Companies play a key role in achieving the Sustainable Development Goals (SDGs), and it is for this reason that they are under constant institutional pressure to increase their commitment to these goals. However, given the complexity of the SDGs, it is unclear whether these pressures lead companies to adopt approaches that address a few goals or if they prefer to manage the entire set of 17, and whether this choice has subsequent effects on the financial performance. To clarify these issues, research conducted by Toloue Miandar, of the University of Bologna, and Ambra Galeazzo and Michela Carraro, of the University of Padua explores how institutional determinants influence firms’ commitment to the SDGs and whether such commitment improves their financial performance.
The SDGs represent a significant shift in the development and implementation of sustainable initiatives. Introduced by the United Nations, this set of goals is aimed at identifying and improving the elements that make up an interconnected set of sustainable development issues. Compared to previous Millennium Development Goals (MDGs), which primarily involved government and regional actors, the SDGs require that companies also engage as agents of change, applying creativity and innovation to solve sustainable development challenges. Thus, companies are under institutional pressure from stakeholders to take decisions and actions in line with the SDGs. According to the neo-institutional theory, companies tend to address sustainable issues to gain legitimacy and a social license to operate, often imitating the decisions and actions of other companies in their institutional context.
The study conducted by Galeazzo, Miandar, and Carraro is based on an analysis of the sustainability reports of the 100 most sustainable companies in the world according to the Corporate Knights index, over the period 2017-2020. Using content analysis using NVivo software, companies’ sustainability reports were classified to identify the overall level of commitment to the SDGs, commitment to the environmental SDGs, commitment to the social SDGs, and commitment to the most frequently cited SDGs. Next, a quantitative analysis was performed with regression models to examine the effect of institutional pressures on commitment to the SDGs and financial performance.
The results show that institutional pressures related to industry type and country of origin positively influence any engagement approach toward the SDGs. However, they show that companies’ financial performance improves only when they engage with the entire set of SDGs or with a specific subset of the most frequently cited ones. According to the analysis conducted, companies in the sample showed an increasing focus on the SDGs precisely during the period under review, i.e., between 2017 and 2020. The total number of SDGs addressed increased from 58 in 2017 to 83 in 2019. In particular, SDG8 (Decent Work and Economic Growth), SDG12 (Responsible Consumption and Production) and SDG13 (Climate Action) were the most frequently cited goals, with an average of more than 20 mentions each during the period analyzed. On the other hand, goals SDG1 (No Poverty), SDG2 (Zero Hunger) and SDG14 (Life Below Water) were the least considered, with an average of less than 5 mentions for each in the period analyzed. This points to a tendency for companies to focus on goals considered more feasible or relevant to their sector.
Data analysis then revealed that companies in developing countries are more proactive in reporting their investments under the SDGs than companies in more developed countries. Companies in high-pollution sectors tend to disclose more of the SDGs in their sustainability reports than those in low-pollution sectors. For managers and policy makers, it is crucial to promote genuine and meaningful engagement with a wide range of SDGs. The less frequently addressed SDGs, such as SDG1, SDG2, SDG14, and SDG15, require additional initiatives and support to be integrated into corporate strategies. Adopting CSR reports within the SDGs framework allows companies to report their social responsibility to stakeholders, helping to improve financial performance. Companies can adopt two possible reporting strategies: disclosing information on a wide range of SDGs or focusing on the most frequently addressed SDGs, for which they have greater expertise and capacity to take action.
In conclusion, this study provides important insight into the motivations and effects of companies’ commitment to the SDGs. Institutional pressures arising from the national and industry context play a crucial role in determining companies’ approach to the SDGs. Moreover, substantial and strategic commitment to the SDGs can lead to significant improvements in corporate financial performance, demonstrating that sustainability can be a key factor in economic success.
