The SDGs are not a management tool.

The UN sustainability goals are not a management tool, even if they may look like it. This has consequences for how they are used in corporations' communication.

The United Nations’ sustainability goals (often referred to as the UN SDGs or just the SDGs) can trace their history back to a UN conference in 1972, via the Brundtland Commission's report in 1987 and the Rio summits in 1992 and 2012, up to today's 17 goals which were adopted by a resolution in 2017.

The SDGs are thus political goals, developed over a long time-period, with solid roots in the UN system.

We can usually assume that regulations follow from stated political goals. For investors, the goals are therefore good indications of what regulatory winds one can expect. The goals can be used as indicators on expected regulatory tailwinds and headwinds.

Corporations therefore benefit from showing investors how their business performs relative to these goals. Employees, customers, and other stakeholders also see the SDGs as an understandable approach to the otherwise complex concept of sustainability.

However, there is a difference between what one, based on the SDGs, can expect in terms of regulatory winds, and what eventually materialises from politicians. That difference is important, can become very important in the coming years, and is commented on below.

First, it is important to note that in management of a specific corporation the SDGs are not very useful. Even if you select SDGs that are relevant to the individual corporation, the SDGs do not work as a management tool. The simplest explanation is that they are not made with this purpose.

This becomes very clear through materiality testing, where a corporation assesses which factors are material for the corporation's value development and at the same time are significant for its stakeholders.

Such materiality testing shows, for example, that in banks it is important to work to prevent money laundering (ask the north European banks Danske Bank and Swedbank about their experiences) and that for food manufacturers it is very important that the food is safe to eat (ask the Norwegian food manufacturer Nortura about e-coli). These goals are not found among the 17 SDGs and their 169 associated goals, but they are very important for the corporations' sustainability.

Based on materiality testing, a corporation selects some indicators on its performance which it monitors. These “Key Performance Indicators” are also presented in sustainability reports, along with a description of what is measured and why, what the corporation is doing in this area and what the goal is. The KPI’s used in managing the corporation should be reported on and vice versa. It makes little sense to report on a KPI that you do not use in managing the corporation.

Herein lies an important reason why one should not use the sustainability goals as indicators. Few commercial corporations are dictatorially controlled in detail from the top. Instead, Key Performance Indicators are used for regular follow-up. The non-financial indicators are the result of materiality testing, where the people who are responsible for an activity and a relationship that is considered significant have, of course, been involved in identifying the KPI’s.

It is with non-financial information as with financial information, where there is always a person who is responsible for the activity and the relationships that materialises as revenue or costs in the accounts. One should be able to imagine a chain of trust, from this person and out to report recipients, which follows the reporting lines and chain of responsibility in a corporation. Then you cannot force people to use KPI’s invented outside the corporation. 

When identifying topics which may be material, the SDGs may be relevant as they say a lot about what is seen as important by the wider society. There is, however, more to be gained by using guidelines from for example, GRI and SASB which are adapted to the corporation's industry.

Politics is based more on what people say than what they do. In business, it is the other way around. If people say that they intend to buy food packed in recycled plastic, but in practice do not want to pay the extra cents it costs, then a corporation must adapt to that behaviour and not the stated intention. In the same way, a political goal of reducing greenhouse gas emissions is not always an indicator of which regulatory changes can be implemented in the short term. Parents who cannot afford the toll road on the way to their children's football training will become grumpy and vote for politicians opposing such tolls in the next election. Farmers and chauffeurs who cannot afford higher fuel taxes, put on yellow vests and join protest marches.

Corporations that manage their business according to KPI’s based on their own materiality testing can adapt to both regulatory changes and changes to the behaviour of customers, suppliers, and employees.

They can operate sustainably.

To sum up we can say that it requires caution to use the UN's sustainability goals in a corporation’s communication. Investors can use them as indicators of expected regulatory tailwinds and headwinds. Corporations therefor benefit from showing investors their performance in areas covered by the SDGs. Reporting and management must, however, be based on separate materiality testing.