the SDGs alone (according to UNEP), and an estimated US$90 trillion needed to support the aims of the Paris Agreement over the next 15 years (The Climate Group), business has a critical role to play as a source of investments and as a driver of technological development and innovation, not to mention as an engine for economic growth and employment.

MSCI – a world leader in stock market and investment benchmarking – created the Sustainability Impact Index, which identifies listed companies whose core businesses directly address environmental and social challenges. The goal is to enable investors to incorporate sustainable impact into their processes and measure investment alignment with the SDGs. Remarkably, the Sustainability Impact Index is outperforming the conventional index by 14.8%, showing that investing in sustainability is an excellent bet.

But even though sustainability investments can offer better returns, when it comes to the SDGs it is a daunting task for any CEO to focus on 17 goals and 169 targets. With this in mind, the WBCSD collaborated with the UN Global Compact and GRI to develop the SDG Compass which provides guidance on how to align business strategies with the SDGs and measure their impact. We complemented these efforts by developing the SDG Business Hub, a dynamic online platform showcasing business insight, emerging tools and resources in this space. Each of these valuable resources are designed to point business in the right direction for achieving the SDGs and enhancing company practice.

To stand a chance of limiting our planet’s temperature rise to below 2°C, investments to address climate change and pursue clean energy become some of the most important investments needed in the near future – and the business case for addressing these issues is clear.

A price on carbon is a cost-effective way to accelerate low carbon innovation, shift investment towards low carbon technologies, and help ensure sustained economic competitiveness. The business community believes that global, robust and stable carbon pricing will be fundamental for the successful implementation of the Paris Agreement.

Innovative private sector initiatives

The Low Carbon Technology Partnerships Initiative (LCTPi) is one of the initiatives that demonstrates how the private sector can drive systemic transformations of the kind we need across all of our economic systems. Involving more than 150 businesses and 80 partners from around the world, LCTPi is a collaboration led by WBCSD to accelerate the development of low-carbon technologies and scale up their deployment.

An independent impact analysis by PwC shows that the LCTPi plans could deliver as much as 65 per cent of the necessary emissions reduction, while stimulating between US$5 trillion and US$10 trillion of investment into the low carbon economy and creating between 25 million and 45 million jobs around the world each year.

This is just one of many initiatives operating around the world. A recent report by We Mean Business, titled The Business End of Climate, shows how bold climate action, supported by smart policy, can keep the temperature rise below 2°C. The report looks at five initiatives that companies have joined as part of their efforts to address climate change: Science-Based Targets, EP100, RE100, Zero Deforestation and LCTPi.

The analysis shows what would happen if these five initiatives achieved their most ambitious plans. Effectively a ‘business-determined contribution’, the report shows that by 2030, business will cut its greenhouse gas emissions by 3.7 billion tonnes of CO2 equivalent a year – half a tonne of CO2 for every man, woman and child on the planet. The report goes further, estimating that if all relevant companies that were able to join the initiatives actually signed up to them, the total impact on emissions could go as far as 10 billion tonnes every year.

Analysis like this shows that business is the best implementation partner for governments around the world as they strive to hit their climate targets.

The importance of business in conservation

Our impact on nature is overlooked too often in the global fight against climate change. At this year’s IUCN World Conservation Congress in Hawaii, the importance of moving the conservation agenda forward was emphasised by all stakeholders. The need to invest in nature to preserve our chances to fight climate change and provide enough for the growing population to develop sustainably is well understood by non-state actors. However, while the private sector’s engagement in global conservation efforts is on the rise, the business case for investing in nature is not yet fully understood.

If the private sector starts integrating nature in its business approach and its impact on the natural environment, others will follow suit. To move the conservation agenda forward, the business case must be backed by science and understood by all stakeholders. To address the gap, WBCSD launched the Natural Infrastructure Guide for Business to help raise awareness of why investing in natural infrastructure makes good business and ecological sense.

These initiatives are important touchstones for companies on their individual sustainability journeys. However, to reach scale, more companies must begin to use the Natural Capital Protocol and integrate their impacts and dependencies on nature in their decision-making processes.

As the topics of natural capital, certification, sustainable food systems, nature-based solutions and oceans continue to grow in urgency, business collaboration and engagement will continue to be a key theme in discussions and delivering solutions.

Building the case

Essentially, we need to change course completely. But this isn’t news. Today, companies are in the process of understanding and prioritising which SDGs are the most relevant, and where they can have the widest, most positive impact. They are assessing how they can innovate to meet the ambitions of the Paris Agreement. However, the business case for the SDGs is not as clearly made as the one for climate action. For this reason, WBCSD is one of the contributors to the Business and Sustainable Development Commission that is put in place precisely to do that: build the business case and engagement pathways for business to lead the SDG solution implementation. By getting sectors to create sector roadmaps, innovation to focus on SDGs as well as the financials to be completed by natural and social capital elements, then we will position the SDGs at the heart of business strategy.

The private sector must take its role even further in terms of innovation, investment and engagement. Sustainable business must become mainstream and companies must join the global initiatives described here. Financiers must unlock the capital that will drive solutions, and governments and business must work together to help these initiatives achieve their targets.

We must make a global concerted effort. The technology and the solutions are available today – it’s up to us to implement them at scale, and accelerate the transition to a sustainable world. 

Gathering momentum

The good news is that the world is catching on to the possibilities for business involvement. In 2015, clean energy investment surpassed fossil fuel investment – but this is only the beginning. It’s possible to go much further, and we must go faster. Numerous opportunities are available for businesses to streamline efficiency in transport and logistics, while offering new ways to manage natural resources and increase the world’s capacity to mitigate harmful greenhouse gases – not to mention the fact that addressing climate change represents a US$4 trillion opportunity, while the cost of inaction could create between US$6 trillion and US$14 trillion in losses.

Read the full Climate Action 2016/17 Publication here

This piece was originally published on on 28 November 2016