Scaling Up Business Impact on the SDGs...developed and developing countries. Second, business is...

2030AGENDAFORSUSTAINABLEDEVELOPMENT

ScalingUpBusinessImpactontheSDGs

IzumiOhno(JICAResearchInstitute)

KenichiKonya(NationalGraduateInstituteforPolicyStudies(GRIPS))

HiroakiShiga(JICAResearchInstitute)FranklinMurillo(SocialProgressImperative)

EstefaniaCharvet(SouthernVoice)

SubmittedonMarch15,2019RevisedonMarch31,2019

Abstract

Achieving the Sustainable Development Goals (SDGs) requires redefining thepurposeofbusinessandscalinguptheirimpact.However,therearechallengessuchas thegapbetweengood intentionsandrealactions;conflictbetweenthecurrenteconomic system and SDG thinking; limited understanding of how business isembedded insociety; andcapacityconstraints indevelopingcountries to take fulladvantageofemergingbusinessopportunities.Weproposethatthe leadersof theG20takenecessaryactioninfourareas:a)encouragecorporatestoembedSDGsintotheir core business strategies and operations; b) reshape the economic systemaround the common good; c) create a “sustainable ecosystem” for shaping abeneficial environment for all stakeholders; and d) upgrade the enterprises andpolicy/regulatory capabilities of developing countries to maximize the potentialbenefitsoftheirparticipationinGlobalValueChains.

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2030AgendaforSustainableDevelopment

Challenge

Threeyearshavepassedsince theadoptionof theSustainableDevelopmentGoals(SDGs)byall193UnitedNations(UN)memberstatesinSeptember2015.However,accordingtothelatestSDGIndexresearch,notasinglecountryisontrack to achieve all SDGs by 2030. 1 We must renew our commitment andreinvigorateeffortstoimplementeffectiveandfeasiblemeasurestoaccelerateprogressontheSDGs.

TheSDGsmarkadeparturefromtheMillenniumDevelopmentGoals(MDGs)in two importantways. First, the SDGs areuniversal and applicable to bothdevelopedanddevelopingcountries.Second,businessisincreasinglyregardedas a key player in driving sustainable inclusive development for severalreasons.First,businesscontributesfinanciallytoSDGachievement(byfillingthe annual investment gap estimated at USD 2.5 trillion (UNCTAD 2014)).Second,businessisgoodatapplyinginnovationstosocietalneedsanddiffusingthemandthuscontributestoimprovingourqualityoflifeinnovelways.Third,businessactivitiescanhavesignificantimpactsonsocietyandtheenvironment,forbetterorworse.Lastly,theSDGsprovideabigopportunityforbusiness.Itisestimatedthatfullyembracingthegoalscouldgenerate12trillionUSDayearinsustainableandinclusivebusinessopportunities(theequivalentof10%ofglobalGDPby2030)(BSDC2017).

TheroleoftheG20countriesiscrucialbecausetheyproduce86%ofglobalGDP(IMF2017),87%ofoutwardForeignDirectInvestment(FDI)flows(UNCTAD2018),andsupporttwo-thirdsoftheworld’spopulation.However,therearefourmainchallenges that restrain their corporates frommaking full-fledgedcontributionstoSDGacceleration:

● Thegapbetweengoodintentionsandtherealactionsbybusiness.WhileSDG awareness is rising in the business community and enlightenedcorporateleadersareemerging,themajorityremainunawareoftheSDGsand of the societal challenges they aim to address. Even many of theenlightenedareyettoconverttheirSDGawarenessintoconcreteactionsormakethempartoftheircorestrategy.Itisimportanttoencourageand

1SeeBerteslmannStiftungandSustainableDevelopmentSolutionsNetwork(2018),viii.

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supportthosecompanieswithgoodintentionsandnewbusinesscasestoembed the SDGs into their core business strategies, operations, andperformanceindicators;

● Conflict between the current economic system that values short-termprofitmaximizationandshareholderreturnsandtheSDGfocuson long-term societal purpose. Even accounting for a handful of enlightenedcorporate leaders, the factremainsthatallorganizationswillstruggletodeliverontheSDGsbecausetheyoperateinasystemthatprioritizesshort-termfinancialperformanceratherthansocialprogress.Systemicchangeisurgentlyneeded.Consistentreportingacrossmuchbroader indicators isneededtounderstandprogressagainsttheSDGs;

● Limitedunderstandingamongcorporates,citizens,andotherstakeholdersof how their interactions impact sustainable development. Becausebusiness is embedded in society, the connectionbetween it andvariousstakeholdersshouldbeaddressedasatwo-wayrelationship.BusinesscanaffectandinfluencestakeholderstodomoretoadvancetheSDGs.Atthesame time, stakeholders can influence the way businesses operate andcontributetosustainabledevelopment;and

● Capacityconstraintsinthedevelopingcountriesaffecttheirabilitytotakeadvantage of opportunities emerging from Global Value Chain (GVC)participation and to avoid the risk of inappropriate supply chainmanagement by FDI companies. While GVCs offer new prospects forgrowth, competitiveness and job creation at all levels of development(APEC 2014), the expansion of GVCs bymultinational corporations intodeveloping countries can bring negative social and environmentalconsequences to the host countries, unless they are managed in aresponsible and sustainable manner (UNIDO 2015; Kaplinsky 2016).Furthermore, developing countries need to upgrade their industrialcapacity so that they can attract quality FDI in the light of changingeconomic,social,andenvironmentalstandards.

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Proposal

The2030Agendademandsanewwayofdoingbusinessalignedwithsocialprogress and sustainable development. Contributions should go beyondCorporateSocialResponsibility(CSR)practice,ormerefinancing.Inthislight,wepresentfourproposalstotheleadersofG20countries,callingforactiontofacilitatethescalingupofbusinessimpactontheSDGs.

Proposal1:EmbeddingtheSDGsintocorebusinessstrategyandoperations

1.1ConvertingSDGawarenessintoconcretebusinessactions

A survey on inclusive growth shows thatwhile 92% of business executivessupporttheSDGs,only17%haveplansorpoliciestoachievethem(Deloitte2018). 2 Another recent survey indicates that although 72% of globalcompanies mention the SDGs in their annual corporate or sustainabilityreports, only 50% had undertaken the crucial process of prioritizingwhichSDGsweremostrelevanttotheirbusiness(PwC2018).3Thus,thereisaneedto convert SDG awareness into concrete business action. Companies mustembedtheSDGsintotheircorebusinessstrategyandoperations.Thisrequireseachcompanytoestablishacoordinatedandwell-sequencedSDGstrategy,byreassessingitsbusinessandthevalueitbringstoemployees,shareholders,andsociety, and also by taking account of the local country context which thecompanyoperates(Figure1).4

Morespecifically,companiesmustprioritizetheSDGsbasedontheirrelevancegiventheircountriesandsectorsofoperation.Companiesmuststrikeabalancebetween business growth and societal and environmental impact, by

2This isbasedon the2018DeloitteGlobal InclusiveGrowthSurveywhichsurveyed350companyexecutives.3 This is based on the 2018 PwC SDG Reporting Challenge that surveyed 729 globalcompanies.4Inthisregard,theMarsCorporation’sinitiativeisnotable.Thiscompanyisexperimentingwithanewbusinessmodelbasedon theconceptof the “EconomicsofMutuality,”whichincorporateslong-termsustainabilityandresponsibilitytopeople,planet,andperformance(see Appendix (1)). In the latest corporate strategy, Mars is committed to sustainablesourcing,ahealthyplanet,thrivingpeople,andnourishingwellbeingthroughthevaluechainprocess(MARS2015).

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consideringallthreedimensionsofsustainabledevelopment(social,ecological,andeconomic).Indoingso,theyhavetounderstandinterconnectivityofthegoals and targets and evaluate which ones they can best use to realizeinclusiveness,ensuringthat“nooneisleftbehind.”Theymustidentifybusinessrisksinrelationbothtocoreproductsandactivities,andmorebroadlyacrossthesupplychainonacountrybycountrybasis.Theyhavetotargetpotentialopportunities (where business activities could help significantly more) inrelationtocoreproductsandactivitiesandthewidersupplychain.

ItshouldalsobenotedthatthevastmajorityofbusinessesremainunawareoftheSDGsandtheirroleindeliveringsocialprogress;thisisthecaseinJapan5but probably also elsewhere. Hence, it is important to raise corporateawareness of their responsibility and potential for contributing to theachievementoftheSDGs.

Figure1:MappingtheSDGsagainsttheValueChain

Source:GRI,UNGlobalCompact,andWBCSD(2015),12.https://sdgcompass.org/wp-content/uploads/2015/12/019104_SDG_Compass_Guide_2015.pdf5According toasurveycommissionedbya regionalbureauofMETI(METIKanto2018),84.2%ofSMEsarenotfamiliarwiththeSDGs,andonly2%ofthe500respondentsansweredthattheyareplanningtotakeorhavealreadytakenspecificactionsinrelationtotheSDGs.

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Inthisregard,itisworthnotingtherecentinitiativebyKeidanren(theJapanBusinessFederation)toreviseitsCharterofCorporateBehaviorwiththeaimofleadingtherealizationofasustainablesociety,andalsotoformulaterelatedImplementation Guidelines.6More than 1,000 largemember companies areexpected to use the Charter and guidelines. This initiative could serve asreference for G20 governments to motivate and encourage their respectivebusinessorganizationsandcompaniestofollowsuit.

1.2 Linking corporate reporting to the SDGs, by using the commonframeworkandstandards

As stated in Goal 12 7 , corporate reporting is important for concernedstakeholders, such as investors and consumers, to monitor corporateperformance. Although many companies have pledged commitment to theSDGs,theirKeyPerformanceIndicators(KPIs)donotnecessarilyreflectSDGthinking.The existing survey shows that only7%of companies linkKPIs tosocietalimpact(PwC2018).CorporationsneedtoimprovethequalityoftheirreportsbylinkingKPIstotheSDGsmoredirectly.

A range of international frameworks, indices, and standards to preparesustainability reports (e.g.,GlobalReporting Initiative (GRI), SocialProgressIndex(SPI),UNGlobalCompact,InternationalOrganizationforStandardization(ISO)) are available to corporations. Moreover, each G20 country has itsdomestic reporting guidelines. In Japan, the Ministry of EnvironmentintroducedEnvironmentalReportingGuidelines,andtheGovernmentPensionInvestment Fund (GPIF) calls on companies to further disclose their CO2emissions.However,duetomultiplicityandinconsistencyofthesestandardsandguidelines,notafewcompaniesseemtofacedifficultiesinfollowingthem.Thisisparticularlysoforsmallandmediumenterprises(SMEs)(METIKanto2018)andthoseofdevelopingcountries,whichhavecapacityconstraintsandlimitedaccesstoinformation(Sommer2017).

6SeeAppendix(2)formoredetail.7TheGoal12 (ResponsibleConsumptionandProduction) states: “Encourage companies,especiallylargeandtransnationalcompanies,toadoptsustainablepracticesandtointegratesustainability information into their reporting cycle. It also specifies the correspondingtarget(12.6)of“numberofcompaniespublishingsustainabilityreports.”

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Evidence shows that consumers are increasingly trustful of—and loyal to—productsorbrandsthatcontributetosociety(Deloitte2017).Therefore,theuseofcommonstandardsforcorporatereportingshouldbeencouragedsothatconsumerscanmakeaccuratecomparisonsandinformedchoices.

1.3 Promoting joint business action for the common good, utilizingmajorinternationaleventsasshowcases

Internationaleventsandsymbolicmomentumprovidegoodopportunitiestopromote business alliances toward the common good aswell as to increasecorporateawarenessoftheSDGs.Suchoccasionscanbeusedtosolicitnewandinnovative ideas and engage enlightened corporates to jointly act forsustainable business. For the G20 Japanese Presidency, the 2020 TokyoOlympics and Paralympics, aswell as the 2025Osaka EXPO, could serve asexcellentopportunitiestodemonstratebusinessleadershipinthisregard.

Forexample,sustainablefoodsupplychainmanagementcanbepromotedbyurgingabusinesstoobserveGoodAgriculturalPractice(GAP)8atmajoreventssuchasthe2020TokyoOlympics.Similarly,theprovisionofinclusiveandfairservicestohandicappedpersonscanlikewisebepromotedattheParalympics.

Proposal2:Reshaping theeconomicsystemaround thecommonpurposeofsustainabledevelopment

2.1 Developingasustainablecapitalmarket9

Investment and disinvestment that incorporates environmental, social andgovernance (ESG) factors into decision-making can significantly changecorporatebehavior toward theSDGs (Figure2).Recent yearshave seen theadoptionandimplementationofmajorinternationalinitiativestopromoteESGinvestments.TheseincludetheUNPrinciplesforResponsibleInvestment(PRI)and the Task Force on Climate-related Financial Disclosures (TCFD).

8GAPisacollectionofprinciplespromotedbytheUN’sFoodandAgriculturalOrganization(FAO)inrelationtoon-farmproductionandpost-productionprocesses,inordertorealizesafe and healthy food and non-food agricultural products, while taking into accounteconomic,socialandenvironmentalsustainability.9AseparatePolicyBriefwillbepreparedonsustainablefinancefordevelopment.SeealsoZadekandKharas(2018)foraPolicyBriefsubmittedtoT20Argentina.

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Encouragingly, ESG investment has increased in G20 countries, as well asdivestment of environmentally and socially harmful projects. However, thedegreeof interestandacceptanceofESG investmentvariesacrosscountriesand regions, with Asia (including Japan) scoring lower than the globalaverage.10Muchneedstobedonetodevelopasustainablecapitalmarket.

Therefore, it isvitally important todevisemeasures to furtherpromoteESGinvestmentandmainstreamitinthecapitalmarket.WeurgethegovernmentsofG20countriestoadoptpolicymeasureswhichproperlyincentivizeinvestorstopaydueattentiontotheagendaofsustainabledevelopment,andtoincreaseESG investment. Such measures could include preferential tax treatment,trainingandfosteringassetmanagersspecializedinESGinvestment.

Figure2:ESGInvestmentandSustainableCapitalMarket

Source:FinancialServicesAgencyofJapan(modifiedbytheauthor).

2.2Promotingsustainableprocurementinthepublicsector

Procurementoccupies20-30%oftotalgovernmentexpendituresindevelopedcountries(OECD2018,seeFigure3).Hence,sustainableprocurementbythe10AccordingtotheGlobalSustainableInvestmentAlliance(GSIA),in2016,theproportionofSustainableResponsiveInvestmentrelativetototalmanagedassetswashighestinEurope(52.6%), followedbyAustralia&NewZealand(50.6%),Canada(37.8%),and theUnitedStates(21.1%).Asiawasthelowestat0.8%withJapanscoringat3.4%.Theglobalaveragewas26.3%.

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publicsectorcanfacilitatesustainabledevelopment.WellbeingindicesliketheSocialProgressIndexarebeingusedbylocalauthoritiesintheUKtocompelfirmsbiddingforgovernmentcontractstocompetenotjustonpriceorservicesoffered,butalsoonthesocialandenvironmentalimpacttheywillcreateforthecommunity.Governments at every level can build similar requirements intotheirprocurementprocedurestoencouragesustainablebusinesspracticesbyensuringfirmsawardedpubliccontractsarealsogeneratingsocietalgood.Weurge that leaders in G20 member countries, in particular, take the lead inpromotingsustainableprocurement.

Asgloballeadersthatserveasmodelsfortherestoftheworld,governmentsofdevelopedcountriescanfacilitatetheadoptionofsustainableprocurementindeveloping countries. International cooperation can support capacitydevelopmentforsustainablepublicprocurementindevelopingcountries.11

Figure3:GovernmentProcurementSpendingasapercentageofGDPandTotalGovernmentExpenditures

Source:OECD(2017)GovernmentataGlance2017edition.

11UnitedNationsEnvironmentProgramme(UNEP)hasbeensupportingsustainablepublicprocurement in developing countries, in collaboration with the Swiss government.http://www.unep.fr/scp/marrakech/pdf/SP2pager_eu.pdf

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Proposal 3: Creating a “sustainable ecosystem” for shaping beneficialenvironmentforallstakeholders

3.1Promotingtheunderstandingandthenotionofa“sustainableecosystem”amongallstakeholders

Forbusinesstothrive,itneedsathrivingeconomy,societyandenvironment.Thisistheessenceofa“sustainableecosystem,”whereallactorsinthesystemare incentivized to behave in a concerted manner to make social progress(Figure 4). In order to mobilize the potential of corporates toward theachievement of the SDGs while minimizing their negative impacts, it isnecessarytocreateasustainableecosystem.Governments,citizens,corporates,andotherstakeholdershavekeyrolesinthis.

Onewaytocreateandmaintainsuchasustainableecosystemisbyensuringthatactivitiesundertakenbybusinessesdonothinderthepotentialofotheractors suchasgovernments, civil society,orotherbusinesses toachieve theSDGs.ItisimportantthattheleadersofG20membercountriesacknowledgetheimportanceofcreatingasustainableecosystem,promotethisnotiontothebroad segments of the society, and encourage the corporate sector tomaketheir interests compatible with wider societal and environmental interests,particularlythoseofconsumers.

Figure4:SustainableEcosystem

Source:Elaboratedbytheauthor.

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3.2Raisingconsumers’awarenessofsustainabledevelopment

Corporates are key actors supporting the delivery of the 2030 Agenda.Likewise, the SDGs represent an opportunity for them to rethink theirapproachestosustainability.Butcorporatesareyettorespondtothischallengeadequately.Nevertheless,growingdemandforproductionthatconsiderssocialand environmental factors has been creating market incentives forcorporations to respond to. General awareness of the importance ofsustainability throughout the supply chain has the potential to increase thenumberofresponsibleconsumers.

More fundamentally, forasustainableecosystemtowork, there isaneed tocreate a virtuous cycle where consumers’ perspectives and needs areeffectively transmitted tobusinesses, inducingcorporatebehavioral changestowardgreatersustainability.Inthisregard,theexperiencesofconsumers'co-operatives(theseoriginatedintheUKandarenowspreadwidely)arenotablebecause they connect consumers’ needs with businesses. For example, theJapanese Consumers’ Cooperative (JCCU) collaborates with members andmanufacturers,andmanagestheprocessofdevelopment,production,supplychainanddistributionofethicalproductswiththeCO-OPbrand.12

3.3Buildingaccountabilityframeworks

Corporatesarealsomarketcompetitorsandcancompetewitheachotheronachieving sustainability. In this regard, the existence and use of commonstandards ineach industryallowsconsumers tomakeaccuratecomparisonsand informed choices between similar goods and services. Similarly,independent, third-party analyses can improve accountabilitywhen used toassess the social and environmental impact of firms. By making the socialimpactofdifferenttypesofeconomicactivitymorevisible,indicesliketheSPIor the SDGs Index empower regulators, consumers, and civil society12JCCUhasabout320consumerco-opsandconsumerco-opunions,withtotalof28millionmembers. Each consumer co-op is an autonomous association of consumers unitingvoluntarily to meet their common needs and aspirations. They cover retail, insurance,healthcare,andwelfarebusinesses.JCCUcollaborateswithmembersandmanufactures,andmanages theprocessofdevelopment, production, supply chain anddistributionof4,500ethicalproductswiththeCO-OPbrand.Theyreceivedthe2ndJapanSDGsawardinDecember2018fromtheJapanesegovernment.

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organizations to hold corporates accountable and encourage sustainablebusinesspractices.

Proposal 4: Upgrading the enterprise and policy/regulatory capabilities ofdevelopingcountriestomaximizethepotentialbenefitsoftheirparticipationinGVCs

4.1Promoting“QualityFDI”todevelopingcountries,whichgivesdueattentionto the sustainablemanagementof entirevalue chains (includingpeople andcompaniesinthehostcountries)

From theperspectiveof developing countries, the expansionofGVCs ledbymultinationalcorporationsprovidesbothopportunitiesandchallengestotheireconomies and societies. According to the Business and SustainableDevelopmentCommission,380millionnewjobswillbecreatedbySDG-relatedbusiness opportunities by 2030, with almost 90% in developing countries(BSDC 2017). Nevertheless, unless multinational corporations give dueattentiontosustainableandresponsiblemanagementof theirsupplychains,thereisariskthathostcountriesfacenegativeconsequencesintermsoffairlabor,environmentaldamages,safety,etc.Thereisalsotheriskthatdevelopingcountries’domesticfirmswillbeexcludedfromparticipatinginGVCs(DolanandHumphrey2000;UNIDO2015;Kaplinsky2016).

Therefore,G20countriesshouldurgetheirrespectivecorporatesectorstobeengaged in “Quality FDI,” which embraces the Triple Bottom Line ofsustainability (satisfying economic, social, and environmental standards)throughouttheirentirevaluechains.13G20governmentsarealsorequestedtoembracetheSDGsandtotranslatethatrelationshipintopolicymeasuresthatenablegreatercorporateaction.Also,leadfirmscanfacilitatetheinclusionoflow-income country producers in GVCs by providing skill upgrading andtechnologytransfers,aswellasmonitoringtheireffective implementationofregulationsandstandards.Thereisawell-knownstorythatthe localhuman

13“QualityFDI”maybecharacterizedascontributingtothecreationofdecentandvalue-addingjobs,enhancingtheskillbaseofhosteconomies,facilitatingtransferoftechnology,knowledge,andknowhow,boostingcompetitivenessofdomesticfirmsandenablingtheiraccesstomarkets,aswellasoperatinginasociallyandenvironmentallyresponsiblemanner(Gorgetal.2017).

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resources trained by a Korean lead firm in the late 1970s made criticalcontributionstodevelopingtoday’sgarmentindustryinBangladesh.14

Inthisregard,itisalsoworthnotinganemergingpublic-privatepartnershipforbuildinganeco-industrialparkinEthiopia(HawassaIndustrialPark(HIP)).Here,PVHCorp.—oneofthelargestglobalapparelcompaniesbasedintheUS,andaleadfirminHIP—hasbeenplayingakeyroleinadvisingtheEthiopiangovernmentontheimportanceofsocialandenvironmentalsustainabilityatthetimeofHIPestablishment(WorldBankGroup2017).15

4.2 Supporting the capacity development of host country governments toupgradetheirGVCindustrialpolicyandimprovetheirbusinessenvironments

AttractingQualityFDIrequiresvigorouseffortsbyboththepublicandprivatesectors of host countries to enhance their policy, human and enterprisecapabilities. Tobecome reliablepartners of leadGVC firms, local companiesmustimprovethequality,productivity,andcompetitivenessoftheirproductsand services so that they can meet international standards 16 and continueupgrading their position in GVCs. Moreover, the host country governmentneeds toembracestrategic industrialandFDIpolicies toattractQualityFDI.Typical measures include: identifying and directly interacting with criticalglobal companies, maximizing collaboration with them to create stronglinkages with local firms, upgrading local enterprise capabilities to meetstandardsrequirementsandimplementingoutreachprogramsforsmall-scaleproducers(JICAandGRIPSDevelopmentForum2016;FessehaieandMorris2018).

ThegovernmentsofG20countriesandinternationalagenciesshouldprovide

14AKorean lead firm,Daewoo, trained the staff ofDeshGarments Ltd (local partner) inBangladesh,sending130workersandmanagementtraineestoitsPusanplantin1979.Aftersix-monthstraining,Deshstartedtooperatesixlineswith600workers,givinga5millionpiecesperyearcapacityinitsmodernfactoryinlinewithDaewoo’sspecifications.While115ofDesh’s130initialworkerslefttoestablishorjoinnewlyset-uplocalgarmentfirms,theycontributedtotheexpansionoftheready-madegarmentsectorinBangladesh(Rhee1990;YunusandYamagata2012).15SeeAppendix(3)forfurtherinformation.16 These normally include satisfying both QCD (quality, costs, delivery time) andsustainabilitystandards.

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varioussupportprogramsforvaluechaininclusionoflocalcompanies,withtheabove capacity development measures. In this respect, the East Asianexperience is a useful reference because one-by-one, countries in differentdevelopment stages have participated in the dynamic production networkcreatedbyprivatemultinationalcorporations.Withstrongtrade,FDI,andaidlinkagesandtechnologytransfer,aregionaldivisionoflaborwithaclearorderand industrial structurehasemerged.This ishowEastAsiahasbecome theglobalfactoryformanufacturedgoods(oftencalledthe‘FlyingGeese’patternof development) and achieved inclusive growth (Shimomura&Wang 2013;Ohno & Ohno 2019). More recently, new opportunities are emerging for adeveloping country to participate in GVCs by becoming part of a particularchain where the country has comparative advantage—regardless of theexistenceof theFlyingGeesepattern.TheMexican automobile industry is apromising case of the growth and integration of local car partsmakers intoautomobile value chains. Here, international cooperation has played afacilitatingroleinupgradingcapabilitiesoflocalenterprisesandlinkageswithFDI.17

***

The SDGsneedbusiness, andbusinessneeds the SDGs, too.Webelieve thatpolitical leadership has a critical role to play in driving ourworld toward athrivingeconomy,society,andenvironment.

WeurgetheleadersofG20countriestocallforthefollowingactionstoscaleupbusinessimpactonSDGachievement:

17During2012-2017,Mexico’sannualcarproductionincreasedfrom3to4million,whileJapanese car manufacturers’ production in Mexico expanded by 66%, from 800,000 to1,330,000.ThisincreasewasaccompaniedbyarapidexpansionincarpartsproductioninMexico,withinternationalcooperationplayingakeyroleinfacilitatingthisprocess.Inthecase of Japanese auto firms in Mexico, the Japan External Trade Organization (JETRO)collaboratedwithMexico’stradepromotionagency,ProMéxicoandprovideddirectcapacitybuildingforlocalSMEs.In2012,JICAinitiatedaprogramwiththehelpofJapanesefirms,toincreasetheproductivityofpotentialMexicansuppliers,throughtraininginJapan’sKaizenmanagementpractices.Inaddition,thetwogovernmentsestablisheda“CommitteeontheImprovementoftheBusinessEnvironment”inthecontextoftheEPA,whichmeetsregularlytodiscussissuesarisingintheoperationsofJapanesefirmsinMexico(IDB2016;Hosono2018).

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l Urging business to embed the SDGs into core business strategy andoperations;

l Taking supportive measures to reshape the current economic systemaround common goals and to create a beneficial ecosystem for allstakeholders;and

l SupportingtheindustrialandsocialupgradingofdevelopingcountriessothattheycanbenefitfrominclusiveandsustainableGVCparticipation.

Acknowledgements.

Theauthorsaregrateful toBethanGrillo(PwC)andhercolleagues for theirinputintothedraftingofthispolicybrief.ThePolicyBriefhasalsobenefittedfrom discussions with and comments from:SachinChaturvedi(RIS),AkioHosono(JICA Research Institute),HomiKharas(BrookingsInstitute), Kwang Wook Kim (Asia Foundation), Adolf Kloke-Lesch (SDSNGermany),KoheiKubo(Keidanren),WonhyukLim(KDISchool),BrentNagel(Social Progress Imperative), Hyuk-SangSonh(Kyung HeeUniversity),MustafizurRahman (CPD), and Imme Scholz (GermanDevelopment Institute). Any errors and omissions remain the soleresponsibilityoftheauthors.

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• Zadek,S.,andKharas,H.(2018).2030AgendaforSustainableDevelopment:Aligningfinancialsystemarchitectureandinnovationwithsustainabledevelopment.PolicyBriefforT20Argentina2018.

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AppendixAppendix(1)

Mars:TheEconomicsofMutualityasInnovativeManagementConcept

TheMarsCorporation,with$35billionannual revenues and known for suchproducts as M&Ms and Snickers, hasbeen experimenting a new businessmodel based on the concept of“Economics of Mutuality (EoM)” since2010. This concept was developed byCatalyst(theinternalthink-tankfortheMars Corporation), and the SaidBusiness School at Oxford Universityand adopts the idea thatwhen sharing(Mutuality) drives businessperformance, greater value can becreated than through profitmaximization.EoMisamajorcorporatemeasurement initiative thatincorporates long-term sustainabilityandresponsibilitytopeople,planet,andperformance in a company’s businessmodel, affecting accounting andvaluation. Thus, it differs from CSR(Corporate Social Responsibility -mostly charity) and CSV (CreatingSharedValue)whichisadhocinnatureandisacustomizedconsultingsolutiontodeterminethebestalignmentofprofitsandsocialimpact.

Source: MARS Corporation 2017, Mars Catalyst, and Said Business School,UniversityofOxford2015.

Source: MARS 2017

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Appendix(2)

Keidanren - The Charter of Corporate Behavior and the ImplementationGuidelines

In November 2017, Keidanren revised its Charter ofCorporateBehaviorwith theprimaryaimofproactivelydelivering on the SDGs (“The Charter of CorporateBehavior: For theRealization of a Sustainable Society”).TheCharterisacodeofconductcomposedof10principlesthatmembercorporationspledgetoobserveintakingtheleadintherealizationofasustainablesociety:

1. Sustainable economic growth and the resolution ofsocialissues;

2. Fairbusinesspractices;

3. Fair disclosure of information and constructive dialogued withstakeholders;

4. Respectforhumanrights;

5. Relationshipsoftrustwithconsumersandcustomers;

6. Reformofworkingstylesandenhancementofworkplaceenvironments;

7. Engagementinenvironmentalissues;

8. Involvementincommunityandcontributiontoitsdevelopment;

9. Thoroughcrisismanagement;and

10. TheimportanceoftheroleoftopmanagementandtheimplementationoftheCharter.

Keidanrenalso formulatedasetof ImplementationGuidelines for theuseofmembercorporations,specifying49key implementation itemsunder the10principles.Thesedocumentsencouragecorporatebehavioralchangenotonlywithin their own companies, but also in their group companies and supplychains,and,byfosteringpartnershipswithvariousorganizations,helpthemacttowardtherealizationoftheSDGs.

Source:Keidanren2017.

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Appendix(3)

APublic-PrivatePartnershipforBuildinganEco-IndustrialParkinEthiopia

TheHawassaIndustrialPark(HIP),inauguratedinJuly2016,isaflagshipeco-industrial park developed and supported by the Ethiopian government andspecializing in textile andgarmentproduction. Facedwith risingproductioncostsandwagesinAsia,theUS-basedPVHCorp.decidedtoinvestinEthiopiaandbring itsAsiansupplierstoHIP.Asanapparelgiant,PVHCorp.attacheshighimportancetobuildingresponsibleandsustainablesupplychains,andthecompany’sexecutivesadvisedleadersoftheEthiopiangovernmentonconcretemeasurestobetakenonenvironment,safety,andsustainabilitystandardstomake HIP compatible with international standards, and the governmentseriously put them into action. These actions included: (i) A Zero-Liquid-Discharge Common Effluent Treatment Plant; (ii) Renewable Energy; (iii)CompliancewithRelevantFireandBuildingStandards;(iv)Compliancewiththe Customs-Trade Partnership Against Terrorism (C-TPAT); and (v) thecreationofaTenant’sAssociation.

Source:Elaboratedbytheauthor,basedonWorldBankGroup(2017).Photosbytheauthor

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