HNA Group pioneers CSR reporting with SDGs in China

 

On September 25, 2015, the 193 member states of the United Nations agreed to release the Transforming our world: the 2030 Agenda for Sustainable Development. The Agenda sets a framework for sustainability development in the next 15 years within three dimensions: the economic, social and environmental. As a new universal guide on sustainability, the agenda reflects a global consensus with the 17 Sustainable Development Goals (SDGs) clarifying the priorities for corporate social responsibility and the path to achieve them. On June 27, 2016, with the support from the UN Global Compact China Network and RINA, HNA Group released its CSR report Creating Shared Value —— HNA’s Contribution to the United Nation’s Sustainable Development Goals. It was the first CSR report in China that strictly uses the SDGs as the benchmark.

What are the SDGs?

In September 2000, the Millennium Development Goals (MDGs) were released at the United Nations Millennium Summit. In the past 15 years, the MDGs have made remarkable achievements, helping one billion people get rid of extreme poverty. As the MDGs were set to expire, on September 25, 2015, the United Nations Summit on Sustainable Development was held and 193 member states agreed on a new agenda: Transforming Our World: The 2030 Agenda for Sustainable Development. The Agenda includes 17 Sustainable Development Goals and 169 targets, with an aim to promote sustainability development in the next 15 years within three dimensions: the economic, social and environmental. The Agenda follows the MDGs, but with expanded and higher targets.

Beyond the aim to eliminate poverty, SDGs give priority to sustainability. The highlight lies in the efforts to balance the three dimensions of sustainable development: the economic, social and environmental, with a focus on coordination and collaboration to achieve all-round development.

Chinese President Xi Jinping delivered a keynote speech on Seeking Common and Sustainable Development and Being Cooperative with Win-win Partnership at the UN Sustainable Development Summit on September 26, 2015. Xi said that China would give priority to responsibility over benefits and commit itself to implementing the post-2015 development agenda with all other countries.

On November 15-16, 2015, the 10th G20 Summit was held in Turkey. Chinese President Xi Jinping attended and delivered a speech entitled Innovative Growth That Benefits All. In the speech, Xi Jinping pointed out that China plans to implement the 2030 Agenda for Sustainable Development as part of its 13^th Five-Year Plan. Meanwhile, President Xi also proposed that each member of the G20 should draft its own implementation plan for the agenda, based on which an overall action must be made to foster strong, sustainable and balanced growth of the global economy.

On April 19, 2016, China’s Position Paper on the Implementation of the 2030 Agenda for Sustainable Development was issued. The paper was also distributed to all UN member states at the 70th Session of the UN General Assembly.

During the implementation of the MDGs, the United Nations did not set up a framework for business to participate. Therefore, only a few businesses engaged themselves in the agenda. However, in the past 15 years, private businesses all over the world have been expanding so rapidly and significantly that they have a profound impact on the way people live. More importantly, an increasing number of multinational companies attach importance to social responsibility and sustainable development, making businesses an important force to solve global problems. Furthermore, the international community also engaged businesses in problem-solving. For example, Michael Porter, a professor at Harvard Business School, said in 2011 that businesses should create shared value through fulfilling social responsibility, which will “reshape capitalism”.

Compared with the United Nations Millennium Declaration, the 2030 Agenda for Sustainable Development provides more opportunities for businesses. The new Agenda not only focuses on poverty, education and health issues, but also targets an inclusive society, economic growth, protection of the environment and ecosystems and climate change. These goals couldn’t be achieved without engaging businesses.
 
Why should we prepare CSR reports based on SDGs?
 

Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.                                         

——Goal  12.6

 

Since the CSR concept emerged globally in the mid-20th century, government agencies, research institutions, non-governmental organizations, experts and scholars had different understanding of its definition and scope. CSR conveys distinctive social, economic, geographical and cultural features while the concept itself has been gradually developing.
As the most inclusive UN project, SDGs reflect a wide range of perspectives in all countries and communities. As only among the UN Global Compact members, more than 1,500 companies were engaged to provide advice on the new agenda. The SDGs are generally applicable to both developing countries and developed countries. They not only call on governments and civil organizations to take swift actions, but also recognize the key role companies can and must play in ensuring the smooth implementation of sustainability initiatives. In a word, the 17 SDGs and 169 targets are universally applicable. They require government agencies, civil organizations, private sector and individuals to work hard to create a decent life and equal opportunities for all.

Of course, although SDGs provide a common framework for development of CSR and sustainability globally, they don’t require all countries, regions or organizations to take the same approach. SDGs take full consideration of the national characteristics, capacities and development status quo, while respecting the policies and priorities of each country. Leading companies are allowed to define their own sustainability priorities based on materiality analysis and their own resource advantages. When all global organizations and individuals act in accordance with the SDGs, global sustainability will follow the same overall framework.

Social responsibility and sustainable development are not defined by any laws or technical specifications, but is much closer to a set of flexible guidelines over attitudes and behavior both globally and locally. This could lead to cultural conflicts and differences in social norms in implementation of CSR initiatives in different countries, regions or organizations. SDGs form the common action and language framework for global organizations. That would help a variety of organizations to communicate the influence and performance of their businesses to their stakeholders in a more efficient manner. Its purpose is to pull the strength of partners to leverage on the synergies and jointly cope with the world’s most pressing social challenges.

Since SDGs have formed a worldwide consensus on sustainability and social responsibility, they provide a common reporting language. According to statistics from KPMG and the Global Reporting Initiative, governments, market regulators and stock exchanges have formulated policies and regulations on sustainability reports or responsibility reports. At least 180 national policies and initiatives on sustainability reports have been released (2013 statistics). On the other hand, many companies have already covered some of the SDGs in their CSR reports, including climate change, sustainable water management, employment and decent work, and biodiversity. If businesses can prepare their sustainability reports based on the SDGs, it will help global companies use the same language for dialogue, which will dramatically help reach consensus on sustainable development.

The current CSR standards and guidelines issued by government agencies, exchanges or social organizations have two distinctive features. First, the ideas do not form a wide network. Most standards and guidelines have CSR indicators that focus on individual companies’ influence on the society and environment. However, it has become increasingly apparent that “the power of a single organization alone cannot effectively address sustainable development issues.” Second, analysis over the backdrop of sustainability is insufficient. The current reporting standards and guidelines center too much on single companies instead of the broad background. In order to pursue sustainable development and fulfill social responsibility, businesses have to make all of their initiatives in line with the sustainability trend for the whole industry, region or even the world. It’s essential to have in-depth analysis of the background for sustainable development.

The No. 17 goal is “to strengthen the means of implementation and revitalize the global partnership for sustainable development”. Unlike the other 16 goals, the 17th goal calls on global organizations to realize SDGs via forming global partnerships. According to the SDG Compass developed by Global Reporting Initiative (GRI), the UN Global Compact (UNGC) and the World Business Council for Sustainable Development (WBCSD), a company can seek for at least three types of partnerships:

– Value chain partnerships, within which companies in the value chain integrate complementary skills, technologies, and resources to bring new solutions to market;
 – Sector initiatives that bring several industry leaders together in efforts to improve standards and practices across the entire industry and overcome shared challenges;
 – Multi-stakeholder partnerships, where governments, private sector and civil society organizations join forces to tackle complex challenges.
The No. 17 goal significantly expands the CSR scope and provides a new perspective for businesses to prepare their CSR reports.

How to use SDGs to prepare a CSR report

So, how should companies use SDGs to prepare social responsibility reports? We propose the following principles for your reference.
 
1. Background principles for sustainable development

The background principles for sustainable development form the basis for companies to prepare CSR reports based on SDGs. It requires companies to evaluate corporate social responsibility initiatives under a broader sustainability context, draft social responsibility goals and disclose social responsibility performance. Then, how should companies analyze their own background information on sustainable development? Here, we recommend them abandon the value chain analysis tools and adopt principles of competitive advantage of nations raised by Michael Porter. Under Porter’s argument, analysis needs to be done in four determinants: factor conditions, demand conditions, strategy and rivalry. That will help companies to identify opportunities and future goals on social responsibility.

2. Materiality principles

SDGs have great inclusiveness with 17 goals covering the priorities of governments, businesses and civil organizations, as well as countries and regions with different development status quo. Therefore, not all 17 goals are applicable to businesses while they don’t require companies to treat the 17 goals equally. For every goal, the contribution from companies and the corresponding opportunities and risks are decided by a raft of factors such as the industry characteristics, natural resources, strategic objectives and value chain partners. Therefore, companies must adhere to the materiality principles when using SDGs to prepare CSR reports. They should shed light on the influence exerted by the business activities on the entire value chain based on strategic analysis to prioritize the material issues.

3. Integration principles

As the top global framework for social responsibility SDGs, in essence it is not the guideline to prepare social responsibility reports. SDGs are not intended to replace a variety of existing social responsibility standards. Therefore, companies have to comply with the integration principles when using SDGs to prepare CSR reports. So, what do we want to integrate? First, we have to integrate different ideas. We need to embed our perspectives under SDGs into the existing reporting standards. It means that we have to use the SDGs to guide the implementation of the GRI standards. Second, we have to compare the indicators of SDGs and GRI guidelines by adding the new issues and parameters of SDGs to the existing GRI index system.

4. Commitment principles

Another major difference between SDGs and the existing standards and guidelines for social responsibility is that the SDGs specifically put forward what we want to achieve in 2030. These goals also pave the way for project planning and sustainable management. This is why we advocate we should refer to SDGs when preparing CSR reports. Instead of making a summary, the CSR report should target the future by identifying the specific social responsibility issues and goals for the company. By making an open commitment to these goals, the company will be inspired to seek for a more sustainable future. When compiling CSR reports, businesses should set the “reasonable proportion” of SDGs based on their industry, location and size.
An era of SDGs is coming. Different countries, religions, nationalities, governments, businesses and civil organizations have reached a worldwide consensus in the field of sustainable development. As an important communication and management tool, CSR reporting will enter a new development phase in this new era.
 
 
This article is published in China WTO Tribune. The authors are:
Sun Xiaowei, Planning & Research Director of CSR Department, HNA Group Company Limited
Han Bin, Executive Secretary-general of Global Compact Network China and Deputy Director of Employers Work Department, China Enterprises Confederation;
Wang Xuezhu, General Manager of Business Assurance, RINA Italy Classification Society (China) Co.,Ltd