The ambitious goals including ‘End poverty in all its forms everywhere’ (SDG 1) and ‘Ensure availability and sustainable management of water and sanitation for all’ (SDG 6), might seem at odds with improving the profitability of businesses.

However, by embracing the goals businesses can contribute to improving both short and long-term profitability and even their chances of survival.

Legitimacy theory, originally defined by Dowling and Pfeffer in 1975, posits that businesses strive to operate according to the boundaries of social acceptance within society because their survival depends on its approval. This is because consumers can withdraw their custom from a business if they feel it has broken the unwritten social contract between them, and therefore no longer has a legitimate reason to consume resources or exist.

The food and beverages industry’s response to activism by Greenpeace is indicative of how the adoption of the SDGs into corporate social responsibility (CSR) policies by corporations, can contribute to maintaining legitimacy and thus, profitability. 

In 2010 Greenpeace’s aggressive social media and direct-action campaigns against Nestlé’s use of palm oil prompted public outrage. This resulted in the company ceasing trading with one of Indonesia’s biggest palm oil producers, whom Greenpeace believed to be expanding illegally into Orangutan territory.

Nestlé also adopted a zero-deforestation policy after eight weeks of their campaigning. Prior to their action against Nestlé, Greenpeace’s attention was focused on other global food and beverages producers including Unilever and Kraft, who succumbed to pressure and agreed to make efforts to source their palm oil responsibly.

The activism directed at Nestlé and its competitors has created institutional pressure within their industry to source palm oil responsibly. Those perceived not to be doing so risk being singled out for direct action campaigns by Greenpeace.

Thus, it is foolhardy for businesses in this industry to fail to develop policies on palm oil and publicise their efforts through their CSR reports. Doing so facilitates proactive management of their legitimacy and the power of their customers to withdraw their custom. However, ten years on Nestlé and many of its competitors are still being criticised by NGOs for their failure to meaningfully address the palm oil problem. This is despite linking their CSR efforts to the SDGs. 

So, how can the SDGs be a useful tool for preserving legitimacy?

If one compares how certain enterprises have adopted the SDGs into CSR policies, it is relatively easy to separate the wheat from the chaff. On one hand, corporations still drawing flack from Greenpeace etc. regarding their palm oil procurement simply rely on industry standards, which are often flouted, to ensure they are contributing to the SDGs.

On the other hand, companies such as Marks and Spencer that have monitored their supply chains to check their suppliers aren’t causing social or environmental harm and expel rouge producers accordingly. In doing so, they have avoided damaging accusations of greenwashing which threaten their legitimacy, whilst substantiating claims to be contributing to the SDGs.

As Millennials and Generation Z come of age, there is a greater awareness of greenwashing than ever. Consumers are increasingly demanding that businesses are socially and environmentally conscious. To earn their trust and loyalty, brands must be good for them and good for the planet. Brands must offer value and be the loudest voice in the room to help get these customers’ values heard and support the causes they believe in. By making contributions to the SDGs that stand up to inspection, corporations can achieve all the above whilst preserving their legitimacy to exist.

Additionally to securing consumers’ trust, businesses incorporating the SDGs into their CSR policies can achieve easy financial wins through improving efficiency. Climate Change is the environmental issue of our time, and SDG 13 ‘Take urgent action to combat climate change and its impacts’ offers a myriad of opportunities for businesses to improve their profitability. Perhaps the most obvious way for businesses to address SDG 13 is through energy and resource efficiency.

Globally, lighting is responsible for around 6% of CO2 emissions. Switching to energy efficient light-emitting diode (LED) technology could save over 1,400 million tons of CO2 and avoid the construction of 1,250 power stations. 

Studies have shown that where business facilities use less efficient fluorescent or metal halide lighting, lighting consumes up to 40% of operating costs. Conversion of this antiquated technology to LED can reduce energy consumption by as much as 90%.

Studies have shown that where business facilities use less efficient fluorescent or metal halide lighting, lighting consumes up to 40% of operating costs. Conversion of this antiquated technology to LED can reduce energy consumption by as much as 90%.

The facilities housing carbon emitting lighting also present many opportunities for businesses to become more profitable through addressing SDG 13. Future Proofing at the time of construction, or through retrofitting, reduces exposure to energy price risk and carbon legislation, helping businesses to remain resilient and competitive.

Furthermore, studies indicate that investing in energy efficient and green office buildings is now considered part of a safer investment strategy. Green buildings can usually command higher values, higher quality tenants, higher occupancy and rental rates and are a more liquid asset, with lower depreciation and operating costs. Healthy indoor environments in green buildings can also bring a subsequent benefit of improved energy efficiency which improve staff productivity and reduce absenteeism.

Another way companies can improve their efficiency is through reducing wasteful production practices which damage the environment and cost money. This has potential to contribute to SDG 12 ‘Ensure sustainable consumption and production patterns’ as well as SDG 13.

In many sectors such as apparel and home goods, waste is part of the business model, and products are discarded if they are faulty or when they reach the end of their lives. However, this needn’t be the case.

Proponents of the circular economy, The Renewal Workshop suggests that ‘Employing people to stash, bury or burn products instead of moving, marketing and selling products sounds counterintuitive to good business, but that’s what happens every day’. Moving from this damaging linear model of production to a circular model could turn this insanity around.

The idea of recovering unsellable products for resale has been around for a long time. Recovery systems for used cars and their parts, electronics and building materials for example, are well established. Finding ways to apply these systems to other sectors presents new opportunities for growth.

For instance, many garments that are discarded at the end of their lives or returned because of minor faults, such as a missing button, could be rescued from landfill, renewed and sold as sustainable products. This would simultaneously be profitable, appeal to environmentally conscious consumers and contribute to SDG 12.

With the clear benefits adopting the SDGs bring, it seems logical that another way business could improve profitability is by becoming ‘ethical’ traders, and shout about their adoption of the SDGs through CSR reporting.

However, despite the growing demand for ethical products, recent research indicates that consumers are often sceptical about businesses’ claims of green credentials. Moreover, products labelled using buzzwords such as eco-friendly, or organic are particularly likely to discourage purchases, according to the research.

A quick Google search reveals that there are countless companies, many of whom claim to be contributing to the SDGS, making unsubstantiated, ridiculous and sometimes surreal claims regarding the sustainability of their goods and services.

A quick Google search reveals that there are countless companies, many of whom claim to be contributing to the SDGS, making unsubstantiated, ridiculous and sometimes surreal claims regarding the sustainability of their goods and services.

For these reasons, it’s no wonder that consumers are weary. Nevertheless, businesses can assure consumers that their products are truly ethical and join movements such as Fairtrade.

To gain Fairtrade certification a business must comply with rigorous economic, social and environmental standards. Fairtrade acknowledges that there is still much work to be done, but its work has a direct impact on all seventeen goals.

Joining the Fairtrade movement brings demonstrable financial rewards. A study in 2019 reveals that Fairtrade Is Gaining Trust and Traction, finding 76% of Americans now view Fairtrade favourably. 

The study captures the mood of the emerging young demographics whose purchasing is driven by values. This translates to profits for businesses. For example, sourcing Fairtrade coffee has been lucrative for New York Based company Brooklyn Roasting which has rapidly enjoyed a quadrupling of its profits since joining and advertising its membership to the movement.

There seems to be many ways in which the adoption of the SDGs by businesses can improve profitability, but in reality, there is only one. From the array of cost saving initiatives businesses can make to improve efficiency to the measures they take to ensure their operations are truly sustainable the take home message is the same. To turn the adoption of the SDGs to profit, businesses must make measurable contributions to them, rather than simply pay lip service to them.

The cases of Nestlé and Brooklyn Roasting illustrate this perfectly. While Nestlé makes bold claims to be contributing to the SDGs, its actions do not reflect its words, and it remains in the firing line on NGOs. This threatens its profitability and risks its long-term survival through loss of legitimacy.

Conversely, companies such as Brooklyn Roasting have reduced the threat of losing their legitimacy through the adoption of blockchain system providing hard evidence that they are contributing to the SDGs, and consequently reaped financial rewards.

Once one also considers the benefits the efficiency saving provides to both the SGGs and profitability, it is obvious that the only way businesses should profit from adopting the SDGs is to meaningfully contribute to them wherever possible.

 Exploring these topics further 

If you’d like to know more you can watch a recording of a webinar we held on 24th March, with guest speaker Marc Buckley who presented on how to integrate the SDG’s into your companies operational business model.