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Interview

Interviews with experts and opinion leaders from our research network

Preparing for the Future with the Sustainable Development Goals (SDGs)

The Sustainable Development Goals (SDGs) adopted at the 2015 United Nations Summit are a universal call to action to address the planet’s most pressing social, environmental, and economic issues. We invited Marcos Athias Neto, Director of the United Nations Development Programme Istanbul International Centre for Private Sector in Development (IICPSD), to talk about how the SDGs can change the world and why the SDGs matter.

Mr. Marcos Athias Neto

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Marcos Neto, Director, UNDP Istanbul International Center for Private Sector in Development

Marcos Neto is the Director of UNDP’s Istanbul International Center for Private Sector in Development and UNDP private sector and foundations team. In his current role Marcos leads UNDP’s global work on private sector and foundations in development. Prior to joining UNDP, Marcos worked as the Cluster Leader of the Innovations & Development Alliances Cluster (IDAC), Global Advisor for Disaster Risk Reduction & Emergency Preparedness at ChildFund International, where he also served as Regional Development Officer for the Northeast US. Previously, Marcos spent 17 years at CARE International with posts at headquarters, as well as in the field; his last post was as CARE’s Director of Partnerships and Special Initiatives and Climate Change and Sustainable Livelihoods. He led CARE’s efforts to build climate change partnerships, especially with environmental organizations. Marcos’ assignments ranged from six years as Regional Manager for Asia and Latin America at CARE UK, to leading CARE USA’s process of establishing CARE’s presence in Brazil. In 2001, Marcos became CARE Brasil’s first National Director. From 2006 to 2008, Marcos was CARE’s Program Director in Central America. His past experience with CARE also includes three years as Deputy Regional Director for Latin America, focusing on resource mobilization, knowledge management and constituency building.

SDG Progress in the Private Sector

Shirai: Three years have passed since the Sustainable Development Goals were adopted in 2015. The SDGs were a revolutionary proposal seeking the participation of all stakeholders, including the private sector. How would you evaluate the progress of current efforts to achieve the goals by 2030?

Marcos Neto: I think that significant progress has been achieved during the first three years of the SDGs mainly thanks to the worldwide adoption of the Goals. The SDGs have become a common language among different sectors of society. It has always been difficult, in any time period, for corporations and Governments to speak a common language, however, today everyone understands what it means when a company says, “We’re working towards Goals 5, 6, and 7.”

There has been a significant progress on national level too. So far 102 Governments have independently examined the progress their countries have achieved towards the SDGs and committed to adjusting their agendas accordingly to accomplish the Global Goals. The business community, too, has begun to embrace the SDGs, which is something that did not happen with the Millennium Development Goals (MDGs).
However, we still lack the necessary funding to achieve the Goals. Substantial capital is required to implement the 2030 Agenda*1, and we have yet to find sufficient financial resources.

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The problems we confront are big and expanding faster than we address them. Climate change and high numbers of displaced people are only two of the unprecedented global challenges. The Intergovernmental Panel on Climate Change (IPCC) published a report on climate change based on new scientific evidence in October 2018 and warned that Global Warming will exceed 1.5℃ in very near future, however the global response has been very limited.

Right now, we reportedly witness the highest levels of displacement in history. According to UNHCR (United Nations High Commissioner for Refugees) statistics*2 there are about 68.5 million displaced people, among whom there are nearly 25 million refugees, over half of whom are under the age of 18. Unfortunately, many people have shown resistance to multilateralism and international cooperation. The 2030 Agenda requires all people to join forces to “Leave no one behind”. Today there is an increasing tendency to privilege the interests of one’s own country, however, the best strategy to achieve one’s national interest, is to cooperate with other countries.

*1
The 2030 Agenda is a set of international development goals with SDGs as its core. It includes the Preamble, the Declaration, the SDGs, the Means of implementation and Follow-up and review framework.
*2
As of the end of 2017

The Environment and Resilience in Developing Countries

Shirai: Among the SDGs, objectives like Goal 7, “Affordable and Clean Energy,” and Goal 11, “Sustainable Cities and Communities” are problems shared by the entire world, but in some cases the priority to work on them is lower in developing nations. What kind of efforts need to be prioritized in order to achieve the SDGs?

Marcos Neto: Prior to the adoption of the SDGs, development agendas were designed for developing nations only, and the main role of developed countries like Japan was to provide financial and other kinds of support. The 2030 Agenda is the first universal agenda to break through the status quo of this division as the SDGs apply to all countries. Prof. Jeffrey Sachs of Columbia University says that “in the eyes of the SDGs, every country in the world is a developing country, because no country in the world has accomplished the entire agenda”.

However, it would be right to state that the Agenda is more complex for developing countries who lack basic infrastructure and a social safety net. Developed countries like Japan need processes and active government efforts that differ from those of developing ones. I look at the SDGs from two perspectives: The first is domestic support needed for achieving the SDGs. The second is international support for developing countries through foreign aid, diplomacy, investment, and the like.

One could say there is some tension between the conventional approach to development and the SDGs. The conventional approach would require to ranking the 17 goals and 169 targets by priority. However, the SDG Agenda does not prioritize progress achieved in areas like governance, oceans, climate, inequality, health, education, work. It requires people to address all issues simultaneously. Although it may be necessary for individual Governments to prioritize the implementation of the policies according to their needs, the Agenda itself does not prioritize any goal over the another.

Shirai: What kind of initiatives are undertaken by UNDP and the IICPSD?

Marcos Neto: UNDP has founded a program called MAPS, Mainstreaming, Acceleration and Policy Support, which has been implemented in 31 countries as of April 2018. The MAPS programme works with Governments and conducts comprehensive analyses of country’s environmental policies, using machine learning. Thanks to our partnership with IBM Watson®, the data is processed by AI, which reduces the usual processing time of three months to three days. Each country’s policies are analyzed in light of the SDGs and the program determines the areas current policies address and the existing gaps between policies and the Goals. Afterwards we use a tool we’ve developed called RIA (Rapid Integrated Assessment) to find accelerators useful for formulating and implementing policies effective in accomplishing the SDGs.

Looking for accelerators doesn’t mean prioritizing one goal over another, but rather looking one level below the goals and finding out what accelerators there are in place that will speed up the SDGs. If society invests in several such accelerators, then all 17 goals will start to move simultaneously.

Shirai: That sounds like an interesting approach, but could you explain what you mean by “accelerators”?

Marcos Neto: One frequently used accelerator is gender, which corresponds to Goal 5*3. According to McKinsey, if the proportion of men and women on the labor market became equal, roughly 28 trillion dollars of economic growth could reportedly be achieved. We also know that women care more about their family’s health than men do and that when women receive higher education and acquire healthcare knowledge for themselves and their children, we move closer to Goals 3*4 and 4*5 .

In rural Africa, for example, women do most of the agricultural labor. By investing in workplace improvements for women, we can increase agricultural productivity and work towards Goal 2*6. And by investing in regional road infrastructure we make it easier to transport products to markets. This way we move closer to Goals 8*7 and 9*8. By thus investing in female labor participation we accelerate the movement towards achieving several of the SDGs.

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The creation of sustainable infrastructure and urbanization is connected to Goals 9 and 11. By investing in sustainable infrastructure, rural infrastructure, transit connecting rural areas and cities, and in renewable energy, we start moving towards accomplishing SDGs like worthwhile human labor and equality.

It’s important to not only work on the 17 Sustainable Development Goals individually, but to find accelerators on a level below the goals that will advance several of them at the same time. This approach is not just best for governments, but also is the best way for businesses to determine their priorities. Businesses should begin with the areas they enjoy a comparative advantage. Once a business understands what it’s best at and what its core business is, it can consider how its activities impact all the connected SDGs and can prioritize its efforts with the intent to affect multiple SDGs.

One point we emphasize at UNDP when creating tools is asking, “How?” How can we get from point A to point B? The SDGs Holistic Innovation Platform (SHIP), which strives to help companies achieve the Sustainable Development Goals, is one such example.

Shirai: In recent years the risk of natural disasters and the like due to climate change has increased globally. Such disasters are also affecting developing nations. What kind of strategies are necessary for developing nations to overcome the challenges they are facing because of natural disasters?

Marcos Neto: Developing countries have a limited budget to invest in disaster readiness. It’s necessary to prepare new infrastructure with future disasters in mind. Building airports, roads, and bridges will require more sophisticated construction methods than before. Public-private partnerships are essential there. It’s essential to build infrastructure that can withstand an even greater number of future earthquakes, hurricanes, typhoons, floods, droughts, and the like.
Another important challenge is human migration. If we don’t do anything about preventing climate change and natural disasters, we won’t be able to avoid mass migration in the near future, especially migration from developing countries.

Taking the worst-case scenario of rising sea levels due to climate change as an example; even the island of Manhattan will have to be surrounded by high levees to prevent sea water from flooding it during high tide. This means that budget for infrastructure will rise to heretofore unseen levels. If we don’t take immediate action, such a time will come.

In addition to this awareness, we need a sense of urgency from the business community, in particular from large corporations. There are opportunities here for companies like Hitachi that provide water and energy systems. We will need improved technology and efficient systems. That means business opportunities in providing society with services to alleviate various problems and in dealing with natural disaster risks all over the world.

Shirai: The IICPSD strategically involves the private sector in disaster reduction, prevention, response, and recovery, and works to increase resilience vis-à-vis natural disasters. What kind of efforts have you been involved in so far?

Marcos Neto: The Sendai Framework for Disaster Risk Reduction adopted in 2015 at the third World Conference on Disaster Risk Reduction held in Sendai City, Miyagi Prefecture, lists global standards. This framework was made possible thanks to Japan’ devoted efforts in disaster prevention. Working with national governments, UNDP has been advancing efforts to prepare for disasters for several decades.

Although every dollar spent on disaster prevention is the equivalent of seven spent on disaster response and recovery, we cannot say that there is sufficient investment. It is difficult to make people understand the value of such investment. This is similar to how spending on bridges is prioritized over spending on sewers. The general population won’t notice the sewer under the street, but they will notice the bridge. Disaster prevention is similarly hidden, but when a disaster such as the hurricane that devastated Florida strikes, everyone has to flee.

In the Sendai Framework for Disaster Risk Reduction, Governments and businesses work hand in hand. We have learned that there are many businesses that are unprepared for natural disasters. Businesses with high resilience and excellent business continuity plans (BCPs) won’t disappear and will thus be able to help with the recovery. They will be able to continue their operations, offer jobs, and produce the goods necessary to recover from a natural disaster.

*3
Goal 5: “Gender Equality”
*4
Goal 3: “Good Health and Well-Being”
  
*5
Goal 4: “Quality Education”
  
*6
Goal 2: “Zero Hunger”
  
*7
Goal 8: “Decent Work and Economic Growth”
  
*8
Goal 9: “Industry, Innovation and Infrastructure”

Business Contributions towards the Sustainable Development Goals

Shirai: Now that ESG (environmental, social, and governance) investment is spreading, there are various ways for companies to approach societal issues through their business. What kind of paradigm is effective for companies in order to expand business in developing countries to solve societal issues while preserving profits?

Marcos Neto: Companies face two problems when incorporating SDGs into their business model.

The first is to convince their CEO that incorporating the SDGs is not charity work, but instead seizing an opportunity to expand their market. Many people in middle management have told me that it’s difficult to explain to their CEO that they should invest in the SDGs. Such internal difficulties have to do with the long history of companies deciding how to compensate their management. There is a global tendency to reward CEOs and senior executives based on short-term performance, but the SDGs are a long-term agenda. Working towards the SDGs will make a business sustainable over the long term. This isn’t only about environmental sustainability; it’s necessary to look at things from various angles. It’s important for businesses to consider their own longevity. History teaches us that businesses that exist today won’t necessarily be there tomorrow.

Out of the businesses included in the Dow Jones Industrial Average in 1900 only two companies operated until the year 2000. All others vanished. The SDGs can be a strategy for businesses to achieve longevity, but the challenge is to reconcile that with expectations of short-term profit.

The second problem is pressure from capital markets. In the case of American businesses, investors receive quarterly reports. They value short-term performance instead of long-term performance. We need businesses to have the courage to proclaim: “We won’t report quarterly profits. And that’s fine.” The necessary timeframe is one or two years, or even several years.

In some cases, legal frameworks become an obstacle to accomplishing the SDGs. Present regulations assume a conventional economy centered on fossil fuels. What the SDGs are trying to do is to shift the economic model and economic system towards one that not only pays attention to long-term and financial aspects, but also to social and environmental ones, and embraces a triple impact.

Ronald Cohen, the father of impact investment, said that for 150 years the measure of a company’s success has been profit alone. Profits were the only framework by which businesses were analyzed: How much they put in and take out. Later, during the 1960s and the early 1970s a second measure, that of risk, was introduced. The result of this inclusion of the two factors of profit and risk in the analytical framework for businesses was the concept of risk-adjusted return.

A third measure that we need now is impact. By impact I mean the impact that a business has on the entire society. From here on we need an analytical framework by which investors and overall society evaluate a company’s impact. By adding the impact on society at large to the two factors of risk and return, it becomes possible to evaluate businesses based on three factors.

The Boston Consulting Group has recently completed a survey regarding this point. After analyzing 200 businesses shifting towards considering their total societal impact, it found that in such businesses total shareholder return, an index showing how much money is given to shareholders which is still the primary framework by which a business’s success is measured, actually increased. This means that companies which strategically plan over the long term with their total societal impact in mind generate higher returns than businesses which only pursue short-term shareholder profit. It is thus vital to find the right balance between long-term impact and short-term shareholder profit.

Investors must demand this from businesses, and we actually see such a trend in aging societies like Japan. For example, pension fund liabilities are becoming longer than they were in the past, which leads such funds to demand long-term returns from businesses. 10 or 20 years is not enough, because it’s necessary for them to pay pensions over 50, 60 years. When we invest in businesses generating long-term profits, the balance between long-term and short-term profit changes, and our thinking about investment changes along with it.

Another important factor in changing this balance is Millennials. As this generation achieves power and wealth as consumers, it demands greater social value from companies and products and decides what businesses to purchase from on this basis. The next wave of change is coming and will fundamentally change the balance and tension I mentioned.

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Shirai: It is certain that people’s attitudes and approaches will change. Where might we see such changes in the future?

Marcos Neto: Consumer goods manufacturer Unilever is producing brands advertising sustainability and performing far better than before. When making the decision to do so, the company visited production sites and considered how it could produce in more environmentally friendly ways, how it could reduce the amount of water used, and whether it could use renewable energy. It also paid attention to ways to sell sustainable brands to consumers and how to sell to low-income customers. Half of the world’s population is part of that market. Unilever noticed that conventional distribution networks did not reach low-income customers and decided to adopt a new distribution strategy.

Now Unilever is creating jobs for the poor, new businesses are emerging, a new entrepreneurial spirit is appearing, and the poor are suddenly selling products for large multinational corporations. All of that began with the adoption of a new strategy. This is another example of prioritization, but it’s also an example of simultaneously achieving multiple SDGs. For the business community, the SDGs are a business opportunity.

The Business and Sustainable Development Commission (BSDC) estimates that the SDGs could create business opportunities on a scale of 12 trillion dollars a year. Such opportunities aren’t created by businesses fulfilling their social responsibility alone. These opportunities appear when companies analyze the SDGs and merge them with their business model. This is also the reason why UNDP partnered with the Japan Innovation Network to create SHIP. SHIP is currently in its pilot phase in Japan, but eventually we will expand it globally.

The aim of SHIP is to explain this process to businesses step by step: What the SDGs are How to look at the SDGs as a business framework; how to change their business model; how to launch a business model that is profitable, beneficial to society, and environmentally friendly. We go through these things one by one.

Shirai: There are markets created by the technological revolution and new business models. These markets contain huge opportunities, but also important challenges to overcome.

Marcos Neto: That is one reason why the business community is so interested in the SDGs. The SDGs are the first development agenda that appeals to central business objectives: profitability, commercial viability, new markets, and innovation. It’s not just an agenda asking for charity and social responsibility. Corporate social responsibility is great as a start, but it’s not enough. Having talked to people from businesses all over the world, I understand that the difficult part for businesses is the “how” part. People tell me, “12 trillion dollars? That’s wonderful. We’d like to be a part of that, but what do we have to do? We’re told to critically examine our business model in light of major complex problems, but how do we do that?”

Shirai: In order to secure sufficient funding and involve various players, it’s important to promote public-private partnerships, which also requires working with businesses in other countries. What kind of partnerships are best suited to promote cooperation between businesses and governments? What kind of support does UNDP provide? Will we see renewed cooperation between the public and private sectors?

Marcos Neto: Public-private partnerships will become absolutely essential. National governments must show the market a different direction. They must also let investors know that they should utilize markets in ways that revolve around the SDGs.

For example, there are still many governments that subsidize fossil fuels. Turning around and instead subsidizing renewable energy is great, be it in developed or developing countries, but given budgetary limits, countries won’t be able to keep paying out subsidies forever or to establish a lot of new subsidies. Governments must decide what incentives and system of subsidies are needed.

The UN Secretary General has made this clear as well, but the time has come to end subsidies for fossil fuels, switch to subsidies for renewable energy, and steer us towards promoting sustainable development. Shifting policy and regulatory priorities and adjusting the direction of markets is an important role of Governments.

At UNDP we do research to advise Governments in building an enabling environment to spread investment and business models in accordance with the SDGs.

Shirai: Since ESG investment was first promoted, a growing number of investors is paying attention to how companies are working on societal problems through their business. What kind of approach should investors adopt to accurately evaluate a business’s value and the impact that the business has on society and the environment?

Marcos Neto: In September 2018 we launched an SDG Impact Platform at UNDP, in partnership with the Impact Management Project. The platform gives investors, banks, private equity funds, and venture capitalists clear criteria to learn how their investment is impacting society and the environment. UNDP is creating these criteria with an eye towards providing a seal for SDG Aligned investors and businesses.
In the future we would like to create a certification process to explain the impact that investments have on society. We have a similar platform called Business Call to Action for companies, with currently 220 participants, including Japanese companies like Sumitomo Chemical, Ajinomoto, and MUJI. The platform promotes business models that involve society’s poor as producers, suppliers, retailers, and consumers.

Companies are beginning to change, and investors are starting to pay attention, but we still have a long way ahead of us. To explain the “how” part to businesses is an important role of UNDP and we’re fully committed to it.

Expectations of Japan

Shirai: The Japanese government is trying to contribute globally to the SDGs. In addition, because of its experience with responding to natural disasters, Japan has technology and knowhow for disaster prevention. What do you expect of Japan in the field of disaster readiness and in creating an environment for coordinating a response to the challenges of the SDGs?

Marcos Neto: First, let express my gratitude to the Japanese Government to thank them for the support that UNDP and the UN receive from Japan. The Japanese Government and people are generous and understand the role they must play in the world and the importance of supporting organizations like UNDP.

I am grateful to the Japanese people for financially supporting our organization around the world and we are working hard to make the most of it.

As you said, Japan is contributing in various ways, be it with resources, financial support, experience, or technology. The Japanese innovation ecosystem is the envy of the world. How can we replicate that in developing countries and skip several steps in their development? Kenya, for example, transitioned from not having a large fixed telephone network to almost everyone having a cell phone. Japan has the experience, technology, and soft skills to efficiently support countries in accomplishing similar such leaps in development and we at the UNDP are excited to support Japan’s efforts.
On my current visit to Japan I’ve met with many government officials and representatives of business organizations. I’ve learned that the Japanese Government and the business community have evaluated the SDGs and are actively trying to incorporate them. An ecosystem connecting businesses, policy, and the SDGs is emerging and could in a short time become something very concrete.

Shirai: Digital technology has great potential to help accomplish the SDGs. Hitachi is contributing to society by offering solutions through its technology in the fields of energy, water, healthcare, and information technology. Do you have any advice for us on what actions we should take towards accomplishing the SDGs?

Marcos Neto: Japan’s ecosystem is useful for helping Japan achieve the SDGs. There definitely is a strong desire around the world to accept all that Japan offers and to open markets to Japanese businesses in a form that is aligned with the SDGs. When Japanese small and medium-sized enterprises or large corporations like Hitachi expand into Africa or Meso- and South America and work towards the SDGs in a responsible manner, that is a form of support. It is also helpful when companies go into countries to which they are expanding with a business model that benefits the company and the country economically, socially, and environmentally. Analyze your own business model. Seek out competitive markets and expand overseas, while showing the world a business model and solutions that help solve today’s global problems and are aligned with the SDGs.

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The former UN Secretary General Ban Ki-Moon has often said that we are the first generation in history that can end absolute poverty and the last generation that can deal with the worst aspects of climate change.

If we miss this chance, our children will pay the price. Companies, including Japanese companies, have the tremendous opportunity to show how technology can be used to benefit humanity. Businesses can serve humanity while making a profit. It’s important that governments and businesses work hand in hand to protect humanity’s future.

Working on such problems, investing in disaster prevention and climate change, and helping developing countries benefits all of the world’s players. Such support will mitigate the impact of the worst results of climate change, such as having to leave one’s country. People can then stay in their countries, lead a decent life, and raise their children in an environment that they have decided to live in. We have to accelerate our efforts to achieve the SDGs by increasing the number of SDG partners and proceeding more quickly. After all, the problems we must solve are progressing ever more rapidly.

Shirai: Hitachi is a company providing social infrastructure systems in sectors such as water, energy, and transportation. Looking at natural disasters in recent years, it appears possible that current infrastructure won’t be able to withstand disasters that surpass our previous assumptions. On the other hand, tremendous funds would be necessary to replace our current infrastructure. How can we solve this quandary?

Marcos Neto:Technology is the essence. We need AI and innovations that we have yet to see. The infrastructure that the world’s developing countries need to build and the infrastructure that developed countries need to upgrade will require astronomical amounts of money. That kind of money doesn’t exist anywhere. We need to build and upgrade infrastructure efficiently, use technology to lower the costs, and create systemic processes that generate innovation. If we could use big data to separate infrastructure that requires quick upgrades from infrastructure that can wait a little longer, it will make it easier to prioritize how to apply our limited resources.

Society 5.0 is almost here. We may solve problems that we currently think are impossible to solve once we reach Society 5.0.

Nelson Mandela, whom I admire, said that, “it always seems impossible until it is done.” We have to do it.

Shirai: Thank you very much for taking the time to talk to us today.

Final Note

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We invited Marcos Neto, director of UNDP’s IICPSD to have a broad discussion about issues and necessary perspectives for companies trying to solve societal problems, beginning with the role of the private sector in accomplishing the Sustainable Development Goals. For private companies, which are required to generate profits, addressing societal issues is extremely challenging. Speaking with Marcos Neto, I was again reminded of the need for us to understand such problem-solving efforts as business opportunities and to drive innovation with our technological ability.