In a previous blog, “The Importance Of The Healthcare Sector For The Sustainable Development Goals,” I discussed the ways in which this sector is important to the 17 Sustainable Development Goals (SDGs). The underlying data for that blog are based on a paper “The Relationship Between Investor Materiality and the Sustainable Development Goals” that I wrote with Professors Gianni Betti and Costanza Consolandi of the University of Siena. A summary of our methodology is provided in my previous blog. In brief, we mapped the material environmental, social, and governance (ESG) issues in all 79 industries organized into 10 sectors, developed by the Sustainability Accounting Standards Board (SASB), to the 169 targets of the SDGs. SASB has identified the material ESG issues for each industry that are important to shareholders in terms of value creation. Mapping these issues to the SDGs’ targets enabled us to assess how each industry is creating value for society. For this we created an index that ranges from 0 to 100.
At the end of my healthcare blog, I promised to write a similar analysis of the other nine sectors. This one is about the resource transformation sector which has an overall index of 28.42, compared to 34.44 for healthcare. It is comprised of five industries: containers & packaging (39.4), chemicals (31.3), aerospace & defense (30.8), electrical & electronic equipment (23.7), and industrial machinery & goods (17.0). For the sector as a whole the SDGs of most importance are #12 (Responsible Consumption and Production-49.7), #14 (Life Below Water-41.0), and #15 (Life On Land-44.9). The least important SDGs for this sector are #4 (Quality Education-5.0) and 10 (Reduced Inequalities-5.45). SDG#12 is closely related to how the products in this industry are made and used. SDGs #14 and #15 concern the sources of the materials for these industries and how its products are disposed and recycled. The results for SDGs #4 and #10 suggest that these industries have little impact on human capital. In general, this sector has very little impact on the material issues in SASB’s categories of social and human capital; they are all in the other three categories of environment, business model and innovation, and leadership and governance.
Similarly, there is variation in scores within each industry regarding the individual SDGs. There are five SDGs where the containers & packaging industry has a significant impact: SDGs #14 (Life Below Water-77.0), #12 (Responsible Consumption and Production-67.7), #15 (Life On Land-58.5), # 2 (Zero Hunger-55.0), and #6 (Clean Water and Sanitation-54.5). The SDGs for which it has the least impact are #8 (Decent Work and Economic Growth-14.6), #5 (Gender Equality-11.1), and #10 (Reduced Inequalities-9.09). The low impact on #8 could be because this industry doesn’t raise challenging working conditions and it’s a commodity industry that will have modest growth at best. The low impact on #5 also suggests, like #4 and #10, little impact on human capital.
For #14, with seven targets, there is an especially high impact on Targets 14.4 (Effectively regulate harvesting and overfishing), 14.6 (Prohibit fisheries subsidies which contribute to overcapacity and overfishing), and 14.7 (Increase the benefits to Small Island developing States and least developed countries from the sustainable use of marine resource)—all at 100.0. Yet for Target 14.5 (conserve at least 10 per cent of coastal and marine areas) the impact is zero.
SDG#12 has eight targets and this industry has substantial impact on 12.2 (Achieve the sustainable management and efficient use of natural resources-77.8), 12.3 (Halve per capita global food waste at the retail and consumer levels-60.0), 12.4 (Achieve the environmentally sound management of chemicals and all wastes throughout their life cycle-60.0), and 12.5 (Substantially reduce waste generation through prevention, reduction, recycling and reuse-71.4) and zero impact on the rest.
For #15, of the nine targets, there is zero impact on three of them (15.6, 15.8, and 15.9) but substantial impact on 15.3 (Take urgent and significant action to reduce the degradation of natural habitats-70.0). The impact on targets 15.1 (ensure the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems and their services), 15.2 (Promote the implementation of sustainable management of all types of forests), and 15.4 (Ensure the conservation of mountain ecosystems, including their biodiversity) are also high at around 60 for each of them.
Finally, the industry has an impact on all five targets of SDG #2, especially 2.1 (End hunger and ensure access by all people, in particular the poor and people in vulnerable situations-75.0). It also has an impact on all six targets of SDG #6, especially 6.1 (By 2030, achieve universal and equitable access to safe and affordable drinking water for all -70.0).
The highest scores for chemicals are for SDGs #12 and #14, after which there is substantial drop off. For the former, with most impact is on Targets 12.2 (By 2030, achieve the sustainable management and efficient use of natural resources -66.7) and 12.5 (By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse-71.4). For the latter, 14.2 (By 2020, sustainably manage and protect marine and coastal ecosystems to avoid significant adverse impacts-66.7), 14.3 (Minimize and address the impacts of ocean acidification-66.7), and 14.7 (By 2030, increase the economic benefits to Small Island developing States and least developed countries from the sustainable use of marine resources-100.0) are most significant. The SDGs for which this industry has little to no impact are #4 (0.0), #10 (0.0), #16 (Peace, Justice, and Strong Institutions-4.35), and #1 (No Poverty -4.55).
SDGs #12 (54.8), #14 (45.0), and #15 (53.7) are in the top four for the aerospace & defense industry, as they are for containers and packaging, but instead of #2 and #6, the other important SDG is #13 (Climate Action-44.1). The least significant SDGs are #4 (0.0), #10 (9.1), and #2 (5.0). The results for #12 at the target level are the same as for containers and packaging in terms of high and low impact targets, albeit with slightly different numbers in some cases. The same is true for #14, with containers & packaging having slightly higher impact measures on three of the targets. Finally, the results for the two industries on #15 are very similar, higher on a few targets for one industry and higher on a few for the others. For SDG #13, the only one of its three targets where aerospace & defense has any impact is 13.1 (Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries-57.1). This is due to the need for the aviation industry to reduce its carbon emissions and the close relationship between climate change and energy securityThere are two SDGs where the electrical & electronic equipment industry can have significant impact: #12 (41.9) and #15 (43.9). In terms of the former, the most important targets are 12.2-12.5, all having a score of between 40.0 and 45.0, The impact score for the others is zero. In terms of the latter, the target scores are very similar to containers and packaging, with some higher and some lower.
There are two SDGs where the electrical & electronic equipment industry can have significant impact: #12 (41.9) and #15 (43.9). In terms of the former, the most important targets are 12.2-12.5, all having a score of between 40.0 and 45.0, The impact score for the others is zero. In terms of the latter, the target scores are very similar to containers and packaging, with some higher and some lower.
The industry in the resource transformation sector of least importance to the SDGs is industrial machinery & goods. The only SDG of significance is #13 (33.3) and the only target it impacts is 13.1 (Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries-33.3) suggesting that some of the industry’s products can help mitigate climate change. The lowest four sectors are #1 (like chemicals), #2 (like aerospace and defense), #4 (like chemicals, aerospace & defense and electrical & electronic equipment), and #10 (like chemicals, aerospace & defense, electrical & electronic equipment, and containers & packing)—all at zero.
Not surprisingly, there is substantial commonality in the resource transformation sector across its industries in terms of the most important and least important SDGs for which it is important. There are also some interesting exceptions that are not obvious, such as the positive impact of containers & packaging on SDG#2 (which is the bottom for aerospace and defense and industrial machinery & goods) and the positive impact of aerospace & defense and industrial machinery & goods on SDG#13. As in my healthcare blog, I want to emphasize that these results are based on a materiality-based analysis and are not indicators of the magnitude of impact on an SDG and its targets. This is a function of a number of variables based on quantitative metrics such as the amount in tons of plastic finding its way into the oceans and the extent to which it is being reduced.
Next up is my analysis of the consumption sector which is comprised of 14 industries. Because of the large number, SASB is planning on splitting it into two industries: Consumer Goods and Food &Beverage. I will start with the former.
